Biden’s Immigration Policies Fuel Economic Growth, Fed Study Reveals
A new research paper from the Federal Reserve Bank of San Francisco indicates that the surge in foreign arrivals under President Biden’s administration is bolstering the U.S. Economy, particularly in key sectors like manufacturing and construction. This contrasts with the Trump administration’s efforts to curb unauthorized immigration, which the study suggests had a dampening effect on employment growth.
The Impact of Increased Labor Supply
The study, titled “Unauthorized Immigration Effects on Local Labor Markets,” analyzed data on arrivals and departures of working-age immigrants across all 3,100 U.S. Counties. Researchers Daniel Wilson of the San Francisco Fed and Xiaoquing Zhao of the Dallas Fed found that an increase in the unauthorized local workforce equal to 1% of local employment raises local employment by 0.92%. This suggests a direct correlation between immigrant labor and job creation.
The research highlights the critical role immigrants play in filling labor shortages. The influx of workers is particularly beneficial in industries facing difficulties finding domestic employees, such as residential construction and the burgeoning data center industry essential for AI growth. A slowdown in these sectors could lead to higher home prices and delays in AI infrastructure development.
Trump-Era Crackdowns and Economic Consequences
The study compared the period of high entries from March 2021 to March 2024 under the Biden administration with the crackdown period from March 2024 to March of last year under the Trump administration. The analysis suggests that the Trump administration’s policies reduced employment in industries experiencing labor shortages.
The CBO Confirms the Trend
The Congressional Budget Office (CBO) echoes the Fed’s findings, predicting that slowing immigration will act as a drag on U.S. Economic expansion. The CBO forecasts that the labor force will add 2.4 million fewer employees in the next decade than previously estimated, citing a rapidly aging population and limited growth in native-born workers.
The CBO report, “The Budget and Economic Outlook: 2026 to 2036,” notes that the U.S. Labor force expanded at a rate of 0.7% in the decade preceding the pandemic, surged to 1.6% during the Biden years, but is projected to slow to 0.4% between 2026 and 2034 – just over half the pre-pandemic rate and 25% of the recent surge.
Milton Friedman’s Insights Revisited
The study’s conclusions align with the views of the late economist Milton Friedman, who argued that unauthorized immigration is particularly beneficial because new arrivals are motivated to work and do not rely on unemployment benefits. Friedman believed immigrants often take jobs that domestic workers are unwilling to fill, providing employers with a crucial labor supply.
FAQ
Q: What is “net immigration”?
A: Net immigration refers to the difference between the number of immigrants entering a country and the number leaving.
Q: How did the researchers determine the impact of immigration on employment?
A: Researchers matched immigrant inflows to employment hubs and U.S. Census data, adjusting for the number of working-age adults not encountered by federal agents.
Q: What sectors are most affected by changes in immigration levels?
A: Manufacturing, construction and the data center industry are particularly sensitive to fluctuations in the availability of immigrant labor.
Q: What does the CBO forecast regarding labor force growth?
A: The CBO predicts a significant slowdown in labor force growth over the next decade, which will put downward pressure on economic expansion.
Did you know? Immigrants are often willing to take jobs that residents of this country are unwilling to take, according to economist Milton Friedman.
Pro Tip: Understanding the relationship between immigration and economic growth is crucial for businesses planning future expansion and investment.
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