A new study on immigration to solve labor shortages

The Migration Policy Institute issued a short study on immigration to solve labor shortages. the study attempts to frame the issues, and does not delve into the research or make any conclusions about what the U.S. should do.

This topic is increasingly becoming center stage for immigration reform, endorsed by Republican governors and industries. My own take is that if there is a change in U.S. practices to increase immigration to meet labor demands, that the private sector, including business and labor will try and will likely succeed to gaining control of design and implementation, leaving the federal government on the sidelines.


When is there a labor shortage?

“There is not a clear answer for when a shortage rises to the threshold of being genuine. In practice, it is often a judgment call for government to decide which jobs seem genuinely hard to fill, and where immigration seems to fit in.”

On the role of technology to replace workers and solve a  problem: “it is uncertain how quickly into what extent new technologies will be adopted. For example, advances in crop harvesting robotics could potentially transform soft fruit production such as strawberries.. Yet, low profit margins in the sector mean that, for the for seeable future, this technology remains out of reach for most producers.”

The report also sites questions about Japan’s feasibility to use robots to take care of elder care. And, “relying on immigration to address shortages can lead to employers and governments, putting off necessary investments, such as upscaling local workers for a hard to fill newly emerging jobs or improving productivity and sectors through mechanization and restructuring jobs.”

Examples of fitting immigrants to their best use: Employer-sponsored program; specialized visas, such as tech visas; using a point system that are met some high scoring candidates, as in Canada. Talent visas, such as electrical workers; permits that apply to a particular sector, such as healthcare.

More than a job assignment: “Attention needs to be given to providing these immigrant workers with opportunities to develop social and provide professional networks so that they can thrive.”



High growth in lowest wage categories and immigrant economics

Immigrants with low wages may have on balance benefited from the pandemic through workforce market disruption and consequent competitive bidding for workers. Here is the evidence, interesting tied to labor market disruption.  One needs to consider how this phenomenon may have encouraged more persons with low formal education to enter the U.S.

First, According to Bureau of Labor Statistics, in 2021, 19.1 percent of foreign-born labor force age 25 and over that had not completed high school. This is much higher than the figure for native-born labor force which is 3.5 percent. I think these workers dominate with lowest 10% of workers in wage, or simply stated “low wage” workers. The jobs filled by low wage immigrant workers will tend to be those for which English proficiency and tacit knowledge of American consumer culture are not needed.  Unauthorized workers are further restricted by verification policies practiced seriously by many public and some private employers.

The effect on the COVID pandemic on these low wage workers were two fold. First, there were massive layoffs in key industries where they work: According to Bureau of Labor Statistics, the lowest 10 percent of workers by wage work: food preparation and serving related, personal care and service, building and grounds cleaning and maintenance. (Farm employment did not appear to be adversely affected.)

Second, the workers when they went back to work had higher wage gains than workers at higher income categories.

According to the Economic Policy Institute, Between 2019 and 2022, The lowest 10th-percentile real hourly wage grew 9.0% over the three-year period, compared to 2.4% among middle-wage workers and 4.9% among (top) 90% percentile workers.

Why did this happen – both the high wage growth AND the relatively high growth?

Why did this happen? According to the EPI, “The sudden loss of millions of low-wage jobs at the start of the pandemic significantly reduced the frictions that tie workers to particular jobs—that is, the barriers that in normal times keep workers from searching for better employment opportunities. These barriers include, for example, the lack of time or other resources to engage in a job search or a lack of awareness of better opportunities. In the pandemic recovery, this phenomenon opened up opportunities and led to increases in hires and quits (“churn”) in the low-wage labor market. This increased churn—on top of a tightening labor market and the need to incentivize workers to take “front-line” jobs with pandemic exposure—increased low-wage workers’ leverage, which led to faster wage growth.”

According to David Autor and colleagues, “Labor market tightness, following the height of the COVID-19 pandemic led to an unexpected compression in the US wage distribution that reflects, in part, an increase in labor market competition. Rapid relative wage growth at the bottom of the distribution reduced to college wage premium. Wedge compression was accompanied by rapid nominal wage growth and rising job to job separations, especially among young non-college-age high school, or less workers.”

