WASHINGTON – One of the biggest stories in America at the start of 2022 is the big resignation: people of all ages and professions quitting their jobs in the wake of the COVID-19 pandemic, leading to labor shortages ‘work.
The forces driving these shortages are complex, from fears of infection and childcare needs to worker burnout, but one factor that can be overlooked is the lower number of new Americans entering. in the country. The last few years have seen a sharp drop in immigration and these declines have had real impacts on the labor pool.
You can get a sense of the impacts by looking at the most basic measure, net international migration to the United States. According to the census, that number in 2021 was a quarter of what it was in 2016.
The latest figure for this population was 247,000. Five years earlier, they were over one million. (Note: These numbers are gathered from mid-year to mid-year, so the numbers above represent numbers from July 1 of one year through June 30 of the following year.)
There may be questions about this 2021 number as data collection took place during the pandemic when it was difficult to reach survey respondents. The challenge around collecting data remains the biggest unanswered question around the 2020 decennial census. How reliable was the count?
But in this case, the downward trend in the number of immigrants began long before the pandemic even began. The figures for net international migration have been declining every year since 2016. So while the pandemic has almost certainly played a role in the decline in recent years, policy changes also appear to have had an impact.
And all of those declines since 2016 are on top of millions of fewer immigrants in the country today than they would have had if the country had kept up a steady pace.
Remember, the big story of the 2020 census was low population growth. The past decade has seen one of the slowest growth rates in U.S. history. And behind that slow growth was a falling birth rate coupled with slower immigration. Add in long-tenured workers retiring from the workforce and you have the makings of an economic problem.
When you look at the types of jobs that foreign-born workers tend to do, you can see some of the industries that have been hit by the pandemic.
Foreign-born workers, for example, are more likely to hold service jobs than native-born citizens. Among the foreign-born, 21% work in the service sector, compared with 14% of the native-born population, according to the Bureau of Labor Statistics. Food preparation and service, and building and grounds maintenance are two jobs where the differences between the two population groups are notable.
Natural resource extraction and construction are also over-indexed fields for foreign-born workers – 14% of foreign-born workers versus 8% of native-born workers.
To be clear, this doesn’t mean that foreign-born workers dominate these fields, but remove enough immigrants from the labor pool and you’re more likely to run out. This means that employers are likely to have to search harder to find good candidates.
And then there is the question of salaries.
Remuneration is another area to keep in mind as the number of immigrants declines. First, worker shortages tend to mean higher wages for employees, it’s just supply and demand. But beyond that, foreign-born workers tend to earn less than their native-born counterparts.
The median weekly income of foreign-born workers was around $ 885 per week in 2020, compared to $ 1,000 per week for native-born workers, according to the BLS.
There are several probable reasons behind these differences. Foreign-born workers tend to have lower levels of education than native-born workers, and the jobs they tend to do (these service occupations in particular) tend to pay less.
Whatever the reasons, however, or whether the pay differentials are fair, the reality is that foreign-born workers earn less. When you remove enough of them from the workforce, you will likely see wages increase.
It’s not the only force behind rising inflation in the country – there’s a lot going on – but it plays a role. And that’s the most important point in all of this data and the decline in immigration.
The pandemic has caused major disruption to the US economy in a long list of areas. Many workers re-examine the course of their lives and try to chart new ones. Supply chain issues have taken their toll. And the sheer uncertainty around the virus and “back to normal” has left businesses and investors to play a perpetual game of “let’s see what things look like next month”.
But the decline in immigration and the workers it supplies to the US economy has played a role. And as stories of labor shortages continue, one can’t help but wonder if political talks around immigration will adjust over the next election cycles.