Lack of immigration is a contributing ‘cause of the labor market shortage’: Economist
There are now 3 million more job openings since pre-pandemic times and according to one economist, a slowdown in immigration is a contributing factor.
·Writer
Thu, December 22, 2022 at 1:12 PM CST
With too many jobs to fill and not enough workers, America is heading into the new year with a labor shortage.
There are now 3 million more job openings since pre-pandemic times and according to one economist, a slowdown in immigration is a contributing factor.
"It's really important to contrast two ideas," Adam Ozimek, chief economist at the Economic Innovation Group (EIG), told Yahoo Finance Live (video above). "One is that lack of immigration is a cause of the labor market shortage, and the other is that more immigration could help alleviate some of the shortages."
Data from the Department of Homeland Security (DHS) shows that authorized immigration in 2021 rose by 5% year over year — with 740,002 individuals being granted legal permanent resident (LPR) status — but still 28% lower than the 2011-2020 average, and the second-lowest amount since 2003.
During a November speech at the Brookings Institution, Federal Reserve Chair Jerome Powell spoke about the ongoing labor shortage, citing a lack of immigration as one of the causes.
“The combination of a plunge in net immigration and a surge in deaths during the pandemic probably accounts for about 1.5 million missing workers," he said.
The economic benefits to immigration
Economists and lawyers have often referred to the American immigrant population as the “backbone of our communities” as they tend to a higher labor force participation rate.
The reason why that's important, Ozimek argued, is because immigrants not only bring major labor supply but also create more demand.
"That means they spend money on houses and cars and furniture and all the stuff that's in shortage right now," he said.
According to a 2021 report from FWD.us, if immigration levels were doubled to more than 2 million new permanent and temporary immigrants each year, U.S. GDP could double and grow as large as $47 trillion in 2050.
A woman poses in front of a replica of the Statue of Liberty after participating in a USCIS naturalization ceremony on August 17, 2018 in Miami. (Photo by Joe Raedle/Getty Images)
"Per capita, this would lead to a 3% increase in average income by 2050 for all Americans compared with keeping immigration at recent levels, and a 7% increase compared with a zero immigration scenario," the report stated. "Compared with recent immigration levels of around 1.2 million immigrants per year, doubling of immigration now would greatly expand the economic future of the country."
While certain industries are dominated by foreign-born workers — like agriculture and manufacturing — immigrants also create more jobs as they are twice more likely to be entrepreneurial than Americans, according to a study by Northwestern University.
“The predominance of the imbalance between supply and demand is on the lower-skilled side, but there are areas across the skill spectrum where we can use more immigrants,” said Ozimek.
However, Ozimek stressed that increasing immigration isn't the only way to improve America's workforce.
"It's not as simple as saying that if all the people who planned on coming here would have otherwise come here [if] we wouldn't have labor market shortages, but it is the case that because immigrants are so flexible, because they've so geographically mobile and they move towards opportunity, they could help alleviate the acute labor market shortages we have today," he said.
A U.S. Marine veteran prays near the border wall between the U.S. and Mexico in Sunland Park, New Mexico, July 21, 2021. REUTERS/Jose Luis Gonzalez
The Trump effect
The slowdown in immigration is tied not only to the effects of the coronavirus pandemic, but also the fallout of Trump-era policies.
Pandemic lockdowns combined with a lack of federal funding caused a backlog of nearly 1.5 million work permit applications with the U.S. Citizenship and Immigration Services (USCIS), whereas Trump’s policies discouraged immigrants from entering the U.S.
The Trump administration "did a variety of things to reduce immigration," Ozimek said. "Some of them, like banning immigrants from certain countries, was very big and transparent and obviously made the U.S. look like not as great of a destination from that perspective."
Other actions they took, he continued, "were more technocratic, like trying to make it harder for skilled workers' spouses to get jobs. Other things are very administratively detailed. So it's a lot of stuff they did that's taking some time to unwind."
During the Trump administration, new H1B (high-skilled worker) visas and temporary worker visas were halted, which kept out nearly 525,000 workers.
Each worker visa is unique with its own limitations and requirements. There are four broad categories: temporary non-immigrant, permanent immigrant, work-study program, and international entrepreneur.
The H1B visa is a lottery system in which employers must file a petition to the government to state their interest in hiring a particular candidate through what's known as a Labor Condition Application. The annual cap for granting H1B visas is 65,000 and another 20,000 only for workers with a master's or doctorate degree obtained in the U.S.
Among the top 10 companies that have filed for the most Labor Condition Applications are Amazon (AMZN), Google (GOOG, GOOGL), Microsoft (MSFT), Meta (META), and Apple (AAPL), according to MyVisaJobs.
Granting workers these visas isn't the only challenge, Ozimek said. There's also an issue of "flexibility." Under both H-2A and H1B visas, if a worker wishes to switch jobs, they must find another employer who can file another petition for them.
“Letting workers go where the opportunity is, where the shortages are, not tying them to one employer, increasing flexibility could be very helpful in addressing some of these acute shortages that we see," Ozimek said. "And also providing faster, more certain paths to green cards. So it's not just about getting workers here — it's about getting them the ability to take whatever job has the highest and best return and where we're seeing the most shortages."
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Tanya is a data reporter at Yahoo Finance. You can follow her on Twitter @tanyakaushal00.
Above is from: https://www.yahoo.com/news/lack-immigration-labor-market-shortage-economist-191213573.html
