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Fed’s Neel Kashkari Demolishes Claims of U.S. Labor Shortage

Neel Kashkari, US Treasury Department Assistant Secretary for Financial Stability, discusses the Troubled Asset Relief Program (TARP), the federal government's $700 billion bailout program, in a forum at Georgetown University's McDonough School of Business on January 13, 2009 in Washington, DC. In his remarks, Kashkari stressed the importance of banks …
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Neel Kashkari has become the Federal Reserve’s foremost skeptic of the notion that the U.S. is experiencing a severe labor shortage.

Kashkari, who is the president of the Minneapolis Fed, points to the lack of significant upward pressure on wages as evidence debunking the claims that the U.S. lacks workers. The logic is pretty simple: if the supply of labor is so limited relative to demand, the price of labor should be swiftly rising.

The fact that the price of labor is not rising much suggests that perhaps labor is not in as short supply as some employers and special interest lobbying groups claim. Maybe these claims of a labor shortage are just covers for those who want U.S. labor costs to fall, which would raise profits in the short term.

Another theory is that labor prices have become stuck at low levels because employers, after so many years of high unemployment and minimal wage pressure, have become reluctant to raise wages. The tool of offering higher wages to attract new workers has fallen out of the toolkit of many American businesses and no one noticed because it wasn’t needed for so long. But now that there are far fewer unemployed people desperately hoping for a job, employers do not know where to turn to find new employees. They’ve forgotten how to poach workers from competitors with higher wages.

On Tuesday, Kashkari returned to this theme in a series of tweets that lay to waste a Wall Street Journal article pointing to “historic, severe shortages” of labor.

 

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Kashkari, who worked at Goldman Sachs before joining the Bush Administration’s Treasury Department, may seem like an unlikely ally to the Trumpian cause of improving the lot of America’s forgotten working class. But he also appears to be the strongest ally of that cause at the Federal Reserve.

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