Key Summary
With the 2024 elections in the United States approaching, a major topic of debate is how to address the immigration crisis. Both President Biden and former President Trump have highlighted the illegal immigration crisis that has historically plagued the southern border. However, the view that politicians hold isn’t the same that business holders and economists have. Politicians have repeatedly used a demonizing tactic to describe illegal immigrants that enter the United States. Although this position is effective at rallying voters, it’s position is contrary to the fact that the United States needs immigrants for our labor force. The United States posted unexpected growth in the final quarter of 2023 and is primed for more growth in Q1 despite some concerns about rising inflation. This unexpected real GDP growth coupled with the United States decline in population (excluding immigration) makes it necessary for the United States to open its borders to address the shortage of labor in a growing economy.
Immigration policy is a hotly debated topic every election cycle in the United States. With a Biden and Trump rematch, it’s expected that President Biden will prioritize a change in border enforcement mechanisms, such as an expedited trial time for illegal immigrants, whereas former President Trump will propose the usage of Title 42. Despite both adding deterrent mechanisms as their policy objectives, these don’t address the major concern that economists point to that our declining population will limit economic growth. During the Trump administration, migrants poured over the southern border, causing a sharp increase in population amongst cities. This huge influx was supposed to result in a huge realization of $1.75 trillion of additional economic output. This did not happen, as cities struggled to fill the vacant jobs despite huge immigration numbers due to Washington’s deep polarization which has caused a major backlog in the security of work visas. Both policies of current President Biden and former President Trump don’t seem to be prioritizing the labor shortages that high stakes industries of the United States are facing.
A comparable case to the current situation the United States has found itself in is China’s one child policy. This policy was enacted as a temporary measure to slow down China’s population growth. This was a major concern for officials as their population was going to exceed their economic growth leading to severe shortages of resources, capital, and consumer goods. Although China’s underdevelopment came from their easing of state control over the economy and not their high birth rates, the United States should learn from this example.
The United States is already boasting an economy that has a labor shortage. Specifically high stake sectors like air traffic controllers, child care, education, and enforcement are struggling to fill vacancies. A shortage of labor in these also have led to public health and safety consequences. Similarly high stake industries such as AI and manufacturing are also floundering despite projections that they will make a huge jump. These issues are threatening economic growth, which is not only an issue for the industry in question, but for the economy in general.
The deterrent solutions proposed by both Presidential candidates are valuable if the goal is to curb illegal immigration. However, the real issue with current immigration flows, is that the bureaucracy is so overwhelmed and that with a decreasing US population (excluding immigration) the economy and businesses are short of necessary labor resources, leading to an eventual decrease in economic output. Finding a political solution in a deeply partisan government is unlikely. Therefore we propose that in the short term employers raise wages, cut hours, or offer hybrid options. Ideally, these changes will attract what workers are available in the labor market. Second, it is vital that employers also offer training, as an increase in immigration will lead to slower increases of wages. Training immigrants will reduce business costs, improve efficiency, and lead to higher levels of retainment. A long term solution would have to stem from a change in the filing system for immigration applications. These updates could come in the form of electronic filing, automatic renewals, providing more forward guidance to and from government agencies, and once the backlog of applications is streamlined and pushed through, increasing the number of available visas and expanding the sectors of jobs to accommodate for the eventual high demand of the AI and manufacturing industries.
A popular political stance has been to condemn all immigration through the demonization of illegal immigration. This has caused many, outside of economists and business owners, to support strict immigration regulations, especially across the US southern border. However, the US is in high demand for labor. With an aging US population and a declining fertility rate, immigration is becoming ever more essential towards the continuing growth of the US macro economy. A gridlock and partisan government over the issue of immigration poses many systemic risks to not only the economic security of the US, but also the national security of the US. Employers have tools at their disposal to attract labor from discouraged, unemployed, or incoming workers but have little effect on the backlog the bureaucracy is struggling to fix. Therefore, we forecast that the United States will continue to face labor shortages until their is a standardization of the visa application system.
Author: Tucker Henry
