To restore faith in markets, at a time when income inequality is on the rise-including inequality at birth-countries will have to work to provide effective access to schooling and healthcare for all, a non-discriminating job market with many jobs, equal opportunities for further advancement regardless of gender, race or background, Reserve Bank Governor Raghuram Rajan said on Saturday.
This will increase the perceived legitimacy of wealth and society’s willingness to broaden the areas where it is spent, Dr. Rajan said delivering a lecture at on “Money and Education” at the Shiv Nadar University. “You should earn by creating perceptible value and, equally, spend to create value.”
There was a need, he said, to make degrees more affordable. One part of the solution is student loans, but we have to be careful that student loans are repaid in full by those who have the means, while they are forgiven in part for those who fall on bad times, or those who take low paying public service jobs, he said.
While inequality between countries is diminishing today, income inequality within countries is on the rise-with some people having colossal incomes and others worrying about the next meal, he said. “Even well-run market economies seem to be favouring those who already have plenty.”
In part, this is because skills and capabilities have become much more important in well-paid jobs, and those born in good circumstances have a much better chance at acquiring these. The winner-take-all nature of many occupations, where a few of the most capable entrepreneurs and the best workers take most of the income accentuates the value of early childhood preparation; and hence the benefit of being born to the right parents in the right community.
He advised students to earn by creating perceptible value and, equally, spend to create value. “Not only will your work be more enjoyable, but you will strengthen the economic freedoms we sometimes take for granted.”
