How Does Immigration Fit into the Future of the U.S. Labor Market?

Abstract

Although the U.S. economy had a banner year in 2018, posting 3 percent gross domestic product (GDP) growth, the long-run projections are not nearly as bright. GDP growth is anticipated to average less than 2 percent annually over the next decade, and slow labor force growth is a key underlying reason. U.S. labor force growth is currently one-third of its recent historical average, and it is projected to slow further as population aging and lower birth rates take their toll on labor supply. Admitting more immigrants is one way U.S. policymakers can bolster growth in the workforce and the economy. A larger role for immigrant workers can also help mitigate other symptoms of the economy's long-run malaise, such as low productivity growth, declining domestic geographic mobility, and falling entrepreneurship. Finally, immigration can help address the looming mismatch between the skills U.S. employers are seeking and those of workers in the country by filling jobs at the extremes of the education spectrum and in science , technology, engineering, and mathematics (STEM) fields, all areas with relatively few native-born workers. Some observers of trends in labor demand project that technological change and automation will displace large swaths of U.S. workers in the near future. If true, there would perhaps be less need to admit more immigrant workers. But these projections fail to account for both recent data and historical experience. Prior periods of intense technological change boosted growth and raised living standards, rather than reducing them. Similarly, there are projections that international trade and offshoring-globalization-will reduce the need for immigrant workers in the United States. Indeed, all of these forces have trimmed payrolls in goods-producing industries and regions of the country, but aggregate employment has grown, and foreign-and native-born workers alike have found employment in other sectors. As U.S. policymakers navigate these complex and intersecting forces, it is important to acknowledge that immigration-like anything else-is not without costs. Research suggests that while immigration benefits employers and consumers, low-skilled immigration has adversely affected the wages of low-skilled U.S. natives and earlier immigrants. A plan to increase employment-based immigration as a way to spur economic growth could be paired with assistance for these groups, including programs to help them acquire new skills and shift to growing sectors and areas, so the benefits of immigration are shared more equitably.