Kashkari: 'Great hope for our future'
By Prairie Business
EDITOR'S NOTE: On Monday, UND's Eye of the Hawk lecture series will feature a town hall meeting with Neel Kashkari, president of the Minneapolis Federal Reserve.
The event will include brief remarks by Kashkari, followed by an open-mic Q&A with the audience moderated by UND President Mark Kennedy. The event will be held from 5:30 to 6:30 p.m. Monday in the Gorecki Alumni Center on the UND campus; for more information and to register, click on the "News & Events" and "Conversations with the Fed" tabs at minneapolisfed.org.
In recognition of the event, the Herald today presents a Q&A with Kashkari. The Q&A was arranged by Prairie Business magazine, the Herald's business publication, for the magazine's October issue.
Prairie Business: President Kashkari, thank you so much for answering these questions from Prairie Business magazine. Our questions will center on the "workforce shortage" that so many in the Dakotas and western Minnesota say is their No. 1 barrier to growth.
When you spoke to the Sioux Falls (S.D.) Rotary in August, some Rotarians complained about a workforce shortage, and you told them, "If you're not raising wages, then it just sounds like whining. ... Are any of you planning to raise wages in the next year or two? Or are you just complaining that you can't find workers?"
Could you elaborate?
Kashkari: It's basic economics: When a resource (labor, in this case) becomes more scarce, its price (wages) should increase. My point is not to call anyone a whiner, but to suggest that an absence of wage growth may be a signal that the labor market is not as tight as it seems.
One of our mandates at the Federal Reserve is to support maximum employment, so we closely monitor this type of data and take it into consideration when making policy decisions.
Q: You also pointed to western North Dakota's success at drawing workers once the Oil Boom drove up wages there. What lesson should employers learn from the Bakken area's example?
It might be an extreme case study, but the Bakken oil boom has two main lessons. First, in a really tight labor market, you see faster wage growth.
Second, workers will respond to higher wages. During the boom, people were moving to western North Dakota from all over the country to take those high-paying jobs.
Q: The response from many employers in our region almost certainly will be, "We'd like to raise wages, but we can't afford to." Many likely would add, "Our profits are thin as it is." How would you counsel the business owners and CEOs who say they're in that situation?
I hear that said enough that I'm sure it's true for a lot of employers. I'm not in a position to tell anyone how to run their business, and as a policymaker, I have a different focus.
Congress has charged the Federal Reserve with two goals: maximum employment and price stability. We want unemployment to be as low as possible without triggering inflation.
The challenge is in trying to include everyone who wants to work in the job market and not just looking at the overall unemployment number, which might look low and lead us to believe that we've achieved "maximum" employment.
One way for us to see if there is still room for more people to join the job market is to look at wage growth. Right now, wage growth remains relatively modest, so that tells me that there's room in the economy to get more people into new jobs.
Q: Some civic leaders think the way to boost wages overall is to mandate an increase in the minimum wage. What's your view?
There are winners and losers when cities raise the minimum wage, and policymakers need to be aware of the tradeoffs. Each city is in the best position to make those judgments for itself.
Increasing the minimum wage is great for those who already have jobs and hopefully get to keep their jobs, but it may make finding a new job even harder for those currently unemployed.
Personally I think a better solution is a strong job market, one in which businesses are competing for workers, more jobs are available and wages are rising for everyone. This scenario doesn't have some of those potential unintended consequences.
Q: What role do you see immigration playing in this issue and the region's economy?
Immigration policy and economic growth are closely tied. Population growth has historically supported economic growth because more people means more purchases of things like homes, cars and refrigerators.
If population growth slows, either through a policy that restricts immigration or because we are having fewer babies, then economic growth will also decline.
So this just boils down to math. Do we want economic growth, or not? If yes, we need to continue to welcome people into our country.
Q: Would your message be any different for business owners in rural areas? What success stories have you encountered of small-town companies or communities that are thriving?
In my travels throughout the Ninth District, I've seen so many examples of thriving communities that it gives me great hope for our future.
Some common threads among those doing well include: First, invest in your people and in your community. The best way to attract and keep workers is to for them to have a good place to live and to raise their families.
Second, embrace new communities. From the fields of North Dakota to the Iron Range of Minnesota, the Ninth District is a region built by immigrants, and this is no less true of the places that are thriving today.
Third and finally, focus on your strengths. Not everywhere can or should be Silicon Valley. Communities across this region have their own competitive advantages that they can build upon — advantages such as a strong agricultural sector, robust transportation infrastructure, proximity to research universities, access to natural amenities, and most important, talented people eager to contribute to their community.
It's up to each area to identify their strengths and build on them.
The Ninth District is a diverse region, and seeing so many different communities thrive in their own way is one of the things I enjoy most in my travels.