On Thursday, July 29, 2021, RSF trustee Jason Furman (Harvard Kennedy School) testified before the House Select Committee on Economic Disparity and Fairness in Growth about combatting increasing economic disparities in the wake of the COVID-19 pandemic.
Furman spoke about the slowed economic progress of American families and the widening economic and social disparities that have occurred as a result. He noted that from 1948 to 1973, median annual household income increased by 3 percent, but since 1973, median household income has only increased by 0.6 percent annually. This decrease, however, is not consistent with the overall economic annual growth rate per family, which is 1.7 percent. Overwhelmingly, the gains from this growth have gone to households in the top income brackets. The disparities Furman highlighted in his testimony are experienced disproportionately based on group affiliation, such as race and gender, with Blacks and Hispanics and women bearing the brunt of these inequalities.
Furman made six main points during his testimony:
1. American families are making much slower economic progress than they have in the past.
2. The source of this slower progress is a combination of slower productivity growth, higher inequality, and a reduction in work.
3. 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.
4. Inequality has many causes, and it also has commensurately many solutions – there is no single magic bullet.
5. There are many opportunities to reduce disparities while boosting overall growth and policymakers should pursue all of them. For example, implementing universal pre-K and expanding access to college.
6. 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. For example, enacting tax increases for high-income households and corporations.
In a related article co-authored with Wilson Powell III for Peterson Institute for International Economics, Furman discusses compensation trends from March to June 2021. Furman and Powell report that nominal compensation – that is, wages and salaries – increased to pre-pandemic trends from March to June 2021. However, during this same period, inflation has increased even more rapidly and therefore, real compensation, or inflation-adjusted compensation, is now trending lower than it was prior to the start of the pandemic.