“Capitalism has underpinned the most prosperous nation known to man. But today, acute economic inequality threatens our system’s cohesion, capacity, and viability.” So begins Tackling Economic Inequality, Boosting Opportunity: A Blueprint for Business, a new report from the Committee for Economic Development (CED), a think tank affiliated with the Conference Board.
The report begins by observing that income inequality has risen steadily since 1970. Today, the top 10 percent of U.S. households bring home about 48 percent of market incomes. Two-thirds of Americans earn less today than their equivalent cohorts from 10 years ago. In a discussion of the report, Treasury Department Deputy Secretary Sarah Bloom Raskin noted that “widening inequality is the most pronounced structural change to the economy since 1970.” This due to factors such as growing wages paid to highly skilled workers, changes in education, changes in labor market institutions, and economic rents paid to corporations.
CED’s report argues that while some income inequality is a natural product of beneficial processes, such as innovation and investment, much of today’s income inequality comes from lagging middle-class income growth. The resulting frustration threatens sociopolitical upheaval, CED argues, if left unaddressed. Severe inequality also has the potential to inhibit economic growth, added Dr. Raskin, by slowing consumption and other mechanisms. CED argues that business leaders need to take the lead on addressing inequality, and they need to conduct business in a way that promotes the long-term prosperity of not just shareholders but also employees, customers, and communities where they operate.
The report offers a number of public policies for which business leaders can advocate, the most important being related to education. In particular, it emphasizes the need to improve access and quality of early childhood education, which the report notes “provides some of the highest returns among various public investments in our future workforce.” Recommendations cover how to improve career orientation in K-12 schools and post-secondary institutions, especially community colleges. Also discussed is the value of apprenticeships.
Another part of the problem, according to the authors, is regulations that inhibit investment without providing significant public return; CED recommends requiring public policies to regularly undergo cost-benefit analysis. The report also makes recommendations about tax reform, reducing healthcare inflation, encouraging retirement savings, and reforming the financial sector.
The report ends with five steps that businesses can directly take to reduce inequality:
- Upgrading employee skills,
- Hiring individuals from disadvantaged populations,
- Adopting competency-based hiring,
- Sharing expertise with workforce developers, and
- Voluntarily refraining from ‘crony capitalism.’
These are all ‘win-win’ propositions that businesses can take today to confront growing inequality.