Latest Posts





A ‘shortage’ of workers in Minnesota is driving wages up

Last week I wrote about apparent contradictions in the coverage of Minnesota’s labor market. On the one hand, we have the good news that wages in the state are rising after a prolonged period of stagnation. On the other, we have the bad news that there is a shortage of workers in the state. Of course, the truth is that, in large part, the rise in wages is a result of the supposed shortage of workers.

Decreasing labor supply and increasing wages

The chart below illustrates the point.

Figure 1 – Labor supply curve

To the left of the chart, where employment is low (high unemployment), wages are low. But, as employment starts to creep up (and unemployment falls) and we move to the right, wages start to increase. Increasingly, workers are relatively scarce and employers need to bid against each other to hire them. This shows why, from the point of view of the average Minnesota worker, the supposed ‘labor shortage’ isn’t the grave crisis some make it out to be.

We see another example of these market forces at work in the Star Tribune today.

Upward of 150 private events and parties are set to kick off on Super Bowl week, and organizers are facing a battle with an unexpected foe: the estimated 2.4 percent unemployment rate in Minneapolis.

Event organizers looking for cooks, dishwashers, servers, bartenders and security personnel are having difficulty filling open positions.

“It’s absolutely crazy,” said Jerome Gerber, vice president of Award Staffing, which has turned down hundreds of staffing requests. “The companies that were coming in to manage the Super Bowl and manage all these events didn’t have a proper understanding of the pay rates they were going to need to operate within the Twin Cities marketplace.”

The organizers of one large downtown event called Gerber and asked him to help them find 1,000 workers. The pay? $11 per hour.

“We told them no. It wasn’t worth the effort,” Gerber said. “We’ve turned down every job that wasn’t paying a minimum of $16 an hour simply because of the competition that week.”

So why the stimulus?

And, again, we have some confusing contradictions here. Last week, Gov. Dayton unveiled a $1.5 billion bonding bill. This would borrow money to spend “on upkeep at public colleges and universities, expanding affordable housing options and improving water infrastructure across Minnesota”, according to WCCO.

Curiously, the governor’s office also boasted that the bill’s spending would create an estimated 22,950 jobs. With unemployment so low and wages rising, do we need Gov. Dayton to be ‘creating’ these jobs? Other employers seem to be doing a good job. Too good, if you listen to those worrying about a looming labor shortage.

A shrinking workforce can be bad for an economy if productivity doesn’t increase to maintain output levels as workers disappear. But the key point there is, as we have said before, productivity. That remains the key issue facing Minnesota’s workers.

John Phelan is an economist at Center of the American Experiment. 




Upcoming Events

  • Morning in Minnesota: St. Cloud

    Location: St. Cloud

    Sign up HERE! Courtyard by Marriott St. Cloud 404 West Saint Germain Street St. Cloud, MN, 56301 Please join Center of the American Experiment on Tuesday, July 21 for breakfast with Center policy fellow and education expert Catrin Wigfall as she explains K-12 education in the state and its persistent disparities despite decades of increased spending. Following her presentation, Catrin will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude   Catrin Wigfall is a Policy Fellow at Center of the American Experiment. She is also the director of EducatedTeachersMN and EmployeeFreedomMN. Catrin’s…

    Register Now
  • Kristi Noem: The Courage to Reject a Shutdown

    Location: Online

    Sign up HERE! Join us Wednesday, July 8th for an interview with South Dakota Governor Kristi Noem over Zoom. In response to COVID-19, Noem defied the norm of a statewide shutdown and let South Dakotans choose for themselves what safety precautions to take. Tune in to this live online event to hear how Governor Noem preserved her state’s economy while still keeping citizens safe. Wednesday, July 8th at Noon CT Sign up HERE!  

    Register Now
  • Morning in Minnesota: Marshall

    Location: Marshall Golf Club

      Sign up for this event HERE! Please join Center of the American Experiment on Thursday, July 16 at Marshall Golf Club for a breakfast with Center economist, John Phelan, as he discusses Minnesota’s economic future. Following his presentation, John will lead a Q&A session. 7:30 AM Check In and Breakfast 8:00 AM Presentation 9:00 AM Conclude John Phelan is a graduate of Birkbeck College, University of London, where he earned a BSc in Economics, and of the London School of Economics where he earned an MSc. He worked in finance for ten years before becoming a professional economist. He…

    Register Now