To fight growing inequality, Fed Chair Yellen outlines "building blocks of opportunity"

Federal Reserve Chair Janet Yellen expressed deep concerns in a speech Friday about growing inequality in the United States. Citing data compiled by the Fed, she outlined the accelerating divide in incomes and wealth between the top 5 percent of households and everyone else. Her remarks identified four "building blocks of opportunity" that she believes would help ensure that upward mobility is within reach of all Americans.

— Resources Available for Children

For most families, "public funding plays an important role in providing resources to children that influence future levels of income and wealth," Yellen said. In particular, she expressed support for government-subsidized early childhood education, which has been shown to improve outcomes for lower-income children. But gains in enrollment and funding have stalled since 2010 due to budget cuts made in the wake of the Great Recession.

— Affordable Higher Education

Since 2001, college costs have risen far faster than income has in most U.S. families. That has resulted in a dramatic rise in student loan debt, which has quadrupled from $260 billion in 2004 to $1.1 trillion this year. "Higher education has been and remains a potent source of economic opportunity in America, but I fear the large and growing burden of paying for it may make it harder for many young people to take advantage of the opportunity higher education offers," Yellen said.

— Business Ownership

Building a business has "long been an important part of the American dream," Yellen said. Business ownership is a significant source of wealth and can be an important way for households to move up economically. But data show that it has become harder for many families to start businesses, and the pace of new business creation has fallen in recent decades. "One reason to be concerned about the apparent decline in new business formation is that it may serve to depress the pace of productivity, real wage growth and employment," she said.

— Inheritances

While large inheritances play a big role in the top 5 percent of households, they are also common among households below the top, Yellen said. "Considering the overall picture of limited resources for most families that I have described today, I think the effects of inheritances for the sizable minority below the top that receive one are likely a significant source of economic opportunity," Yellen said.