Wage differentials between US and emerging countries

Indian software developers

The median annual salary for a software developer in the United States is around $77,000. The median annual salary for a software developer in India is around $11,000. The World Bank’s PPP conversion factor for India in 2021 was 23.8. Adjusting for this, the Indian worker’s annual salary is around $29,000 in terms of purchasing power in the United States, 37% of the American worker’s.

Nigerian nurses

A starting nurse in Nigeria makes, in PPP, about $4,000 a year. A starting registered nurse in the U.S. makes about $60,000. The Nigerian nurse makes 6% of the American nurse in terms of purchasing power.


DeSantis’ hostile environment for unauthorized persons

On February 23, Florida Governor DeSantis filed legislation which amounts to a mass crackdown on unauthorized persons in Florida. (Here is the state’s press release). The New York Times reports that the bill is approaching a vote.

Following other states, e-Verify

DeSantis is attempting to introduce what the Conservative Party in the United Kingdom explicitly calls a “hostile environment.”  Let’s look at the matter of employment.

According to the American Immigration Council (August, 2020), 775,000 undocumented immigrants comprised 18 percent of the immigrant population and 4 percent of the total state population in Florida in 2016. This figure understates the importance of the unauthorized population, as many live with U.S. citizens or permanent legal residents.

The state’s total workforce is about 10 million.  My guess is that 500,000 of them are unauthorized, and that some live with or partners of 100,000 legal workers. Thus, directly or indirectly about 6% of the workforce will be adversely affected be DeSantis’ crackdown.

With regard to employment, the Florida bill basically seeks to match Arizona’s 2007 Legal Arizona Workers Act (LAWA). The most direct impact of this law for the workforce as to require all employers to use e-Verify, though the hostile environment created by the entire law likely had an impact on employment.  Arizona was the first (2007) of eight states (including Alabama, Arizona, Georgia, Mississippi, North Carolina, South Carolina, Tennessee and Utah) that require all employers to use e-Verify.

Research centers in most of these states have studied the impact of the requirement on the size of the unauthorized workforce, the impact on the legal workforce, usually showing minor impacts. This is a hard topic to research because many unauthorized workers are independent contractors (grounds work, cleaning, construction laborers, personal aides) and thus not subject to e-Verify, which applies only to employees.

Perhaps the most specific numbers in impact are for Arizona, for which researchers in 2011 concluded as follows:

A study done in 2011 of the impact of the Arizona law concluded as follows: “Arizona achieved the intended goal of reducing the number of unauthorized immigrants. The population of non-citizen Hispanic immigrants—a high proportion of whom are unauthorized immigrants—in Arizona fell by roughly 92,000 persons, or approximately 17 percent, [because of the law] over 2008–2009. However, there was a shift to self-employment. Wage and salary employment of Hispanic non-citizens dropped by approximately 56,000 while non-citizen Hispanic self-employment increased by about 25,000. We found no strong evidence that LAWA, as of yet, either harms or benefits competing authorized workers.”

The current labor market in Florida

Florida’s unemployment rate today is  2.6%

There are many open positions in construction and the hospitality industries.



The Migration Policy Institute’s information resources

The Migration Policy Institute has released updates to its useful information resources on immigration in the United States.

Frequently requested statistics on immigrants and immigration in the U.S. updated to March 14 2023

(You can also go to Pew Research’s key statistics, dated 2020.)

State immigration profiles.

In its announcement of these updated data sources, the MPI included four specific items of information:

Immigrants were 13.6% of the total U.S. population in 2021, the most recent available year. In 2000 the share was 11.1%. The share has been flat for several years due to Trump policies and the pandemic. However, the immigrant population is expected by the Census Bureau to grow at a faster rate than the U.S. born population.

Mexican immigrants in the United States declined by more than 1 million between 2010 and 2021.  In 2013 number of new Asian-born persons who immigrated to the U.S exceeded the number of Latin American-born persons who immigrated.

Immigrants’ median household incomes in 2021 ($69,622) were almost identical to those of the native born ($69,734). This figure is somewhat misleading because immigrants form an hour class profile in economic status: relative to the U.S. born population a high share with little formal education and a high share of those with advanced formal education.

