(NewsNation) — Inflation is the top concern for most Americans today, and some policy experts have argued that increasing immigration could be a solution.
A recent study by researchers at George Mason University in collaboration with FWD.us, a pro-immigration group, found that lower levels of immigration before and during the pandemic contributed to recent inflation.
“To achieve higher real wages while reducing inflation and encouraging employment, the US must either increase labor force participation and expand training or increase the pool of workers available through the admission of foreign workers,” the researchers concluded.
In a December article for Foreign Affairs, two academics, who are research associates at the National Bureau of Economic Research (NBER), called on policymakers to fight inflation through immigration reform.
“More immigration would help meet today’s excess demand for labor, which over time would limit wage and price growth,” wrote Gordon Hanson, an urban policy professor at Harvard and Matthew Slaughter, the Dean of the Tuck School of Business at Dartmouth.
According to one estimate, the immigration slowdown brought on by COVID-19 shrank the labor force by about 1.6 million people.
Since then, industries that heavily rely on immigrant workers, like construction and hospitality, have struggled to fill positions. Farmers have also had a hard time — a trend that some fear could directly impact the nation’s food supply.
On one hand, the tight labor market has led to higher wages, particularly for the nation’s lowest-paid workers.
But as economic logic goes, those labor costs ultimately get passed on to the consumer.
In November, Federal Reserve chair Jerome Powell pointed to the robust jobs market as one of the drivers of inflation.
“Wage growth remains well above levels that would be consistent with 2% inflation over time,” Powell said.
The labor market has remained resilient despite the Fed’s best efforts to cool demand.
Today, there are more than 10 million job openings but only 6 million people are looking for work.
But economists disagree about how much higher wages have contributed to inflation — which currently stands at 4.0% year-over-year.
As Josh Bivens, chief economist at the Economic Policy Institute, pointed out last year, wage increases didn’t keep pace with inflation. His analysis determined that the rise of inflation had “not been driven” by tight labor markets pushing up wages.
As of January, U.S. Treasury Secretary Janet Yellen seems to agree. She told Bloomberg the U.S. is not seeing a “wage-price spiral” — a dynamic when wages and prices cause each other to rise.
Some are skeptical that more immigration will help lower inflation.
“When the central bank lets spending grow too fast, adding workers does not make up for it,” Ramesh Ponnuru, a senior fellow at the American Enterprise Institute, argued in Bloomberg last year. “Higher immigration won’t fix that component of inflation.”
Steven Camarota, director of research for the Center for Immigration Studies — which advocates for less immigration — also disagreed that more immigration would reduce inflation in a meaningful way.
Camarota’s analysis found that a 10% wage reduction in jobs often held by immigrants could reduce prices by only 2.2%.
“Prior to Covid, workers, including those without a bachelor’s degree, have generally seen their wages decline or grow very little for more than two decades,” Camarota wrote. “Reducing their wages by admitting more immigrants can be seen as unfair and unwise.”
In May, lawmakers on Capitol Hill introduced bipartisan legislation that would create more legal pathways for undocumented migrants and reform specific criteria for work visas, among other changes.
Last year, net immigration to the U.S. rebounded to its highest level since 2017.
Although it’s still above the Fed’s 2% target rate, annual inflation has fallen to 4.0% from its 9.1% peak last June.
