Immigration ‘taking pressure off’ the job market, U.S. economy: Expert

Mark Zandi, chief economist at Moody’s Analytics, said the increase in foreign-born workers is “taking pressure off the economy.”

“In fact, it’s probably one reason why the economy grew so strongly last year,” he said.

U.S. gross domestic product, a measure of economic output, grew by 2.5% in 2023, beating expectations and increasing from 1.9% in 2022.

The growth in foreign-born workers comes amid a contentious immigration policy debate in the U.S.

In mid-February, House Republicans impeached U.S. Department of Homeland Security Secretary Alejandro Mayorkas, whom they blame for perceived shortcomings in border security. He now faces the prospect of a Senate trial.

Meanwhile, cities are trying to absorb an influx of people arriving at the U.S.-Mexico border. In December, the U.S. Border Patrol reported almost 250,000 encounters with migrants crossing into the U.S. from Mexico. That marked a monthly record, though that number fell by half in January, according to federal data.

“The present migrant crisis is quite unprecedented, both in scale, in the diversity of the nationalities that are coming to the border, and the impact it’s having not only on the border states but in the states and cities inside the country,” Muzaffar Chishti, senior fellow at the Migration Policy Institute, a nonpartisan immigration policy think tank, recently told CNBC.

In 2023, about 31.1 million workers out of the 167.1 million in the U.S. labor force were foreign-born, on average. The remainder were “native-born” workers, those born in the U.S. Immigrants’ share of the labor force has increased since 1996, when the Bureau of Labor Statistics began collecting such data.

Most are here legally: In 2021, 4.6% of U.S. workers were unauthorized, a share that’s stayed in a “narrow range” since 2005, according to the Pew Research Center.

More than 3.7 million immigrants joined the U.S. labor force between 2020 and 2023, on average — a 13.7% increase. Meanwhile, 2.6 million native-born workers joined the labor force over the same period, a 2% increase.

The labor force is the sum of people ages 16 and older who have jobs or are unemployed and actively looking for work.

A growing population and labor force are key components of a healthy economy and the nation’s ability to pay its bills, economists said.

In simple terms, more workers generate more goods and services. A larger number of people earning paychecks means more consumer spending, the lifeblood of the U.S. economy. More people paying income tax on earnings boosts tax revenues at a time of growing U.S. budget deficits, and helps prop up social programs such as Social Security and Medicare, which are funded by payroll taxes and facing a shortfall.

The problem is that native-born U.S. households are having fewer children and the baby boom generation is aging out of the job market, economists said. Absent immigration, such dynamics would cause a long-term shrinking of the U.S. population and labor force, while social programs would require greater tax revenue to support more retiring seniors.

The Congressional Budget Office, or CBO, a nonpartisan federal agency, predicts U.S. deaths will exceed births starting in 2040, at which point immigration will account for all population growth.

“When you just consider the native-born population, we’re seeing very little labor force growth because of the aging population and low birth rates,” said Jack Malde, senior policy analyst at the Bipartisan Policy Center.

Immigrant workers tend to be younger, too, helping counterbalance the U.S.’ aging workforce.

About 91% of immigrants age 16 or older who arrive in the U.S. from 2022 to 2034 will be under age 55, according to recent projections by the CBO. By comparison, that would be true for just 62% of the overall U.S. adult population.

Given the needs of the U.S. workforce, immigration has been “a net benefit for the economy,” said Malde, who specializes in immigration and workforce policy.

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The CBO estimates the U.S. labor force will grow by 5.2 million people from 2023 to 2034, largely due to “a surge in immigration” that began in 2022 and will continue through 2026. As a result, gross domestic product will be about $7 trillion higher and revenues $1 trillion larger than they would have been otherwise, it said.

“More workers means more output, more income, and that in turn leads to the higher revenue,” Phillip Swagel, CBO director, said of those projections during a House hearing in February.  

Immigrant workers have also helped put downward pressure on pandemic-era inflation by easing a shortage of workers, economists said.

Job openings surged to record highs in 2021 and 2022 as the U.S. economy reopened. The ready availability of jobs led businesses to compete for talent by raising wages at their fastest pace in decades; higher labor costs pressured businesses to raise prices, stoking inflation.

