Want to Boost U.S. Productivity? Tackle Inequality
If women and minorities could realize their potential, everyone would be better off.
Untapped resource.
Photographer: Justin Sullivan/Getty ImagesWhen considering ways to address economic inequality in America, policy makers typically assume that there’s a trade-off: If you try to make people more equal, you risk constraining the productivity growth essential to overall wealth -- but if you try to boost productivity, you risk increasing inequality. You can be soft-hearted or hard-headed, but not both at the same time.
To some extent, an equity-efficiency trade-off is an inherent part of a market economy. Higher incomes incentivize people to work harder, move to more productive jobs, get education, invest, and innovate -- making the whole country richer, but also leaving some much better off than others. And trying to redistribute income can dampen those incentives, reducing overall wealth.