According to Conrad, the United States has a very deep pool of well-trained talent that is taking substantially more entrepreneurial risks than their counterparts in Europe and Japan and producing faster growth and higher median wages. Since 1980, employment growth has grown twice as fast as Germany and France and three times faster than Japan, he said, with median household incomes in the U.S. 15 to 30 percent higher than European and Japanese economies.
"And we're doing that with a pool of workers where about 25 percent score in the top third internationally on academic tests; about 45 percent of our workers score in the bottom third," Conrad said. "If you look at Germany, it's about a third at the top, a third at the bottom. If you look at Japan, it's almost 50 percent at the top and only 15 percent at the bottom. So, with even a smaller pool we're generating faster growth at higher incomes."
Though people tend to assume that in societies with vast inequality income mobility it's impossible to climb the socioeconomic ladder, Conrad explained that's not the case. He cited a landmark study that exhibited mobility has not slowed down at all in the United States but has actually gone up.
Another study he mentioned compares mobility in the U.S. to Scandinavia, which has the most equally distributed income of all high wage economies. The study found mobility is virtually identical for all Americans except in the bottom 20 percent. If you look at the bottom 20 percent, mobility is identical for white Americans and slower for African Americans. If you dig into that, you find that single motherhood and high school dropout rates account for the differences in mobility, with a profound effect on the mobility of all races and income groups. With this, mobility seems to be more of a sociological issue than an economic one, according to Conrad.
The Federal Reserve's economic actions to address income equality— such as high taxes on the rich, regulation and entitlements— are impeding growth and worsening the original problem.
"The Fed does come in for criticism in trying to pump up growth by printing money," Conrad said. "I don't think it will work. You've got to remember that the Federal Reserve doesn't produce anything, it doesn't create anything that would actually increase growth."
He continued, "But the argument I made in my first book was that the money would largely sit unused because we're bumping up into other constraints to growth which is our willingness to take risks so, for example, borrow that money and put it to work. It would sit unused and create neither inflation nor growth. So I think it's largely to destabilize the economy a bit. It's made financial markets harder to interpret but it's had actually very little effect, I think, on the economy, so a lot of risk for not much benefit."
To view Conrad's full interview with Dawn J. Bennett, click here.