Employers need to be able to hire both foreign and American workers in order to bounce back.
President Joe Biden is looking to increase legal immigration levels across the board — a plan that has drawn criticism from immigration restrictionists who warn about the possible economic fallout. But economists say increasing legal immigration to the US could potentially aid the country’s economic recovery from the pandemic recession.
The New York Times recently obtained a 46-page draft blueprint of the Biden administration’s plan to revamp the US legal immigration system to make it easier for foreign workers, trafficking victims, Americans’ family members abroad, refugees, asylum seekers, farmworkers, and American Indians born in Canada to come to the US.
Though it’s unclear exactly how many more immigrants Biden intends to admit to the US, the plan signifies an increase in immigration beyond just a reversion to pre-Trump administration levels, and he could implement it largely without needing Congress’s approval.
It would be a fulfillment of one of Biden’s campaign promises on immigration and would mark a significant departure from the policies of his predecessor, who entered office with a goal of reducing legal immigration by 63 percent, in addition to curbing unauthorized immigration at the border.
But immigration restrictionists have argued that it could impede the economic recovery from the pandemic by allowing foreign workers to compete with Americans for wages.
“They just want to shovel people in here,” Ken Cuccinelli, former acting head of US Citizenship and Immigration Services under President Donald Trump, told the Times about the Biden administration’s plan. “They are not running an immigration system for the benefit of America, and certainly not for the benefit of ordinary Americans.”
Economic research, however, suggests it’s more complicated than that, and that immigrants could in some ways actually help bolster the recovery by taking jobs that Americans don’t want, creating new jobs, and contributing to economic growth as consumers. How effectively they can do so might depend on the categories of immigrants that Biden chooses to emphasize and on the numbers in which they are allowed to come to the US — two factors that remain unknown.
But economists I spoke to said there isn’t an economic justification for continuing to maintain Trump-era policies that have made immigrating to the US substantially more difficult over the last four years and amid the pandemic specifically. At this point in the recovery, employers need the option of hiring both immigrants and native-born workers in high numbers.
Immigrants have little to no effect on native-born workers’ wages
It’s difficult to study the economic impact of immigration on native-born workers because it’s often hard to isolate that impact from other factors. A sudden increase or decrease in immigration can coincide with other economic events that could contribute to fluctuations in wages or unemployment levels.
For example, researchers can’t quantify the economic effect of the near-shutdown in legal immigration during the pandemic because so many other factors were at play, from people’s desire to stay home to local mandates limiting business capacity.
There was evidence of local labor markets suffering due to the lack of foreign workers, particularly in places that rely on seasonal labor, such as one of Michigan’s largest tourist towns and on Maryland’s eastern shore, the heart of the crabbing industry. But it’s not possible to make any broad pronouncements about how the lack of immigrants has affected the economy.
Some of the best-known research on the topic focuses on a single period of immigration in 1980, a time when the local economy was already suffering from high unemployment and high inflation.
The so-called “Mariel boatlift” brought roughly 125,000 Cubans, more than half of whom were high-school dropouts, to Miami over the course of five months after communist dictator Fidel Castro loosened emigration restrictions. US President Jimmy Carter established a program that granted them temporary legal status and access to asylum processing.
University of California Berkeley’s David Card found no significant effect on the wages of native-born Americans in Miami as a result of the boatlift. Harvard’s George Borjas, on the other hand, found that native-born males without a high school degree saw their wages decrease between 10 and 30 percent.
Other economists have shed doubt on Borjas’s results, finding that he failed to account for demographic shifts among the workers he studied before and after the boatlift. Taking that into consideration significantly reduces the negative effect on wages that Borjas observes to the extent that it is no longer discernible.
While the Mariel boatlift studies showed what happens to wages immediately after a wave of immigration, other widely cited research suggests that any effect of immigration on wages tends to diminish in the long term.
Borjas, Bocconi University’s Gianmarco Ottaviano, and University of California Davis’s Giovanni Peri estimated that native-born Americans overall saw their wages increase only by about half a percent in the long term. High school dropouts saw a bit of a larger effect on wages, but it was still very small: a 1.7-percent dip in Borjas’s study, and a 1.1-percent increase in Ottaviano and Peri’s study. But the overall takeaway is that the long-term effect, positive or negative, is almost none.
“Immigration just doesn’t affect native-born wages or employment very much, the negative effects tend to be short term and the positive effects tend to be long term,” writes Alex Nowrasteh, director of immigration studies and the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute.
Conversely, decreasing the legal immigrant workforce also doesn’t necessarily benefit American workers. A cautionary example is the Bracero program, which brought in millions of temporary farmworkers from Mexico starting in 1942. When it ended in 1964, native-born workers’ wages actually rose more slowly because farmers started relying on machine harvesting and growing less labor-intensive crops instead.
