Yellen: Workers Should Be Paid More So They Can Afford More of Their Employers’ Stuff

KING: "If 2/3 of the American economy is driven by consumer spending and the income is going to the top 1 percent and not to the people who are doing the spending, isn't that a contributing factor itself to the sluggish economy? The lack of demand?"
YELLEN: "Well, I mean, we are trying to stimulate demand. Greater spending is the key to trying to get the economy to operate."
KING: "But what I'm saying is that consumers that generally don't drive the economy don't have -- aren't getting the income."
YELLEN: "That clearly is a factor of the pace of expansion we've seen, yes."
KING: "And this, the famous book that has just come out by Mr. Piketty that talks about the drag worldwide by income inequality. Have you had time to digested that? It's only 1,000 pages."
YELLEN: "I can't say I've gotten to the last page of it, but I'm certainly familiar with the book."
KING: "Well it just seems to me it's something -- again, going back to the basic principle that 2/3 of our economy is driven by consumer spending. Henry Ford 100 years ago this year had this insight, doubled the pay of his workers so they could buy his cars. And we've got to start thinking that way again."
YELLEN: "Well many economists have argued that the distribution of income does matter to the pace of spending. And you know, I don't know of utterly clear evidence on this topic, but it does make sense to assume that households that would tend to spend a great deal of their income when income distribution shifts in the direction of those who are wealthier and likely spend at a margin less of their income, that creates a drag on the economy. And a number of economists have certainly made that argument."