Are Migrant Workers Stealing Jobs? The Real Story Around Immigration
By: Brian Seay, CFA
Two major storylines are shining a spotlight on U.S. immigration. First, the monthly jobs report continues to outperform expectations, largely due to “foreign born” workers. Second, we are entering a Presidential election cycle where the current crisis at the border will be a hot topic of debate. Some view what can only be described as a wide-open southern border as a significant problem. News stories about crimes committed by illegal immigrants seem to hit the news every night. The Bible teaches that we should love foreigners and refugees. From an economic perspective, immigrants may contribute to disinflation. But much has been written about migrant workers stealing jobs from Americans and driving down wages. So how do we reconcile all of that? What does the data say about immigration and employment in America.
In this article we examine what the data says about immigration, the U.S. labor force, wages and how all of these concepts interact.
First, it’s important to separate a policy stance on illegal, undocumented, and unmonitored immigration from legal migration. I don’t see how it’s possible that good things come from letting any individual, regardless of their affiliations, political beliefs, criminal and military history into any country, including the U.S. That seems to be an easy invitation for bad actors to come into the U.S. are commit crimes, on both the large and small scale. So, regardless of the data and the perspectives I share around immigration, simply allowing anyone into the country because we want more immigration is not a good policy idea. We are going to talk about the impact of illegal immigration on wages and the economy, but I don’t want anyone to walk away thinking that more illegal immigration is a good idea. It’s not.
Since this is such a hot topic, lets start with the facts on immigration statistics. In 2019, net immigration to the U.S., including estimates for illegal immigrants, was about 415,000 according to the non-partisan Congressional Budget Office (CBO). That was a lower year than the past decade, where immigration figures typically ranged between 800,000 and 1,500,000 each year. In 2023, the CBO estimates that 3,300,000 immigrants came into the U.S. They expect the trend to continue into 2024. The difference is almost entirely undocumented workers, as they number of work visas and legal permenant workers remained relatively constant around 800,000. For reference, the U.S. population is about 270 million and the workforce is about 167 million people. When we are looking for 3% growth each year in GDP, having 1.5% population growth and almost 2% labor force growth from immigration is significant.
So how are all those people impacting the Economy and the Labor Market? Is the flood of immigrants a good or bad thing?
Let’s start with population growth. When we look at the economy, growing the economy requires at least one of these three things to occur.
1) More people work
2) Existing people work more hours
3) Workers are more productive with the existing hours they spend working.
The first chart shows the composition of population growth in the U.S. You can see that as our birth rate has declined, we are not replacing our population each year. In fact, every year, we rely more and more on immigration to grow our total population and workforce. So we don’t have more people without immigration.
The second chart shows the number of hours worked during the average week. You can see that hasn’t really changed much in the last decade plus since they began tracking the numbers. We aren’t working more.
Lastly, you can see productivity. There are well reasoned arguments against productivity as a statistic, mostly because it is solved after we measure GDP, the number of hours people work and the number of workers. However, I think any fair-minded person can see that technology helps people become more productive over time, and the in the U.S., productivity has been growing about 2% per year for the last few decades.
So without immigration, we are relying on paltry productivity growth to offset a declining population and flat work hours. That doesn’t sound like a recipe for success. We need immigration to drive GDP growth, business growth and wealth in the United States.
In fact, since 2019, the U.S. born work force is down. The same is true over the past 12 months. The Foreign-Born labor force is responsible for all of the growth in the workforce over the past few years. Now, as we dive into the stats, it’s important to understand the definition of “Foreign Born”. The Foreign Born category measures anyone in the U.S., most likely legally, that was born in another country. They might be U.S. citizens that were naturalized at some point, perhaps after school, through marriage or just after several years of living in the U.S. So recent immigrants obviously make up a portion of the “foreign born” population, but it’s a broader segment than just recent immigrants.
Are all of those immigrants’ stealing jobs from native born workers? Are native born Americans choosing not to work because their jobs are taken?
Here are a few data points to help answer this question:
Workforce participation among prime-age workers, measured by either ratio, is closer to highs for this century than averages or lows.
Labor force participation rates among foreign- and native-born groups tend to move together. We don’t see high participation among foreigners and lower participation among native born workers.
We don’t see a significant difference between the unemployment rates for native and foreign-born workers. Unemployment across most demographic groups in the U.S. is near all-time lows.
Even uneducated men have not seen unusual workforce participation declines during the immigration boom.
Now, do immigrants work and do they “steal jobs” are two different questions. Foreign workers are coming into the U.S. and working. The Center For Immigration Studies made the point in a 2018 article that “there are no jobs that Americans won’t do.” It is true that there are Americans employed in industries commonly staffed by foreign workers. There are lots of American cooks, construction workers and housekeepers. However, are there enough to keep up with the demands of the economy? The answer is no. We know that all the recent workforce growth has been by foreign born workers. Without foreign workers, especially in service sector jobs, inflation would likely be much higher.
In my view, the evidence is clear. Foreign workers are here working, but mostly alongside native born Americans who are also employed at generationally high levels. It takes both kinds of workers to make the economy grow.
I mentioned earlier that foreign workers do have some negative impact on native born American workers. If they aren’t taking their jobs, then what is the impact?
When we look at the wages for lower income Americans, they have largely kept up over the economic cycle. But supply and demand are real forces. The influx of foreign workers in service sectors like housekeeping and construction necessarily keeps wages from growing for native born workers in those fields. If there was no immigration, it’s likely that wages would need to be higher to attract workers in those areas. Now, higher service sector wages would likely drive overall inflation higher, so I’m not sure that those workers would be any better off. As everyone has experienced over the course of this economic cycle, higher pay doesn’t necessarily mean a better standard of living. But you can’t argue that firm wouldn’t have to pay more if they were limited only to U.S. born workers.
The increase in immigration, both legal and illegal, has been one of the key contributors to inflation moving lower over the past year. We have not seen demand for goods or services contract. U.S. Real Retail sales are up more than 10% since 2019 and have declined only 1.2% since the 2022 inflation peak Average Hourly earnings are down 17% since the inflation peak in 2022. Our capability to deliver goods and services has grown significantly over that period, largely due to the expansion of the foreign-born workforce.
I don’t know if the increased immigration was an intentional policy of the Biden administration or a happy accident. Either way, it has been important in driving inflation lower over the past two years despite increasingly high levels of government spending.
The other common objection I hear to immigration is crime.
But research out of Stanford shows definitively that immigrants are less likely to be incarcerated than native born Americans. Do immigrants commit horrible crimes? Absolutely. Much of that crime is associated with cartels and gangs. My view is that better border enforcement should be able to easily weed out the bad guys that want to come into the country to do harmful things. The remainder of the global population are generally people of goodwill. So, you can be pro-immigrant, pro-immigration and anti-illegal immigration all at one time. In Fact, I think that is the right stance.
So, what does all of this mean? A few thoughts in conclusion:
Legal immigration into the U.S. is a good thing. Immigrants do not steal jobs from Americans, though they likely lower wages for those in industries with a heavy immigrant workforce.
The U.S. needs immigration to continue growing the economy unless everyone is going to start having more babies. I encourage this but am doubtful that this will become a trend.
We should encourage less educated workers to gain skills that enable them to be more specialized than entry level migrant workers. This will help them combat lower wages, even without significant secondary education requirements.
To have the right level of legal immigration into the U.S. we need immigration reform. We need more visas of all types and better border security so that we understand who is coming in to the country. You can do both at the same time.