Fed Chair Janet Yellen’s four ways to make it in America by John Kell @FortuneMagazine October 17, 2014, 11:45 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Federal Reserve Chair Janet Yellen — perhaps aware we now live in a Buzzfeed world dominated by lists —has outlined four building blocks of opportunity in America. In a speech Friday, Yellen said the growth of economic inequality in the United States “greatly” concerns her. She outlined four points in her speech, which broadly addressed economic inequality and how the U.S. can make it better. 1. Family resources for children The Fed chair said research shows that future earnings for today’s children can be enhanced by a number of family resources, including homes in safer neighborhoods with good schools, better nutrition and health care, early childhood education, and intervention for those with learning disabilities. It shouldn’t come as a surprise that Yellen maintains that affluent families have more money to pay for those resources, and Yellen — pointing to data from the Fed’s most recent Survey of Consumer Finances — says the gap in wealth between families with children at the bottom and top of levels of society has grown steadily over the past 24 years, with the pace accelerating recently. How does the U.S. fix such disparity? Yellen says social safety-net spending is important, as is public funding of education. “Research shows that children from lower-income households who get good-quality pre-kindergarten education are more likely to graduate from high school and attend college as well as hold a job and have higher earnings,” she said. Yellen also noted that the U.S. can’t just throw money at public education and hope that it improves economic inequality. “Better-quality teachers can help equalize some of the disadvantages in opportunity faced by students from lower-income households,” she said. 2. Get an education Yellen said a higher education is the other key cornerstone of economic opportunity for Americans. “The premium in lifetime earnings because of higher education has increased over the past few decades, reflecting greater demand for college-educated workers,” Yellen said. But the Fed has sent some mixed messages on that point, with a Wall Street Journal story last month noting that roughly a quarter of college graduates with jobs are earning barely more than those with only a high-school diploma. The Journal’s source for that story was new research released by the Federal Reserve Bank of New York. The Journal has also reported that some college, without obtaining a diploma, could be worse than none at all. In her speech, Yellen focused more on costs, rather than the data that suggest college might not be a wise investment for some students. Yellen said outstanding student loan debt quadrupled from $260 billion in 2004 to $1.1 trillion this year. That debt burden is higher for families with lower net worth, Yellen said. 3. Start a business Yellen admits starting a business helps fewer families, but is still an important source of opportunity worth mentioning. While owning a business is risky, and most new businesses close within a few years, Yellen said research shows business ownership is associated with higher levels of economic mobility. But she warned that it has become harder to start a new business today, and the pace of new business creation has gradually declined over the past couple of decades, Yellen said. 4. Get an inheritance This is likely the most limited source of economic opportunity for Americans. Yellen points out that the average inheritance reported by those in the top 5% who receive them was $1.1 million. That is far above the $183,000 average among the next 45% reported by those that receive an inheritance, and the $68,000 reported among the bottom half of households. Still, Yellen says she believes there are enough inheritances given to families that aren’t necessarily rich, and thus it plays a role in helping families economically. That group is fairly limited. Only 11% of U.S. retirees definitely expected to leave an inheritance to their children, according to a HSBC report on global retirement trends. Still, that report wasn’t all doom and gloom. HSBC reported that Americans expected to leave nearly $177,000 to their loved ones. That’s far higher than the roughly $93,000 value of inheritance Americans expected to receive.