About 26% of the 69.7 million children under age 18 in the United States lived with a least one immigrant parent as of 2021, up from 19% in 2000 and 13% in 1990. I have posted that immigrants have become a birthing factory because they are likely to arrive in the U.S. during prime child bearing years in their lives.

Who is working here with irregular status

How many persons are in the 160 million workforce whose legal status is either non-existent or irregular but permitted to work? Less than I thought, and the many are working with authorization.

The Center for Immigration Studies estimates there are about 5 million who conventionally would be called illegal. Another 2 million who would be considered otherwise illegal workers but are working with federal government authorization. The total of 7 million constitutes 4.4% of the total private sector workforce.

Those working illegally. They comprise (A) 2 million “off the books,” (B) 1.8 million where the names and SS numbers do not match, (C) 700,000 with expired temporary work visas, and (D) 600,000 with stolen SS numbers. They total to 5.1 million, or 3.2% of the workforce. Most are paying into Social Security and Medicare, and pay income taxes. Off the books are 2 million or 1.25% of the workforce.

Those working with federal approval. They comprise (E) 650,000 DACA status, and (F) 1.3 million other temporary status, including 410,000 Temporary Protected Status, 440,000 persons with asylum applications, and 440,000 others with formal work permission but whose status is irregular. They total to 0.8% of the workforce.

[This was first posted in 2021, but its relevence is even more important today due to the continued shortage of workers in the economy.]

The UK is running out of workers

One million people are estimated to have left the United Kingdom due to Brexit. Here is a quick snapshot of some workforce problems. Comment is Freed analyzes the personnel shortage in the public sector:

Childcare: I don’t see how the government’s proposed expansion of childcare will be possible at current average wage levels to compete with retail [employment]. The only alternative would be to open up our immigration system for lower-paid jobs and I don’t imagine either the Tories or Labour will be keen to do that. Likewise re-joining the [EU].

Nurses, meanwhile, are dealing with much higher demand, with full hospitals, and particularly intense pressure on A+E and intensive care. Exhaustion and burn-out from the pandemic are rife. Those who worked in intensive care during covid suffered post-traumatic stress disorder at similar levels to soldiers returning from Afghanistan.

Medical doctors: [UK] medical school places are artificially constrained by the Treasury due to their high cost. Demand has risen much higher than the increase in these places – the NHS has 17% more junior doctors since 2019 and 10% more consultants. The only way to square the circle has been a massive increase in non-UK doctors. Almost 11,000 doctors from outside the EU joined the workforce in 2021, up from 5,000 in 2017. This compares to around 8,000 UK trained doctors. This spike in recruitment also meant 50% of nurses who joined the NHS last year were non-EU.

Global remittances and charges

Total global remittances in 2022 were $626 billion. The total volume was $121 billion in 2000 and $420 billion in 2010.  (Go here for time line.)

According to the World Bank, the global average charge for remittances in late 2022 was 6%.  The percentage of remittances with a charge of less than 5% increased from 17% in 2009 to 42% in 2022.  Thus, the UN’s target for 2030 of 3%, and none higher than 5%, are being approached.

But why are remittance charges high? The culprits include complexity in regulation, including anti-money laundering controls, underdevelopment of banking infrastructure, hidden fees such as exchange rate margins, immaturity of digital payment systems. Mobile phone digital payment systems such as Venmo account for roughly 1% of global payment value.

Here is a World Bank-run analysis of remittance vendors and charges for the U.S. to Nigeria. The charges range from zero to 6% and average 3%. For the U.S. to Honduras there are no costless  methods and the average is 4.13%.

Competitors for low-cost remittances today include Azimo, Xoom and WorldRemit. To get a sense of how customers of regular remittances compare these vendors, see this analysis, which concludes “It’s impossible to nominate a winner in this category. While Xoom edges ahead on rates for some currencies, WorldRemit offers a slightly better deal on others.”



Is population decline a bad thing?

Most advanced countries are experiencing between flat and declining populations. The steady state fertility rate (births per woman) is 2.1. South Korea: 0.85. U.S: 1.7. The only way to keep population steady or growing is longer life expectancy and immigration. Canada one of extremely few countries with a functional immigration system which imports people (about 1% of total population a year, compared to about 0.3% in the U.S.).