Immigration restrictionists, therefore, seem to be overstating the negative effect of immigration on American workers’ wages while overlooking the potential benefits of bringing in more foreign workers.
Immigrants can fill vacancies, create jobs, and drive economic growth
The US economy is already well on its way toward full recovery. Unemployment was down to 5.8 percent in May, which is still more than two percentage points higher than it was pre-pandemic, but much lower than the peak of 11.3 percent.
But the recovery has been unequal across industries and across different kinds of workers. Sectors like retail, leisure, and hospitality, which tend to rely on low-wage workers who are more likely to be Black or Hispanic, have continued to have some of the highest rates of unemployment.
These also tend to be some of the industries that rely on immigrant workers. Immigrants make up 22 percent of the workforce in hospitality, one in seven in retail, one in five in food services, and one in three in hotels and accommodations.
Immigration could help these struggling industries fill positions that are needed to support efforts to reopen at full capacity.
“These sectors rely on specific occupations in order to recover,” said Michael Clemens, a senior fellow at the Center for Global Development, where he studies the economic effects and causes of migration. “As restaurants reopen in response to rising demands, they require dishwashers, they require sous chefs — they require everybody involved in order to get going. In this process of reopening and reemploying dishwashers, jobs for the rest of the people are created.”
For some of these jobs, there just aren’t enough willing American workers available. You might have noticed a proliferation of “Help Wanted” signs recently. Clemens told me he observed the same effect in a study of hand-harvest farmworkers in North Carolina during the Great Recession, which brought about a spike from 4 percent to 11 percent unemployment in the state. He found that of the 450,000 North Carolinians who were unemployed in 2010, just 10 accepted jobs in the hand-harvest industry that year.
“There is this idea that when unemployment is high, or as it was extremely high last year, that any immigrant worker takes a job away from an American,” Clemens said. “It’s not true because there is a division of labor in America between immigrants and natives in many industries that is critical to those industries. It’s not that there’s this undifferentiated pool of unemployed workers out there who are happy to do any of those tasks. That’s just not how the American labor market works, even when it’s hurting.”
Indeed, research has shown that native-born workers typically react to immigration by specializing in fields that require English fluency and pursuing communication-intensive jobs where they earn higher wages. Immigrants with limited English skills are comparatively restricted to manual-labor jobs. Even immigrants and Americans who have the same educational levels and who might otherwise seem interchangeable, therefore, might not necessarily be competing for the same jobs.
While some hard-hit industries will need more immigrant workers before they will see unemployment rates decline and recover, others, such as the tech industry, were relatively unaffected by the pandemic because workers could continue to be productive from home. The demand for more workers in those industries never declined — but the availability of immigrants to fill those positions did. If that isn’t rectified, it could stymie companies’ ability to grow and potentially hurt the country’s long-term recovery.
A recent report by New American Economy, a pro-immigration think tank and advocacy group, found that there is a shortage of high-skilled workers, with unemployment rates in sectors such as computer- and mathematics-related occupations dropping and employers even requesting foreign workers in those fields at a slightly higher rate amid the pandemic.
“While many businesses have sought to expand, continued travel restrictions on top of an outdated immigration system may in fact prolong and exacerbate the shortage of high-skilled workers,” the report states. “This ultimately runs counter to the goal of a speedy economic recovery.”
Beyond fulfilling specific labor shortages that are critical to economic recovery, immigrants can also help stimulate the economy in other ways. Thousands of people immigrate to the US every year as investors, bringing in hundreds of thousands of dollars each.
Immigrants are also more entrepreneurial, launching businesses at about twice the rate of native-born Americans, which creates more jobs and also fosters innovation. That is true of big tech companies such as Amazon, Apple, Google, and Yahoo — which were founded by immigrants or their children — and of small businesses, which make up 70 percent of employers nationally.
Immigrants can also drive economic growth as consumers because they buy goods and services and create demand for more workers. For at least the first five years after the Mariel boatlift, for example, researchers observed that effect. It’s the same reason why the quadrupling of women’s workforce participation over the last century didn’t hurt male workers and even saw them benefit from higher wages.
“Immigrants are consumers, they are investors, they are founders and inventors,” Clemens said. “They are also suppliers of labor. They’re suppliers of specialized labor. And for all those reasons they are very different from this cartoon idea of immigrants as suppliers of undifferentiated labor.”
That’s a power that Biden’s plan seems to be trying to harness — not just for the immediate recovery, but for the long term.
Author: Nicole Narea
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