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The US Labor Market Is Normalizing. Thank Immigrants
Reasonable (and unreasonable) people can disagree about the proper course of US immigration policy, but one thing isn't up for debate: Pursuing a closed-door strategy will be inflationary, all else equal.
If the US wants to replace every Maria working in the vast services sector with a Mary, and every Jose working construction with a Joe, then Americans should expect to pay more. And nobody can blame Maria and Jose. They were more than happy to work for less (and their teenage kids were too) bu
It may be stylized, but there is nothing humorous about it. That’s exactly how it is, and that explains at least some of the resilience in our unemployment numbers these past few years. “Economics” does not care where labor comes from, it only cares that it is good labor, and that it is fairly priced.
The USA is unique among large countries in being both (demographically) rich and (demographically) not-old. I believe the main reason is in-migration which brings younger workers who, for their first generation in America, tend to have largish families. A secondary reason is spacious geography which allows relatively largish housing.
I back-of-enveloped that the Covid period, both the health and economic effects as well as the politics exacerbated thereby, removed something like 5-8 million workers from a labor force of around 160 million. Taking away 2-5% of supply will send prices up, up, up as commodity investors know, and what is labor but the most vital commodity of all.
Another labor shortage in the US is of highly trained and educated workers. Not just tech and engineering, but also medical and teaching. TSMC’s struggles to staff its Arizona fab is just an example.
I cannot fathom why the US doesn’t open its doors wider to high education, high skill immigrants. Not even the most provincially paranoid populist can seriously claim that a foreign-born anesthesiologist is likely to be a menace to or burden on society, and the merits of having surgery with anesthesia, rather than without, should be uncontroversial.
Yet, as we’ve established, of stupidity there is sadly no shortage.
For multiple reasons Americans are more engaged today in reinforcing the wedges that divide us than implementing straight forward solutions to some of our problems. Immigration is such low hanging fruit to help with a plethora of ailments, particularly inflation and a tight labor market, it would also be relatively easily to increase legal immigration and attract both skilled and unskilled workers, alas, we rather make foreigners a boogie man to argue endlessly on Twitter about the demise of American values. We fail to realize people still want to come to the US, one day they may not, even if we really need them to.