In economic parlance, the labor market was “tight.”

“Reopening of borders in 2022 and easing of immigration policies brought a sizable immigration rebound, which in turn helped alleviate the shortage of workers relative to job vacancies,” Evgeniya Duzhak, regional policy economist at the Federal Reserve Bank of San Francisco, wrote in a 2023 paper.

While a larger immigrant workforce raises overall GDP and tax revenue, those measures may not be the best barometers of economic impact, said Steven Camarota, director of research at the Center for Immigration Studies, a group advocating for tighter immigration controls.

“If that’s your goal, immigration is good policy,” Camarota said. “If your goal is to increase per capita GDP, that’s a very different question.”

A Center for Immigration Studies analysis of Census Bureau data found that labor force participation among 25- to 54-year-old U.S.-born men without a high school diploma declined 5 percentage points, to 70%, from 2000 to 2023.

It fell 6 percentage points, to 84%, for those with a high-school diploma over that time, but fell only 2 points, to 94%, for college-educated men, the analysis found.

Camarota said immigration — along with factors such as globalization, weaker unions and a stagnant federal minimum wage — suppressed wages and made it harder for native-born men without college degrees to find jobs, keeping them on the sidelines and causing their labor force participation to decline. Foreign-born workers provide businesses with an easy labor supply, leading policymakers not to care as much about the U.S.-born groups being left behind, he said.

“For society, [immigration] is not such a good deal,” Camarota said.

The extent to which immigration may be keeping U.S.-born men without college degrees on the sidelines is unclear, Malde said. There are other reasons why their labor force participation may have declined long-term, he said: automation and technology reducing the demand for low-skilled labor; economic shifts away from manufacturing and toward service-oriented jobs, which often require higher educational attainment; and changing social norms.

The prime-age labor force participation rate of U.S.-born men without a college degree “grew at a record pace in each of the last two years and is above its pre-COVID trend,” according to the Economic Policy Institute, or EPI, a left-leaning think tank.

In other words, the economy is both absorbing immigrants and generating job opportunities for U.S.-born workers, the institute said. The idea that immigrants are “taking all our jobs” is “deeply misguided,” EPI researchers wrote in a recent analysis.

The U.S. unemployment rate has been below 4% for two years, hovering near record lows. It was an average 3.6% for U.S.-born workers in 2023, the lowest rate on record, EPI said.

“The labor market is tight as a drum,” especially for the types of lower-paid jobs many immigrants take, Zandi said.

“There’s just no evidence at this point in time that immigrants are taking American jobs,” Zandi added. “They’re jobs that are simply going unfilled.”

A 2017 meta analysis of economic research on immigration conducted by the National Academies of Sciences, Engineering, and Medicine suggests the impact of immigration on the overall U.S.-born wage “may be small and close to zero,” particularly when measured over a period of 10 years or more.

However, evidence for certain “subgroups” of the workforce, especially those most likely to compete with immigrants, is somewhat mixed, the analysis found. For example, some studies suggest “sizable negative wage effects on native high school dropouts,” though there are “still a number of studies that suggest small to zero effects,” it said.

There’s also a “sizable” concentration of immigrants in jobs that require high education and skill levels, such as computer software developers, accountants and physicians, the paper noted. In these jobs, “the evidence is stronger, though still inconclusive” that immigrants are pushing up wages “modestly,” it said.

Immigrants also launch new businesses at far higher rates than the overall U.S. population, according to research published in 2020.

The study — authored by researchers from the Massachusetts Institute of Technology, University of Pennsylvania, Northwestern University and the U.S. Census Bureau — found immigrants in the U.S. workforce to be “substantial job creators” with an 80% higher “entrance rate into entrepreneurship” compared with native-born individuals. It examined data on more than 1 million firms founded between 2005 and 2010 that survived for at least five years.

“Overall, the findings suggest that immigrants appear to ‘create jobs’ (expand labor demand) more than they ‘take jobs’ (expand labor supply) in the U.S. economy,” the study said.