Want to Boost U.S. Productivity? Tackle Inequality
If women and minorities could realize their potential, everyone would be better off.
When 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.