Population decline creates problems: (1) faster shift towards old, post-workforce population, i.e. more old people per worker; (2) constraints on workforce supply. But constraints need to be examined by sector (personal services, technology, scientific, retail, etc.). And they are open to solutions, which may be more available with the penetration of artificial intelligence, with its capabilities in robots as well as human-like cognition. Social and political forces do, of course, constrain the flexibility of our immigration policies. There is no evidence that declining population adversely affects productivity improvements, but maybe I’m missing something.

Other problems from population decline include the risk of deflation. Deflation increases debt burden, discourages investment, and makes it more difficult for a central bank to manage the economy.

Another is that politics and enterprises have less new blood flowing into them, raising  the risk of organizational sclerosis.

Population increase can be by increasing fertility rate (very few successful examples, such as Hungary) and immigration. Immigration is a fruitful form of population stability and increase for two reasons: (1) immigration (especially at middle class level creates) a more cosmopolitan, liberal democratic society, which most of us want for social, cultural and economic reasons. (2) immigration tends to concentrate at child-bearing age (20-40) hence a fertility boost. (Immigrants are 14% of US population but 20% of births).

New strategies for immigration can lessen workforce constraints due to aging. Example: A consortium of hospital systems makes a 20-year deal with nursing schools in Nigeria to provide a steady stream of nurses. California Ag companies make deal with a Mexican state for farm labor. These will not happen until immigration control is shared with private organizations. These are basically rough copies of how the AMA influences the immigration of medical doctors.

Slow and fast chain migration

Chain migration is a phenomenon where immigrants to a country help facilitate the immigration of others from their home country. Here two examples: one with over a hundred years of development, the other occuring virtually overnight.

LONG TIME COMING: Filipino nurses in the United States

Many Filipino nurses have migrated to the United States over many years, with earlier waves of immigrants helping to facilitate the migration of others from the Philippines. These nurses have formed tight-knit communities in cities such as Los Angeles and New York. the comprise 4% of all nurses in the U.S. and over one quater of nurses who died due to COVID.

One analysis: “In the early 1900s, the U.S. set up nursing schools in the Philippines that taught an American curriculum in an effort to “civilize” the Philippines. Then, in 1948, just two years after the Philippines gained independence from the U.S., the U.S. created the Exchange Visitor Program, which allowed foreign professionals to come to the U.S. for two years to help spread American democracy across the world and fight Soviet propaganda. Many Filipino nurses, already trained in American-style nursing, came to the U.S. Then, in 1965, the Immigration and Nationality Act was passed, which allowed a larger number of immigrants from around the world to come to the U.S. There was a critical shortage of nurses following WWII and U.S. hospitals started advertising for Filipino nurses.”

FAST: Poles to the U.K.

Polish immigration for work in the United Kingdom surged after early in this century.  Many Polish immigrants to the United Kingdom came from the same regions of Poland, with earlier immigrants helping to facilitate the migration of others from their home region. These immigrants have formed tight-knit communities in cities such as London and Manchester.

Here is why. The Polish population in the U.K rose from under 100,000 in 2000 to over 600,000 in 2012.” n many respects the movement between Poland and the UK followed a common pattern in Western Europe in the second half of the 20th century. Examples include Italians to Switzerland in the 1950s and 1960s, Turks and Yugoslavs to Germany and Portuguese to the Netherlands in the 1960s and 1970s. [The very short term surge can be explained by] the right people in the right place under right circumstances. Right People: a boom in Poland of educated young people feeling very mobile. Right Place: easier to move from Poland to the UK and find low wage jobs in healthcare and food processing which UK workers did not like. Right Circumstances: The juncture of Poland’s accession to the EU (May 2004) with the decision taken by the UK government to grant immediate access to the British labour market. That other countries did not follow suit meant the lack of any strong competition from other receiving countries.”

Since Brexit there has been a large decline in the Polish population. According to the Office for National Statistics, the number of Polish-born people living in the UK decreased by 116,000 between 2018 and 2020, from 912,000 to 796,000. This is the largest decrease in the number of EU-born residents in the UK since records began. The Brexit vote was in 2016; its formal implementation in 2020.