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The US labor market and citizens' views are shifting in favor of immigration

The US labor market and citizens' views are shifting in favor of immigration

One year into Joe Biden’s presidency, I wrote a commentary explaining why the administration should pivot to a pro-growth strategy on immigration reform. Meanwhile, Biden has been caught up in the wrangling over the southern border without making the case for increased legal immigration. 

The consequences are telling: The administration’s stance on immigration ranks second after inflation as a problem in a survey of voters by Schoen Cooperman Research. 

The case I presented for boosting legal immigration was that changing demographics is the main reason that the pace of U.S. economic growth has been cut in half in the past two decades from the post-war average of 3.5 percent per year. As baby boomers retired and the U.S. birth rate slowed, the native-born population has stagnated. Meanwhile, the growth of immigrants has moderated to 0.4 percent per year, or roughly half of the trend rate. The combined effect has been a significant slowing of the working-age population (16-64 years). This has occurred as Congress has failed to enact meaningful immigration reform in three decades.   

The case today is even more compelling because of labor shortages related to the COVID-19 pandemic. Prior to the pandemic, net international migration slowed steadily from a peak of 1.2 million in 2016 as a result of measures President Trump took to reduce both legal and illegal immigration. Trump then took further steps to restrict immigration during the onset of the pandemic, including curbing travel to the U.S. and suspending many foreign worker visas and green cards. The administration also invoked the Title 42 public health law to deny asylum on pandemic-related grounds.  

Upon assuming office in January 2021, President Biden overturned many of Trump’s immigration policies. As a result, there was a dramatic reversal in the pattern of immigration last year. The U.S. Census Bureau estimates that net immigration to the U.S. fully rebounded from its COVID-19 slump, when immigration fell to the lowest levels in decades. The biggest increases were for work visas and humanitarian migrants.   

The timing of the immigration upturn proved fortuitous: It helped to alleviate some of the impact of labor shortages while the overall unemployment rate has been hovering near a 50-year low. Foreign-born workers have a higher labor force participation rate than U.S.-born workers, and they have helped to counter some of the inflationary impact of a tight U.S. labor market.  

With the headline Consumer Price Index inflation rate falling to about 3 percent recently, wages are now growing faster than inflation. Net immigration will have to stay at relatively high levels to have a lasting impact in containing inflation, but this is far from assured. Consequently, the case for permitting more legal immigration now encompasses both economic growth and inflation reduction considerations.

Why then is the Republican Party clinging to an anti-immigrant stance when it favors policies that contribute to strong economic growth and low inflation? 

One explanation is that Republican concerns about immigration are mainly cultural and political rather than economic. For example, a poll taken by the Associated Press-NORC Center for Public Affairs Research ahead of the 2022 midterm elections found that Republicans are more likely to feel that immigrants threaten to erode America’s culture by a margin of 36 percent to 27 percent. One in three respondents, moreover, feared that immigrants could influence the outcome of U.S. elections. 

However, this rendering does not tell the full story of the way the American public feels about immigration.  

The conservative-leaning Cato Institute’s 2021 Immigration and Identity National Survey suggests American attitudes about immigration are changing. Nearly three-fourths of those surveyed (72 percent) believe immigrants come to the U.S. to “find jobs and improve their lives,” while 27 percent think they come to obtain government services and welfare. When asked whether immigration should be kept at its present level, increased or decreased, the latest survey showed that the results were fairly similar across the three categories.   

Even more telling are recent developments in two key red states — Florida and Iowa. 

According to The New Republic, Republican lawmakers in Florida are now backtracking from a bill that was passed to criminalize the transport of undocumented people into the state. The legislation required hospitals to ask about immigration status on invalidated out-of-state driver’s licenses or other ID forms for undocumented people. It also prevented local governments from issuing them. This provoked a strong backlash from thousands of immigrants in the state, so some Florida Republican lawmakers are now trying to do damage control. 

Immigration is also likely to be an important issue in the upcoming Iowa caucuses to nominate a Republican presidential candidate. According to a Bloomberg Businessweek report, a glaring shortage of workers has put some of Iowa’s Republican officials on a political tightrope. They are trying to balance the need for increased immigration to ease a hiring crunch in the state, while not straying too far from the national party line on immigration control. Meanwhile, several local business people in Iowa have opposed a bill sponsored by a state senator that would mandate the use of E-Verify to check documents provided by new hires to prove they are authorized to work in the U.S. 

So, with little sign that Congress is about to adopt immigration reform any time soon, what steps can be taken to lay the groundwork after the 2024 elections? 

In my view, the case for increased legal immigration should be made separately from illegal immigration and the southern border. The message regarding the economic benefits is compelling — namely, increased immigration promotes U.S. economic growth and helps to tackle labor shortages and inflation. Beyond this, there is no compelling evidence that the majority of Americans are opposed to immigration on social or political grounds. 

Nicholas Sargen, Ph.D. is an economic consultant with Fort Washington Investment Advisors and is affiliated with the University of Virginia’s Darden Business School. He has authored three books, including "Investing in the Trump Era: How Economic Policies Impact Financial Markets."


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