Legal Work-Related Immigration Has Fallen by a Third Since 2020, Contributing to U.S. Labor Shortages

Taking a Bite Out of the Economy
The sharp reduction in the number of temporary visas for foreign-born workers in 2020 and 2021 harmed the U.S. economy. Based on my own calculations, the total cost was around 0.4% per year of total gross domestic product – at least $82 billion per year in 2020 and 2021.

Immigration restrictions affected far more people, however, including those who were unable to obtain a green card because of the closure of embassies and consulates. All told, these policies resulted in an estimated 2 million fewer working-age immigrants in the U.S. in 2020 and 2021.

Including those additional losses nearly triples the economic cost of U.S. immigration restrictions to about 1.1% per year of U.S. GDP.

Unless the U.S. reverses course and issues more work-related visas, I estimate that the worker shortage will double to over 4 million by 2030. My calculations also suggest this will shave about 4.3% off of GDP, on average, annually for the next eight years. Adding that all up, that would amount to about $9 trillion in lost economic output.

Labor Shortages
Labor shortages are especially severe today in certain industries that rely heavily on immigrants as employees.

For example, in 2020 foreign-born workers accounted for 39% of the farming, fishing and forestry workforce, 30% of all people employed in construction and extraction, 26% of everyone working in computer science and mathematics and 22% in health care support.

As a result, these industries are facing unprecedented challenges in trying to find workers to fill open jobs.

If these labor shortages continue, I’m certain that they will keep hurting job markets, supply chains and productivity as companies have to pay their employees more and then increase prices due in part to those higher labor costs.

The labor force participation rate, which measures the number of people in the job market as a percentage of the total working-age population, has been hovering around the lowest levels seen since the 1970s as more U.S. workers drop out of the job market. After plunging to 60% in 2020, it bounced back partially. The rate stood at 62.2% in July 2022.

Feasible Fix
Of course, there are other factors besides a lack of foreign-born visas issued that are responsible for the shortage of workers.

But none are easy to resolve. It’s hard for the government to increase the share of adults who are working, and there’s little that can be done in the short term about the country’s aging workforce – the result of a long-term fertility decline.

Even if the political hurdles can be high, I believe boosting the number of immigrants allowed to legally work in the United States is an important way that the authorities can ease labor shortages.

Jose Ivan Rodriguez-Sanchez is Research Scholar of Economics, Rice University. This article is published courtesy of The Conversation.