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Context From The Talk

Edward Lazear On How To Reduce Income Inequality

Income Inequality

How do we address increasing inequality? My argument there would be what we need to focus on primarily are the skills that people have. Tax policy is not a very good way to deal with inequality. Taxes and redistribution are at best a temporary fix. They don’t solve the underlying structural problem. That’s basically saying, we are going to figure out ways to give people money, but that won't affect the future trends - even if you ignore the adverse incentive effect of transferring money to people. It still doesn't fix the problem in the long run.

So the question is, how do you fix the problem in the long run?

If you look at the skill distribution in the United States, there's too big a gap between the skills for people at the top and the people at the bottom. That skills gap has increased over time, that's a big problem. What do we want to do? Well, we don't want to kill the skills at the top.

What we want to do is bring up the skills at the bottom. Until we do that, we're never going to deal with this inequality issue in any kind of a fundamental long-term way.

Edward Lazear, 2017 Hoover Institution Summer Policy Boot Camp