Expert Claims Immigration Alleviates Pressure on Job Market and U.S. Economy

Immigrant workers have also played a significant role in alleviating pandemic-era inflation, according to economists.

“Reopening of borders in 2022 and easing of immigration policies brought a sizable immigration rebound, which in turn helped alleviate the shortage of workers relative to job vacancies,” Evgeniya Duzhak, regional policy economist at the Federal Reserve Bank of San Francisco, wrote in a 2023 paper.

Job openings surged to record highs in 2021 and 2022 as the U.S. economy reopened. The ready availability of jobs led businesses to compete for talent by raising wages at their fastest pace in decades; higher labor costs pressured businesses to raise prices, stoking inflation.

In economic parlance, the labor market was “tight.”

Immigrants are substantial job creators, with an 80% higher entrance rate into entrepreneurship than natives.

While a larger immigrant workforce may boost overall GDP and tax revenue, Steven Camarota, director of research at the Center for Immigration Studies, argues that these metrics might not adequately gauge the true economic impact.

“If that’s your goal, immigration is good policy,” Camarota said. “If your goal is to increase per capita GDP, that’s a very different question.”

A Center for Immigration Studies analysis of Census Bureau data revealed a decline in labor force participation among certain demographics. For instance, among 25- to 54-year-old U.S.-born men without a high school diploma, participation dropped by 5 percentage points to 70% from 2000 to 2023. Similarly, it fell by 6 percentage points to 84% for those with a high school diploma during the same period but only by 2 points to 94% for college-educated men.

Camarota contends that immigration, alongside other factors like globalization, weakened unions, and a stagnant federal minimum wage, has suppressed wages and exacerbated job scarcity for native-born men lacking college degrees. This situation sidelines them, causing a decline in their labor force participation. He argues that foreign-born workers provide a convenient labor supply for businesses, leading policymakers to overlook the struggles of U.S.-born groups.

“For society, [immigration] is not such a good deal,” Camarota concludes.

The impact of immigration on the labor force participation of U.S.-born men without college degrees remains uncertain, according to Malde. He suggests that long-term declines in participation may stem from various factors beyond immigration, such as automation, technological advancements reducing demand for low-skilled labor, shifts from manufacturing to service-oriented jobs requiring higher education, and evolving social norms.

wage effects on immigrants
Evidence on wage effects for specific workforce groups competing with immigrants is mixed. (Credits: Unsplash)

Contrary to the notion that immigrants are displacing American workers, the Economic Policy Institute (EPI), a left-leaning think tank, highlights that the prime-age labor force participation rate of U.S.-born men without a college degree has surged in recent years and surpasses its pre-COVID trend. This suggests that the economy is absorbing both immigrants and providing job opportunities for native-born workers.

EPI researchers argue that the belief that immigrants are “taking all our jobs” is deeply flawed. The U.S. unemployment rate has consistently remained below 4% for two years, reaching historic lows. Specifically, in 2023, the average unemployment rate for U.S.-born workers was 3.6%, the lowest on record, according to EPI.

Mark Zandi emphasizes the tightness of the labor market, particularly in lower-paid jobs that many immigrants typically occupy. He contends that there is presently no evidence to support the notion that immigrants are displacing American workers. Instead, he suggests that these are job vacancies left unfilled.

A 2017 meta-analysis of economic research on immigration, conducted by the National Academies of Sciences, Engineering, and Medicine, suggests that the impact of immigration on the overall wages of U.S.-born individuals “may be small and close to zero,” particularly when assessed over 10 years or more.

However, the evidence regarding specific “subgroups” of the workforce, particularly those most likely to compete with immigrants, is somewhat mixed. For instance, while some studies indicate “sizable negative wage effects on native high school dropouts,” there are still numerous studies suggesting minimal to zero effects.

Job Inflation
Immigrants concentrate on high-skill jobs, potentially modestly pushing up wages, though the evidence is inconclusive.

Moreover, there is a “substantial” concentration of immigrants in occupations requiring high levels of education and skill, such as computer software developers, accountants, and physicians. In these fields, the evidence, although inconclusive, leans towards immigrants modestly pushing up wages.

Additionally, immigrants exhibit significantly higher rates of entrepreneurship compared to the native-born population, as revealed by research published in 2020. The study, authored by researchers from the Massachusetts Institute of Technology, University of Pennsylvania, Northwestern University, and the U.S. Census Bureau, found immigrants in the U.S. workforce to be significant job creators, with an 80% higher “entrance rate into entrepreneurship” compared to native-born individuals.

Analyzing data on over 1 million firms founded between 2005 and 2010, which survived for at least five years, the study concludes that immigrants contribute more to expanding labor demand than to expanding labor supply in the U.S. economy.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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