The U.S. labor market is experiencing a significant shift as the share of immigrants in the workforce continues to rise, reaching a record 18.6% in 2023, according to the U.S. Bureau of Labor Statistics. This influx of foreign-born workers, accounting for about 31.1 million out of 167.1 million workers in the U.S., is not only reshaping the demographic composition of the labor force but also bringing substantial economic benefits, experts say.
Mark Zandi, chief economist at Moody's Analytics, highlighted the positive impact of this trend, stating, "The increase in foreign-born workers is taking pressure off the economy." He attributed the robust economic growth of 2.5% in 2023 partly to this phenomenon, noting that it played a crucial role in supporting the U.S. gross domestic product and easing the strain on the job market, as reported by CNBC.
Despite the ongoing contentious debate over immigration policies, with recent political actions such as the impeachment of U.S. Department of Homeland Security Secretary Alejandro Mayorkas by House Republicans, the economic narrative underscores the value of immigrants to the American economy. Muzaffar Chishti, a senior fellow at the Migration Policy Institute, emphasized the unprecedented nature of the current migrant crisis, highlighting its impact not only on border states but also on the interior of the country.
Economists argue that immigration is essential for sustaining a healthy economy, especially in the face of demographic challenges such as an aging population and declining birth rates among native-born households. The Congressional Budget Office predicts that by 2040, U.S. deaths will outnumber births, with immigration accounting for all population growth. This demographic trend underscores the importance of immigration in preventing a long-term decline in the U.S. population and labor force.
Immigrant workers, who tend to be younger, help counterbalance the aging U.S. workforce and contribute to economic growth by generating more goods and services, boosting consumer spending, and supporting social programs through payroll taxes. Jack Malde, a senior policy analyst at the Bipartisan Policy Center, noted, "Immigration has been a net benefit for the economy."
The surge in immigration since 2022 is projected to significantly contribute to the growth of the U.S. labor force, with the CBO estimating an addition of 5.2 million people by 2034. This influx of workers is expected to increase the gross domestic product by about $7 trillion and generate an additional $1 trillion in revenues. Phillip Swagel, CBO director, explained, "More workers means more output, more income, and that in turn leads to higher revenue."
Furthermore, immigrant workers have played a vital role in mitigating pandemic-era inflation by addressing the shortage of workers. The reopening of borders and the easing of immigration policies in 2022 brought about a notable rebound in immigration, which helped alleviate the imbalance between workers and job vacancies.
While concerns have been raised about the potential impact of immigration on certain segments of the U.S.-born workforce, particularly those without college degrees, the evidence suggests that the overall effect on wages may be small and close to zero. The 2017 meta-analysis by the National Academies of Sciences, Engineering, and Medicine found mixed evidence regarding the impact on specific subgroups but noted that immigrants tend to push up wages modestly in highly skilled jobs.
Moreover, immigrants are significant contributors to entrepreneurship in the U.S., with research indicating an 80% higher rate of new business creation compared to native-born individuals. This entrepreneurial spirit further reinforces the argument that immigrants are more likely to create jobs and expand labor demand in the U.S. economy.
