Education, training can close economic gap, says Bernanke

Bolstering and training -- rather than erecting trade barriers -- would help narrow the economic gap between low and high-income workers, US Federal Reserve Chairman Ben Bernanke said on Tuesday.

In his most extensive remarks to date on economic inequality, Bernanke also issued a fresh warning for the US to steer away from policies that seek to erect protectionist barriers to trade and investment opportunities or to stifle the economy's flexibility.

Such a course, he cautioned, "would do far more harm than good."

His remarks came as Democrats, who have sought to portray the Bush administration's economic and tax policies as mainly benefiting the wealthy, made it a priority to take steps to alleviate widening economic inequality in the US.

US George W. Bush, in recent speeches, has tried to soothe worries about job and economic security in a constantly changing economy.

Bernanke, in remarks delivered to the Omaha Chamber of Commerce, said that disparities in education and training were "likely the single greatest source of the long-term increase in inequality."

Thus, "policies that boost our national investment in education and training can help reduce inequality while expanding economic opportunity," he said.

A copy of the chairman's prepared remarks was made available in Washington. His remarks underscore the economic disparity among workers that has widened over the decades.

In 1979, a full-time worker close to the top of the wage scale earned about 3.7 times as much as a full-time worker near the bottom of the wage rung. Reflecting the relatively fast growth of wages of higher-paid workers, workers near the top of the wage scale today earn about 4.7 times as much as those near the bottom, Bernanke said.

Bernanke, while exploring various possible forces behind this, did not offer specific policy solutions. That, he said, must be left to politicians.

Trade especially with China, have led some Democrats and Republicans in Congress to advocate policies that, among other things, would impose hefty tariffs on Chinese-made goods flowing into the country.

But Democrats and other critics say the Bush administration's free-trade policies are the cause of the US' record-high trade deficits and the loss of US factory jobs.

"The influence of globalization on inequality has been moderate and almost surely less important than the effect of skill-biased technological change," Bernanke said.

To help the working poor, the Democrat-controlled Congress recently approved a boost in the federal minimum wage from US$5.15 an hour to US$7.25 an hour over two years. The wage hasn't budged for nearly a decade. Differences between the House and Senate versions must still be resolved.