Companies need to pay market wage rates – Twin Cities

Central bankers must be circumspect in their public expression, lest they roil the markets, and some take this to the point of being mealy-mouthed.

So Neel Kashkari, president of the Minneapolis Federal Reserve, is seen often a breath of fresh air for his candor — as in a recent speech in Sioux Falls, S.D. In an economy where we hear increasingly frequent references to “labor shortages,” Kashkari puts it bluntly: “If you’re not raising wages, then it just sounds like whining.” Amen Brother!

This strikes at the core of a market economy. If, at some given market price, buyers are not able to buy as much of an item they would like or need, then the price needs to rise. If the item is labor, then the higher “price” is the wage rate. And, if some employers won’t be able to make it financially if they must pay more for labor, that is the market’s way of demonstrating that society does not value the product or service they are offering enough for it to be produced. These are simple realities of how markets allocate resources efficiently.

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