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“Workforce Shortage” Sounds Like Low-Wage Employers’ Whining to Kashkari

Fearlessly fielding questions from the Sioux Falls Rotary yesterday, Minneapolis Fed President Neel Kashkari didn’t just rebuff the local anti-immigrant crowd. He also tweaked Governor Dennis Daugaard and South Dakota’s business leaders by telling them to quit confabulating a “workforce shortage” and pay better wages [bracketed times refer to the Fed video below]:

[4:03] I’ve heard already—we did some preparation for this trip. I’ve heard from a lot of folks that you all are short workers. So I want to hear… is that true? What types of workers are you looking for? What kind of pressure is that putting on wages?

[23:50] I talked about how the unemployment rate in the country has come down, yet we’re not seeing wages climb. So a question that I’m asking everybody is, if you’re complaining about you can’t find workers, why aren’t you raising wages? That’s what we at the Fed are looking for signs of, that tight labor market leading into higher wages.

[28:45] Are any of you planning to raise wages in the next year or two? Or are you just complaining about you can’t find workers and you’re not going to raise wages? Because I can tell you something… if you look at North Dakota and the oil boom, if you raise wages, people respond, and you can find workers. So are you really struggling to find workers, if so, the proof for me is you’re raising wages. If you’re not raising wages, then it just sounds like whining [Neel Kashkari, Minneapolis Federal Reserve President, remarks to Sioux Falls Rotary Club, 2017.08.07].

That last line about whining drew applause from some of the Rotarians.

Raise wages to recruit more workers—why do we never hear that from Governor Daugaard or other leaders in our frequent discussions of South Dakota’s labor needs?

The Minneapolis Fed provides the full video of its President Neel Kashkari’s Q&A at the Sioux Falls Rotary yesterday.



  1. Wayne B. 2017-08-08 08:57

    Unskilled wages are pretty high in Sioux Falls. Advertised wage at Little Caesar’s is $13.00 per hour for non-manager. Panda Express was $12.00 if memory serves.

    I can’t tell you what other positions are bringing, but the median household income in Sioux Falls is definitely above that of South Dakota’s writ large.

  2. Cory Allen Heidelberger Post author | 2017-08-08 09:06

    Hmm… are the pizza and burger shops the ones making the noise about the workforce shortage and demanding pro-business education reforms? Or are those low-skill employers actually hewing more to traditional supply-and-demand thinking in the labor market?

  3. jerry 2017-08-08 09:53

    I have owned food service and can tell you that all hands in the kitchen, be it dishwashers, cooks, or line cooks in the backroom are skilled labor. The servers that get the orders into the backroom are also professionals that deserve the wages they receive for jobs well done. If anyone thinks they are not, jump on it and show me how it is done. Even though many may be young, they are willing to be the professionals that know and understand the importance of their work. Many have to take state exams on how food is prepared prior to cooking, how to keep it fresh and cooled properly and when it must be discarded. They are worth every nickel of the wages they receive.

  4. Susan Wismer 2017-08-08 10:00

    If there were half as many fast food places, they’d be able to afford to pay their help better with the increased sales per establishment, right? We tell every single mom and student to get a job that hardly pays enough to pay the childcare expense. By virtue of that low-paying job, the employer palms off onto society the real costs of that employee: eligibility for SNAP benefits, housing and fuel assistance, earned income credit, Medicaid… What would the food service market look like if it really had to pay its own way?

  5. Roger Elgersma 2017-08-08 10:19

    If wages went up with inflation that last forty years we would have a minimum wage of fifteen dollars and hour. So where are these people getting more than what minimum should be. Still, huge need for higher wages. It still takes twice the hours at thirty percent over minimum to go to college as thirty percent over minimum when I was young. We could get thirty percent over minimum driving a tractor on a farm. So just because minimum is so low does not make thirteen dollars an hour sound good. With productivity increases we would have minimum of $18, but some of that should go to the computers that help increase productivity. Back them we could balance a budget no matter which party was in power. Partly because all those workers were paying more taxes. So now with the workers paying less, Thune was saying the other day that we should follow the lead of other countries and lower corporate tax. He does not need to blame anyone but himself for unbalanced federal budgets since he has to position to do something about it and just pushes the other way. With South Dakota being the lowest wage state, if he does not want corporations to pay taxes, just who does he think will be paying more?

  6. South DaCola 2017-08-08 10:24

    Thank You Jerry, as someone who has worked on and off full-time and part-time for almost 30 years in restaurants, you are right, it takes ‘skills’ to work in that industry. You are also correct about food safety, and also alcohol serving training. I believe the current online course of alcohol is over 3 hours long. Some people assume hospitality workers are just too stupid to get a real job, fact is, if you are a good server, you can make almost twice as much as the cubicle rats.

