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Economist Spotlight: Interview with Alan B. Krueger, Part One

POSTED: February 5, 2014 | BY: CEE Staff | TAGS: ,

This is the first in an eight-part series of CEE’s Economist Spotlight with Dr. Alan B. Krueger.

Dr. Krueger, the Bendheim Professor of Economics and Public Affairs at the Wilson School at Princeton University and former chairman of President Obama’s Council of Economic Advisers, is the author of the newly published textbook, Explorations in Economics. In this spotlight series, Alan will address topical issues including unemployment benefits, increased job growth, minimum wage legislation, investment in human capital, and more.

The interviews were conducted by 2013 Alfred P. Sloan Teaching Champions Awardees, Kathleen Brennan and Saji James.

Kathleen Brennan:

Q. Recent research from Harvard (Source: last week’s PBS Newshour) indicates that income mobility hasn’t changed much in the last three decades, but income inequality is rising.  Is growing inequality a natural consequence of globalization and technological change?  What policies can be implemented to address the growing inequality in the U.S. economy?

Alan Krueger:

A.  Income inequality has risen dramatically since the late 1970s, and low-wage workers have seen real income declines.  And the study you cited finds that parental income is a stronger determinant of children’s economic success today than it was a generation ago.

Growing inequality is partly a result of globalization and technological change, but I don’t think they are the whole story.  The decline in the real value of the minimum wage, drop in union membership and an erosion of norms in the workplace that maintained wage contours and led to a more balanced sharing of productivity gains have all contributed to the rise in inequality beyond the market forces of globalization and skill-biased technical change.

First and foremost, a stronger economy will help to reduce inequality.  The only progress we’ve made against rising inequality occurred in the late 1990s, when the economy was strong.  Increased educational attainment, especially among children from disadvantaged families would also help reduce inequality and provide more opportunity in the long run.  Lastly, I think that we as  a nation could do more to improve the balance in bargaining power between workers and firms.

Saji James:

Q. What policy prescriptions would you give that would support the notion of a “living wage?”

Alan Krueger:

A. First and foremost, I think we need to improve access to post-secondary education and expand pre-school education.  The U.S. has failed to keep up with the rising demand for skilled workers that has resulted from technological change and globalization.  Education is the surest way to raise incomes, but it is not sufficient.  So in addition, I would like to see steps to improve bargaining power for workers, such as a higher minimum wage and expanded unionization, although such policies come with tradeoffs and mainly  involve a redistribution from firm owners and customers to workers.  I would also like to see an expansion in the Earned Income Tax Credit (EITS) for single workers.  And, lastly, it is worth noting that the Affordable Care Act, or Obamacare as it is known, provides subsidies to purchase health insurance and access to Medicaid for low-income Americans.

The next Economist Spotlight: Interview with Alan B. Krueger will publish February 11, 2014.

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