share of national income accruing to workers a second adverse development in recent years has been the apparent reduction in the share of overall national income that accrues to workers. here i will be brief and suggestive because the scholarship is far from settled. but the basic trends in the data are troubling. labor ’ s share of total income generated in the nonfarm business sector has been on a downtrend since the 1980s and has fallen sharply since the turn of the millennium. it stood at 56 percent at the end of 2013, the lowest level since the bls began collecting data on the measure in 1948. to be sure, various conceptual and measurement challenges make it difficult to compute labor ’ s share of income with any degree of precision. however, taken at face value, these data have significant implications for the distribution of income in our society, given how skewed the holdings of capital are. economists have focused less attention on the factors underlying the apparent decline in labor ’ s share of income than they have on the rise in income inequality in general, but among the candidates are technological change, which has allowed for the substitution of capital for labor in the handling of routine tasks, an increase in firm bargaining power, and perhaps a decline in competition in product markets. the increase in inequality of the trends i have identified, the one that has received the largest amount of press attention recently is the rise in income inequality. while income inequality has been increasing since the 1970s, over the past two decades the process has been characterized by what some have called polarization, with those at the top of the distribution accumulating a significantly larger share of income, those at the bottom of the distribution experiencing modest relative gains, and those in the middle of the income distribution falling further behind in relative terms. gauging by one fairly comprehensive measure of income used by the congressional budget office, the share of income garnered by those in the top 1 percent of the distribution more than doubled between 1979 and 2007 to about 17 percent, while the share accruing to those in the 1st through 80th percentiles fell 9 percentage points. 9 and while it is true that those at the upper end of the income distribution were disproportionately affected during the financial crisis, with the result that inequality actually fell a bit in the wake of the recession, high earners also appear to be benefiting disproportionately from the recovery. thus, the crisis does not seem really to

areas has been the target of much of the budget restraint in recent years. even in the area of physical infrastructure, we have fallen behind past efforts. after a surge associated with fiscal stimulus during the recent recession, public spending on infrastructure has tumbled, resulting in the slowest growth ( 1 percent ) in the state and local capital stock since wwii. i certainly am not intending here to join the broader debate on fiscal policy, either short or longer term. but i do note that fiscal policymakers could promote the longer - term prospects of the nation by increased spending in areas that are likely to yield increases in living standards. the amount of increased investment spending that could reasonably be absorbed would be quite modest in comparison with the very large amounts associated with major fiscal issues such as health - care expenses. and even a strong investment agenda would not be a complete response to the economic challenges i have discussed. but, like monetary policy, it could play a useful role. conclusion the longer - term challenges to the american economy that i have identified this evening are real. but i certainly do not regard a continuation of these trends as inevitable. on the contrary, the american economy is still possessed of great advantages and potential that, while always and necessarily evolving, have served us well over the years. 20 my principal aims this evening have been, first, to echo those who have been drawing attention to these challenges in recent years and, second, to encourage more discussion and debate of the specific policies that can best help us meet these challenges. as should be apparent in my remarks on monetary policy and an investment agenda, i believe that there are policies already developed and available to us that can contribute to this effort. my hope is that such policies will be pursued and that others, perhaps yet to be developed, will follow. for more details on the u. s. infrastructure, see american society of civil engineers ( 2013 ), 2013 report card for america ’ s infrastructure ( pdf ) ( reston, va. : asce ) ; and her majesty ’ s treasury ( 2006 ), the eddington transport study – the case for action : sir rod eddington ’ s advice to government ( pdf ) ( london : her majesty ’ s stationery office ) these advantages – such as the country ’ s substantial natural resources, a stable but adaptive legal framework for economic activity, a dynamic labor market, and a fostering of entrepreneurship – have contributed to productivity growth that is estimated to have averaged about 2 - 1 / 4 percent over the