Inflation: What didn’t cause it?
In the year to June, the Consumer Price Index rose by 8.5%. What caused this? Let us first eliminate some answers by looking at what didn’t cause this. As I…
In a recent story about Utah’s economy, the New York Times concluded that the biggest economic concern in the state is no longer a lack of jobs, but a lack of workers. Businesses all over the state are struggling to expand because of a labor shortage.
The newspaper easily could have been writing about Minnesota.
So writes Minnesota’s Department of Employment and Economic Development in the most recent edition of its magazine. This supposed shortage of workers is described thus in the latest Minnesota Employment Review;
Essentially, the supply of available workers in the Twin Cities Metro Area is too low to meet the demand.
Twin Cities Business magazine recently described it as ‘The Real Immigration Crisis‘.
Raise the wage!
Fortunately, there is already a mechanism in place to remedy situations where demand is greater than supply. That is the price mechanism. What DEED really means is that the supply of available workers in the Twin Cities Metro Area is too low to meet the demand at the current price. At some higher price, wages in this case, supply and demand will reach equilibrium.
Indeed, that already seems to be happening. As DEED notes:
As of April, average wages of private sector workers are up 7.5 percent over a year ago, with many industries contributing to this strong wage growth, including professional and business services (7.3 percent), manufacturing (6.8 percent), financial activities (7.4 percent), education and health care (6.8 percent), and leisure and hospitality (8.6 percent).
So what’s the problem?
Commenting on the labor shortage, DEED also writes:
Depending on your perspective, that isn’t necessarily a bad thing. A worker shortage means more opportunities for job seekers, rising salaries and lower educational requirements to make it easier to recruit employees.
We have heard a lot recently about how costs of living are rising, wages aren’t keeping up, and people are increasingly struggling to get by. Well, here are the economic processes in action which will work to alleviate such problems. As crises go, this one is pretty un-crisis-y.
John Phelan is an economist at Center of the American Experiment.