show lower levels of inequality at any point in time than measures that exclude such payments ; the difference reflects the progressive nature of our system of taxes and transfers. however, analysis of these broader measures indicates that, over time, tax and transfer policies have not materially altered the general tendency toward greater inequality. data on the distribution of income in the top 1 percent comes from an update of piketty and saez ( 2003 ), available at http : / / elsa. berkeley. edu / ~ saez / tabfig2004prel. xls. appear as wage inequality when measured at a given time ; but as long as the new employee can expect to gain experience and someday earn a higher wage, inequality arising for this reason should not particularly concern us. studies that track individuals'positions in the earnings distribution over time suggest that, in a given five - year period, almost half the population moves from one quintile of the distribution to another, and the percentage moving between quintiles increases over longer periods ( mcmurrer and sawhill, 1996 ). however, economists disagree about whether income mobility has changed significantly over time ( lee and solon, 2006 ). if it has not, then factors related to mobility cannot go far in helping to explain the upward trend in measures of short - term inequality. 7 the sources of changes in the level and dispersion of economic well - being what are the underlying sources of these long - term trends in wages, incomes, and other measures of economic well - being? economists have established that, over longer periods, increases in average living standards are closely linked to the growth rate of productivity – the quantity of goods and services that can be produced per worker or per hour of work. since 1947, hourly labor productivity in the u. s. nonfarm business sector has increased a robust 2 - 1 / 4 percent per year, and productivity growth has been close to or above that figure in most of the past ten years. this sustained productivity growth has resulted in large and broad - based improvements in the standard of living. when discussing inequality, we should not lose sight of the fact that the great majority of americans today enjoy a level of material abundance – including the benefits of many technological advances, from air conditioning to computers to advanced medical treatments – that earlier generations would envy. that being said, understanding the sources of the long - term tendency toward greater inequality remains a major challenge for economists and policymakers. a key observation is that,

a ten - day holding period and a 99 percent confidence interval, thereby creating potential arbitrage opportunities between the banking book and the trading book. the u. s. agencies issued their proposals to revise market risk capital requirements at the same time as the basel ii proposals, and we seek comment on the market risk proposals as well. notably, in the united states we would continue to have banks with significant trading book activity hold additional capital for the risks inherent in that line of business, whether they remain basel i banks or move to basel ii. given the international composition of this audience, i want to offer a few thoughts about the crossborder issues related to basel ii implementation. as you know, the u. s. agencies participate with other national supervisors in the accord implementation group and other groups to identify differences in implementation and discuss possible ways to harmonize rules and thereby reduce burden on crossborder banking organizations. we recognize that the adoption of differing approaches to basel ii by various countries may create challenges for banking organizations that operate in multiple jurisdictions, but it is good to remember that cross - border banking has always raised specific challenges that supervisors from various countries have worked hard to address. let me assure all bankers here that supervisors are aware that the process of adopting national versions of basel ii has heightened concerns about home - host issues. the federal reserve and other u. s. agencies have, for many years, worked with international counterparts to limit the difficulty and burden that have arisen as foreign banks have entered u. s. markets and as u. s. banks have established operations in other jurisdictions. we encourage bankers that have questions and concerns about home - host issues to promptly communicate with their regulators in all jurisdictions so that the issues can be addressed. enterprise compliance risk management and bsa / aml i would now like to turn to another area of the financial sector that regulators are focused on : compliance - risk management. this type of risk may result when an organization fails to comply with the laws, regulations, or standards or codes of conduct that are applicable to its business activities and functions. the federal reserve expects each banking organization to have a compliance infrastructure and culture in place across the entire institution that can identify and effectively control the compliance risks it faces. to create appropriate compliance - risk controls, organizations must first understand risks across the entire entity. managers should be expected to evaluate the risks and controls within their scope of authority at least annually. i also emphasize the need for the board of directors and senior management to