By Ana Monteiro, Bloomberg
Immigration, which slowed during the pandemic, could help ease a shortage of workers in the U.S. that’s pushed job vacancies to an all-time high, according to policy makers at the Federal Reserve.
While it remains a hot-button political topic in the U.S. — with some arguing that immigration comes at the expense of American jobs — two regional Fed presidents are making the case this month that it all boils down to “math.”
Richmond Fed chief Thomas Barkin and Minneapolis’s Neel Kashkari said that allowing more workers to come from overseas would help to ease the pinch caused by an aging population. Kashkari made his comments on the same day that U.S. Labor Department data showed a record 4.5 million people quit their jobs in November.
Many nations are trying to figure out how to plug the gaps in the labor market. In Japan — known for its hurdles to immigration — the government had warmed to overseas labor in recent years, because of the need to offset a shrinking workforce. China, which maintains strict limits on immigration, is trying to encourage couples to have more children.
Stagnant labor-force participation, blamed on more citizens opting for early retirement, as well as the ongoing pandemic keeping more people out of the workforce, has helped vacancies reach record levels over recent months. It’s also boosted wage growth as businesses seek to attract and retain employees amid the hottest inflation in almost four decades.
And while the world’s biggest economy added an unprecedented 6.45 million jobs in 2021 as the recovery from Covid-19 gathered pace, payrolls were 3.6 million below pre-pandemic levels as people stay on the sidelines, leaving employers questioning how they’ll fill the positions.
Legal immigration “is a very helpful supplement to grow the workforce, which I think then makes growing the economy somewhat easier to do,” Barkin said at a Jan. 13 virtual event hosted by the Virginia Bankers Association and Virginia Chamber of Commerce. “I think it would be important to have a real commitment to legal immigration at the right kind of scale.”
With the State Department cutting the number of visas it issued in 2020 and 2021 due to the pandemic, businesses ranging from factories to farms have struggled to fill vacancies.
The lack of employee availability means businesses are having to forgo opportunities “in part because we just don’t have enough confidence that we have enough workers,” Barkin said.
The problem looks set to get worse: the U.S. population grew at the slowest rate on record in 2021, expanding by fewer than 1 million people for the first time since 1937, Census Bureau data showed. The number of births has retreated every year since 2008 barring 2014, with the pandemic exacerbating the trend.
Over the long term, an aging population and declining birth rate are “a serious issue for our country” and most advanced economies, Kashkari said Jan. 4, adding that if these demographic trends continue, they could hurt economic expansion.
“This is math,” he told a virtual gathering hosted by the Wisconsin Bankers Association. “You could either just accept slow growth, you could do what Japan does and subsidize fertility — pay families to have more kids — it doesn’t work, by the way. Or you could embrace immigration. That’s it. Those are your three choices and that’s just math.”