Immigration is key to keeping the U.S. economically competitive, Minneapolis Federal Reserve Bank President Neel Kashkari told state legislators Tuesday, warning that slower population growth shrinks economic gains.
“You can either accept slower growth, you can turn to immigration, or you can try to subsidize fertility. And that’s just the math,” Kashkari said.
In the first presentation by a Federal Reserve Bank president to the Legislature in recent history, Kashkari championed the economic power of quality education and immigration policies that fit the country’s needs. The nation is not yet at maximum employment, he said, and as wages grow he expects even more Americans to join the workforce.
On a local level, he told the Senate Finance Committee his branch is conducting an eight-year study of Minneapolis’ increased minimum wage and what it means for workers, businesses and the economy. The committee also recently hired a professor to lead a long-term study of disparities in education and health care and come up with solutions.
“We are desperate for movement in these areas. They are absolutely stymying our economy,” Finance Committee Chairwoman Julie Rosen, R-Vernon Center, said of the disparities.
The Federal Reserve Bank’s research can give legislators data and analysis they need to come up with financial solutions, Kashkari said. Many of the issues he highlighted overlap with legislators’ top priorities, and state lawmakers pressed him to provide them with more information on Federal Reserve Bank research in the future.
Kashkari, a Republican who made an unsuccessful bid for California governor before taking the job in Minnesota, emphasized that the private market has the power to fix some of the problems he raised.
Minnesota, with its cold winters, is going to struggle to attract workers if it doesn’t have an affordable housing stock, Kashkari said. He is trying to figure out why the private sector isn’t stepping in to build additional housing.
“Why is it that the minimum cost of a unit or a house has gotten so high that the economics just don’t make sense for that developer or that family?” he asked. “And what are the policy solutions that can lower that level?”
The state could look at ways to relax regulations on developers to help spur affordable housing construction, he said. Sen. Mary Kiffmeyer, R-Big Lake, said regulatory restrictions should also be pared back for child care providers, another industry Kashkari addressed.
Child care providers are in very high demand, yet they are paid low wages, Kashkari said, stating “something is broken if those two things are true at the same time.”
He offered his own take on the U.S. economic outlook, repeating a message of modest growth that state economic and budget officials offered in their February forecast last week. He said he doesn’t see a recession on the horizon, but there won’t be a “growth spurt” either.
“I’m going to do my part not to screw it up and raise [interest] rates unnecessarily that could end the expansion,” he said.
The state’s February forecast highlighted that Minnesota’s population growth has slowed and said domestic and international migration are crucial to labor force growth.
While Kashkari focused on immigration as essential to continuing economic growth, Sen. Bobby Joe Champion, D-Minneapolis, said he is concerned the Federal Reserve Bank executive is overlooking black and American Indian workers who can be pulled back into the labor force.
Kashkari replied that he wants to bring all Minnesotans into the workforce, including people of color and people in lower-income communities who are not getting equal educational opportunities.