Wage inequality is a concern for even the top bankers in the country, as New York Fed president William Dudley told an audience at Rutgers University in New Brunswick yesterday that the problem negatively impacts opportunities for economic mobility.
“One of the things I’m very focused on is income mobility,” said Dudley, who’s led the New York Federal Reserve Bank since 2009. “The fact is, income mobility in the United States isn’t very good.”
While there are signs wages are on the rise in New Jersey, the state still ranks 43rd out of 50 when it comes to income equality.
Dudley, a Cranford resident, met with NJ Spotlight after the event and noted that things like education, job training, and transportation are important factors because they can help create more opportunities.
“I put the emphasis on opportunity,” Dudley said. “You really want to make sure that people that are at the lower end of the income scale have an equal set of opportunities to better themselves.”
“I think it’s important that success is driven, not by where you were born or who your parents are, but success is born by your own work ethic,” he went on to say.
New governor will have to perform ‘balancing act’
Dudley also spoke with NJ Spotlight about a number of other economic issues, including New Jersey’s huge unfunded pension and retiree-healthcare obligations. That will be a “major issue” for incoming Gov.-elect Phil Murphy to take on once he assumes office in mid-January, he said.
“There’s a balancing act that the new governor is going to have to play, which is, how do I fund the pension liabilities more fully, but at the same time don’t try to raise the tax burden so high that I drive the residents away,” Dudley said. “People can obviously vote with their feet. I think that’s going to be a fundamental challenge in New Jersey.”
The Rutgers event was part of an ongoing Fed initiative that takes Dudley and other staff members on visits throughout the Federal Reserve System’s 2nd District, which includes 12 counties in New Jersey, all of New York, Fairfield County in Connecticut, and Puerto Rico and the U.S. Virgin Islands. He was also slated to tour Port Newark’s container terminal and visit with Newark Mayor Ras Baraka during yesterday’s trip.
Dudley became the New York Fed’s president and CEO amid the Great Recession in 2009, replacing Timothy Geithner, who had been picked to be secretary of the U.S. Treasury by then-President Barack Obama. Dudley said going on the regional visits during his tenure has provided him with a way to see things that don’t always show up in the economic data.
“Every trip there are things that we learn,” Dudley said. “Life is not a bunch of statistics.”
NJ expansion since end of recession ‘less robust’
At Rutgers yesterday, Dudley spoke about the current pace of New Jersey’s economic recovery as he also took questions on topics that ranged from the impact of virtual currency to an upcoming change in leadership at the Federal Reserve’s Board of Governors.
During the NJ Spotlight interview, he said that while New Jersey has been in a period of expansion in the wake of the recession, the expansion here “has been less robust than the country as a whole.”
“If you look at New Jersey, it’s quite disparate in terms of performance,” he said. “The locations that are really close to New York City have been sort of doing the best, like Hudson County. Some of the other parts of New Jersey have been lagging behind.”
New Jersey’s unemployment rate has gone up several times in recent months; it stood at 4.9 percent in October, well above the national jobless average of 4.1 percent, and higher than the 4.8 percent rate of the same time last year. And while the state is still up about 22,000 jobs since the start of 2017, Murphy, a Democrat, was able to seize on the uneven economic performance this year during his successful campaign against Republican Kim Guadagno, Gov. Chris Christie’s longtime lieutenant governor. To help reignite the state economy, Murphy has promised to put more emphasis on technology and startups, increase the minimum wage, and boost funding for public education, including providing free community college.
Amazon in Newark would be ‘transformational’
Dudley also pointed to the role of tech incubators and startups when asked about things that state policymakers can do to help encourage economic growth. But he cautioned against using generous tax incentives to lure companies to relocate to a state, saying that’s generally a “zero-sum game.” He did make an exception when discussing the ongoing, bipartisan push in New Jersey to use lucrative state and local tax breaks to entice retail-giant Amazon to build its second corporate headquarters in Newark. If Amazon chooses to build in Newark, the project could generate as many as 50,000 new jobs.
“The whole Newark thing and Amazon, I think, is a little different just because if Amazon were to come to Newark, I think it truly would be transformational,” Dudley said.
On the minimum-wage issue, Murphy has said he would like to hike New Jersey’s minimum hourly rate of $8.44 up to $15 during his first term in office. Democrats, who control the state Legislature, have announced that they share a similar goal, though Republicans are urging a more measured approach.
Dudley’s view on minimum-wage policy is that the hourly rate should be linked, as a percentage, to the median wage. “I think if you had a minimum wage set at some percentage of the median wage, it would be better for individuals because they’d actually have a much smoother path of their wages over time, and it would be better for businesses because they could actually plan what their wage growth is likely to look like over time,” he said.
According to U.S. Census data New Jersey’s current median wage is just over $20 an hour.
“You still have a political decision about what percentage to use, where do you strike the minimum wage relative to the median wage? That’s not something I am going to opine on, that’s a political decision,” he said.
Dudley, who recently announced that he plans to step down from his Fed post later this year, also weighed in on the notion of creating a state-run bank, which is something that Murphy made a central issue during the campaign. Right now, only one other state, North Dakota, operates such an institution, but Murphy believes it could be used in New Jersey to generate more investment in things like infrastructure and small-business lending.
“If you can identify some areas that are underserved, where the economics could actually work, and you could insulate the state bank from political influence, I think I would be very open-minded to that,” Dudley said. “I certainly don’t think it’s unreasonable to have a state bank, as long as it satisfies those tests.”