  7. jerry 2017-08-08 10:32

    That statement Susan is one of the reasons you never became governor. Is that snark you are peddling? Earned Income Credit for one? What on earth are you speaking of? Read up on its history and then lets talk. Less fast food would not raise wages, it would lessen them. Democrats believe in competition, republicans believe in monopoly. Get that stuff right and run again.

  8. Rorschach 2017-08-08 21:17

    By the way, Neel Kashkari is a Republican who ran for US Senate in California a couple of years ago

  9. Nick Nemec 2017-08-08 21:36

    At last someone tells the SD business community the truth. The law of supply and demand works, if you can’t find workers with the skills you demand at the wages you are paying then maybe you aren’t paying high enough wages. If you build it they will come.

  10. Clinton Brown 2017-08-09 07:59

    I agree that wages here, especially in manufacturing/industrial, need to be higher but I can also tell you from experience with companies elsewhere that the shortage is all over. There just aren’t enough people for the available work and that is the truth.

  11. Cory Allen Heidelberger Post author | 2017-08-09 08:12

    Jerry, I disagree with your assessment of Susan’s economic observations. She is absolutely right that low-wage employers persist by relying on government subsidies through welfare. We’re picking up their tab. We could use a governor to make that point instead of bending over backward to avoid mentioning wages in workforce talks.

    Clinton, Nick contends with theory and as Kashkari showed in practice, there weren’t enough people to drill the Bakken. Big Oil offered big checks, and people flocked to the tundra from all over the place.

    Ror, Kashkari ran for Governor, placed second in the top-two primary, and then lost to Jerry Brown.

  12. Clinton Brown 2017-08-09 08:44

    Yeah, I saw that also in the Bakken and each industry has it’s own “story.” You are right and they did flock to the area but if you look at relocation for jobs and compare it to the last 70 years we have the lowest percentage willing to go where jobs are in US History. Oil/gas also has a history of people going where the money is as well. Other industries do not. There are many different variables and that is the problem. The equation isn’t the same in the world of work. Each business, each industry and each sector has a different story.

  13. jerry 2017-08-09 08:59

    If you go to many places that serve food, you will find that many of those there are also working at other jobs too. So this is there second job or maybe third job. I singled out the Earned Income Tax Credit as something that would need to be looked at for its history. That program is basically a stimulus package that immediately goes back into the economy as mom and pop spending. Get rid of that and you get rid of a jolt to the economy when the economy has slowed from holiday spending.

    Medicaid spending is another slap as many of the workers are young women who need Medicaid to cover the expenses of pre natal care, post natal care as well as the delivery itself. With Medicaid, there are no co pays and there are no medical expenses that leech the earnings of the low income workers so they can go to the doctor to be treated when necessary. Susan gives ammunition to the right wing here in South Dakota with reasons for not expanding Medicaid with her analogy. Each one of the social costs described, be it utilities, housing help etc., not only help the low paid worker, they also go directly back into the economy at least twice more in spending and taxes generated. Veterans and the disabled work in these food places so it is not just young women who are subsidized with this kind of help.

    Child care is a big deal. There should be state sponsored child care for the workers no matter if they are male or female, the cost of child care forces the needs for all of the social needs. Look at it this way. If you make 8 bucks an hour and you are paying 6 bucks an hour for your kid while you are working, how is that gonna work for you?

    As a governor, shouldn’t you do something about that? Shouldn’t there be a demand for family leave that would also be paid for by “palming off”? As governor, shouldn’t you demand Medicaid Expansion? Not a peep about that, just blaming employers for the wages paid. BTW if you look at wages paid that are indicated by Wayne B, ask yourself the total would be after 32 hours of work per week. Then take out all of the withholding. Kashkari is correct, the wages need to be raised to pay workers in all fields. $15.00 an hour is a fair rate to start. I fail to see how curbing food service would somehow magically raise wages. When you have too many workers for to few of jobs, wages do not go up, competition for those jobs makes wages go up.

  14. mike from iowa 2017-08-09 11:28

    Does McDonalds and WalMart still urge employees to apply for food stamps and medicaid?

  15. jerry 2017-08-09 11:55

    If they qualify for food stamps and medicaid, they should apply. Both of these companies apply for and get subsidies so it is only fitting for their employees to do the same. They sit on property that was granted TIF’s by the local governments or encouraged by the state to set up shop with low interest loans on top of the subsidies.

    We miss the point of how wages and employers should walk together. They both need one another to survive. A business cannot operate without having a product to sell and the sales must be able to include workers of all classes. That is why even the huge oil companies, fast food giants and all in between depend on subsidies to not only help in the exploration of minerals, but to be able to provide more services to us all.

    For some reason, Democrats are reluctant to have this discussion while republicans rant about how it does not fit into any mold but to explode the deficit while they take those same subsidies for themselves.

  16. Clinton Brown 2017-08-09 12:42

    Reading all of these comments is just ridiculous. You all are missing the point and arguing over details that do not matter in the long term of employment. Plus your focusing on industries that will probably come and go. We are already seeing retail go away. Fast food jobs? FFS, come on. None of these jobs are the middle class.

