Jerome Powell Says Evolving Technology Doesn’t Have to Cause Inequality

Fed Chairman Jerome Powell testifies before Congress.

Federal Reserve Chairman Jerome Powell took a nuanced stance toward technology’s relationship to income inequality, saying the two don’t need to have correlation.

“What evolving technology wants is that people with skills and aptitude benefit from it,” Powell told the Economic Club of New York during a virtual panel on Wednesday. “If those people are there, then you can have a rising tide that lifts all boats. You can have rapidly evolving technology and declining inequality. And we had that for many years, but U.S. educational attainment plateaued relative to those our peers. Lower growth explains lower productivity.”

The Fed chair acknowledged the “skill bias technological change” model, in which shifts in production methods favor skilled workers over unskilled ones. But he also attributed rising income inequality in the United States to failure in the education system.

“You have people without real wage increases since I graduated from college 45 years ago. And you have other people whose place in the income spectrum on the high end has gone up 500%,” continued Powell. “Our education system has not kept up with the needs of a technologically advancing economy… If it does that, you can have more prosperity and it can be more broadly shared.”

Earlier in the discussion, Powell dismissed concerns over inflation, but acknowledged the U.S. unemployment rate was closer to 10%; despite a report from the Bureau of Labor Statistics report last week putting it at 6.3 percent.

“We are still very far from a strong labor market whose benefits are broadly shared,” said the Fed chair. “The pandemic has led to the largest 12-month decline in labor force participation since at least 1948,” he said.