Economic disparities and the economic challenges facing American families
Prepared testimony at the Select Committee on Economic Disparity and Fairness in Growth hearing on "The Nature and Consequences of American Economic Disparity"
Thank you for the opportunity to testify on the important topic of economic disparities. I am the Aetna Professor of the Practice of Economic Policy at the Harvard Kennedy School and also in the economics department at Harvard University. I am also a nonresident senior fellow at the Peterson Institute for International Economics. I do research and teaching on a wide range of economic policy issues.
The American economy had pervasive disparities before the pandemic. The pandemic exacerbated many of those disparities in market outcomes, but the policy response, in many ways, was successful in combatting some of the widening disparities. The policy response, however, was temporary, and the pre-existing structural problems in the US economy will remain. That is why I am so pleased that this Select Committee is tackling what I view as the fundamental challenge our economy, and perhaps our society more broadly, faces.
My testimony makes six points:
- American families are making much slower economic progress than they have in the past.
- The source of this slower progress is a combination of slower productivity growth, higher inequality, and a reduction in work.
- Disparities are pervasive by income, education, race, ethnicity, gender, and many other dimensions. They express themselves in almost every area including the economy, education, environment, health, housing, clean water, crime, and more.
- Inequality has many causes, and it also has commensurately many solutions—there is no single magic bullet.
- There are many opportunities to reduce disparities while boosting overall growth, and policymakers should pursue all of them.
- Finally, there are additional ways policymakers could reduce disparities in order to help American families with relatively little impact on growth, and policymakers should pursue those as well.
The remainder of my written testimony expands on these six points.