Some beginning thoughts on wages

I argued before that North Dakota is labor-constrained. My thinking on this went through multiple iterations, and I continue to try and refine this. In particular the data to demonstrate this most clearly just may not exist at this time, but I continue to pursue it. Here is the state of wages from Q1 2017 by county in North Dakota.

Maybe the most interesting thing to come out of this map is despite the “cooling off” of activity in the oil patch, the western part of the state is still the highest paying collection of counties in terms of the average weekly wage. So when I hear people discuss an inability to attract or retain labor, particularly in eastern areas of the state, the first response I have is: “What are you doing with wages?” In this regard I completely agree with Minneapolis Federal Reserve President Neal Kashkari when we said, ” If you’re not raising wages, then it just sounds like whining.” (Link to story with this quote is here.)

While the map provides a few insights of this in terms of the in-state distribution of this problem, we need also consider this at a bigger level.

While wage growth over the last decade mostly worked in North Dakota’s favor compared to the nation, of late it reversed and the state lags the national trend. While I do not have a picture of it right now, if we could not get adequate labor supply into the state when wage growth was so much higher than the national average, how do we expect it to perform when it is lower? Clearly there are also industry distribution questions here as well. If there is only one growing sector at the time driving everything it maybe necessary to refine our comparisons.

Labor issues seem to be one of the largest problems facing the state right now, and maybe for much of the last decade. This necessitates a further detailed look into labor markets and factors constraining the growth of labor supplied in the face of notionally significant demand.

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