In the speech, Federal Reserve chair Janet Yellen talks about the inequality in income and wealth distribution in the United States. Before the Great Recession, the gap was relatively small. However, the losses that people incurred widened the gap. High rates of consumption widened the gap further and made the lives of low wage individuals difficult because they were forced to use their savings to cater for income losses. Despite the recovery of the stock and house markets, the process of restoring lost wealth was very slow (Yellen par. 3). Yellen notes that the aforementioned inequality is of great concern because America has one of the greatest economies in the world. On the other hand, she notes that inequality is at an all-time high now than it has ever been at any time during the last century (Yellen par. 3). This situation has made the rich richer and the poor poorer. Yellen cites three sources of inequality in income and wealth distribution. Data collected by the Federal Reserve shows that only a few families have experienced an increase in income in significant amounts. Housing is one of the pillars of wealth and income for many families in America (Yellen par. 6). Therefore, shifts in house prices correspond to shifts in wealth and income distribution.
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For example, the high prices of houses in the past two years have increased the wealth of many families considerably. The speaker notes that education, possession of a private business, and inheritance are cornerstones of economic prosperity (Yellen par. 8). Variations in the funding of public educations make the quality of education at various levels different. Unfortunately, students who cannot afford higher education mainly come from low-income families. Lack of education denies them numerous opportunities for advancement in life. Another challenge is the quality of instructors employed by the federal and state governments. The quality of education offered in schools is determined the quality of teachers. Higher education plays an important role in determining income and wealth distribution because it is the main criterion used during recruitment. Owning a private business and inheriting wealth are also determinants of economic prosperity (Yellen par. 11). However, they are limited to families that can afford to own businesses and create enough wealth to be inherited by other generations.
Yellen makes strong arguments in the speech that aid in explaining the inequality in wealth and income distribution. Many families get their income and wealth from privately owned businesses. Others obtain economic prosperity from high-paying jobs that are determined by the level and quality of education attained. Quality education is usually expensive and only accessible to financially stable families. Higher education is very expensive and many students pursue other avenues instead of taking student loans to finance their education. This situation is worsened by an increasing rate of unemployment. I think education is the most important factor in trying to eradicate the current inequality in income and wealth distribution. Many people have used education to rise from poverty to wealth despite encountering numerous challenges and possessing many disadvantages. Education is important because it is the best way of changing the mindsets of people into making them believe that they can change their circumstances. Overreliance on houses is risky because people’s wealth is determined by fluctuations in demand for houses in the market. The speech explores the major causes of the widening gap between the rich and the poor as well as the source of social and economic classes in society.
Yellen, Janet. Perspectives on Inequality and Opportunity from the Survey of Consumer Finances. 2014. Web.