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Widening Inequality Threatens U.S. Growth and Social Mobility

Tackling Inequality: Getting the Policy Challenges Right

Speaker: Jose Angel Gurria, Secretary-General, Organization for Economic Cooperation and Development
Presider: Mary Ellen Iskenderian, President and Chief Executive Officer, Women's World Banking
February 26, 2014

Event Description

Inequality has been steadily rising in the United States since the 1970s, but the gap between rich and poor increased dramatically following the financial crisis of 2008. José Ángel Gurría of the Organization for Economic Cooperation and Development joins Mary Ellen Iskenderian of Women's World Banking to discuss the growing inequality problem and what steps can be taken to promote more inclusive growth going forward. Gurría highlights tax policy reform, the minimum wage, and increased governmental support for worker training as examples of policy options that can help the United States move toward greater equality of opportunity for all.

Event Highlights

José Ángel Gurría on the importance of addressing inequality in order to ensure social mobility and equality of opportunity:

"When hard-working people cannot make ends meet, when the fruits of economic growth reach the pockets and tables of only a lucky few, when children start their lives in poverty but never grow out of it, inequality becomes a structural problem, which means it's not simply a result of other phenomenon, but basically a problem in and of itself. It locks in privilege, traps people in a vicious circle of exclusion and lack of opportunity from which it becomes very difficult to escape."

José Ángel Gurría on how an increase to the minimum wage can boost the effectiveness of the Earned Income Tax Credit in reducing inequality:

"If you increase the minimum wage, then it makes sense to increase the Earned Income Tax Credit, because then the benefit will accrue to the worker. If you do not increase the minimum wage, then part of the benefit of the Earned Income Tax Credit will accrue to the employer. And the power of the employer vis-a-vis the employee will be much greater."

José Ángel Gurría on how labor market policies can help to address inequality and promote growth:

"Why does the pink slip work here? Or why not, for example, say, cut the hours that you work, instead of firing the people, and then using the hours where you're not working to retrain, to re-skill, to up-skill the workers so that when the order book starts filling up again, you have a very—in fact, better skilled workforce and, at the same time, you keep the loyalty of the workers to the company, the company invests in their skills. They stay—it's kind of a win-win proposition. Now, this is not theoretical. This is not a Pollyanna-ish desire. It works in other countries."

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