    The future of work has entered the automation age now. The kids in school today will have jobs that do not even exist today. Wake up. Quit squabbling over regulations, subsidies and political BS rhetoric.

  17. jerry 2017-08-09 12:55

    Mr. Brown, what do you see as long term employment for the middle class?

  18. Jenny 2017-08-09 14:03

    Clinton has the typical SD ‘pub thinking that wages don’t really matter, so which is exactly why young people get the hell out of SD once they’re out of college.
    I’ll say it again, WAGES MATTER! IT IS EXPENSIVE TO LIVE! PAY BETTER, SD or you will continue to not find workers!

    All SD ‘pubs, should read the book ‘Nickel and Dimed on not getting by in America’ by Barbara Ehrenreich. The GOP owns the wage problem, can’t blame the Dems. We’ve been fighting for a living wage for years.
    Billy Joel and his song Allentown tells it the way it’s been the last 50 years.

  19. DarkwingD 2017-08-10 13:43

    Get rid of the subsidies and the unequal tax breaks (heck, I’d lower taxes equally for everyone; that’d be win-win for all) and suddenly these hucksters would raise their wages and pretend that they never whined in the first place.

    The sad truth is, the employers have a right to hire whomever they wish and at any price, just as how you and I have the right to work with whomever we want at any wage. It’s a two-way street, which is how markets determine optimal prices. But because government is involved in picking winners and losers AT YOUR DIME, they’d rather lie about the real problem instead of pointing at Uncle Sam for destroying the labor market. Everyone wants to be part of the gravy-train; not admit to themselves that perhaps, it’s wrong to meddle in private affairs.

  20. jerry 2017-08-10 15:09

    Private affairs have a limit though. The minimum wage is a benchmark to start and then the employer can make his or her own choice to raise the wages for the employee or not. Markets are determined by speculation, take a look at the over priced and over heated Wall Street so yeah, their is a practice of picking winners and losers that we taxpayers hope is for the winners.

  21. Clint Brown 2017-08-14 08:28

    My job is a headhunter. If you want long term employment then you need to be in fields that offer that opportunity because your skills matter. Hourly fast food jobs or similar unskilled jobs are not a guarantee and at the bottom of the ladder. Not saying they are bad or not needed. Just a higher risk for unemployment and lower pay. It is what it is.

    Now, if you want to get serious then start looking at the world of work. Look at what is happening and get the skills necessary. You also need solid work ethic and the ability to demonstrate to your employer or future employer that value you bring. A job is not something you are entitled to. A “living wage” is also not something you are entitled to. Life isn’t fair, wake up and realize it. Get to work and be productive.

    We should be focusing on education, skill development and adjusting our society to recognize where the demands are now and in the upcoming. Instead you bicker on a statute to create a living wage or minimum wage hike because you think a law will create something that is unattainable nor desired by a free market. You throw out BS rhetoric and class warfare, political charged comments instead of ACTUALLY knowing what is going on.

    Get educated.

  22. Porter Lansing 2017-08-14 10:23

    – Workers in the richest country on Earth are 100% entitled to a living wage. The Ethical Trade Initiative code (clause 5) describes a living wage as “enough to meet basic needs and to provide some discretionary income.” Basic needs include a standard level of nutrition, housing, transportation, energy, healthcare, childcare, education and savings within regulated working hours (e.g. without overtime hours).

    – Workers on living wages are likely to be more productive – because they are better motivated and less likely to leave – reduced attrition means lower recruitment and training costs.
    – Likelier to be healthier – reducing loss of working hours due to sickness.
    – Your brand reputation will also be enhanced; customers are increasingly sensitised to the working conditions of those that make the products they buy.
    – Workers on low wages have to rely on benefit payments to survive. If they received a living wage, governments could cut benefit spending.

    What you can do to help workers attain their entitlement of a working wage.
    – Incentivise employers to pay living wages – e.g. By increasing orders to those suppliers.
    – Purchase goods and services only from employers willing to pay a living wage.
    – Advocate for mechanisms to set national minimum wages that equate to living wages

    – As with any other cost increases such as raw material costs, or indeed reductions such as fuel costs, the value chain as a whole will have to adjust. It may be possible to accommodate these increases out of existing margins, or through increased productivity and efficiency, it may be however that the value chain as a whole from primary producer to consumer needs to accommodate such changes.

  23. Clint Brown 2017-08-14 11:03

    LOL, “governments could cut benefit spending.” That is the biggest laugh of that whole response.

  24. Porter Lansing 2017-08-14 11:17

    @Brown … Is it funny because you don’t understand it, don’t agree with it or don’t know how to respond intelligently to the fact that low income workers (e.g. Walmart, McDonalds, Thunder Road etc.) are on food stamps, Section 8 and TANF while the companies are recording record profits causing all of to pay higher taxes?

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