Foreign-born workers take up some of the U.S. labor slack

As Baby Boomers continue to retire, and younger American workers cannot fill in the gap, immigrants are playing an important role in the U.S. labor market.

In 2022, there were 29.8 million foreign-born workers in the U.S. That was a 6% increase from the previous year, while native-born workers numbered 134.5 million. That growth rate in American workers has hardly budged from 2021, and only represented roughly a 1% gain overall, according to the U.S. Bureau of Labor Statistics.

For all the complaints in some quarters that unemployed immigrants are a burden on the economy, the Labor Department put the unemployment rate of foreign-born persons at 3.4% in 2022. The jobless rate for U.S.-born workers during the same period was 3.7%. The truth is that the immigrant’s share of the workforce has been rising for decades, although it dipped slightly during the Pandemic.

During the same period, the participation rate of Americans in the labor force has been steadily decreasing. The participation rate for women is also flatlining. The aging of the U.S. workforce has a lot to do with the decline in American labor. In the U.S., only 59% of the workforce is of working age, which is between 18 and 64 years of age. That compares with 77% of the immigrant population in that age range.  

 The accusation that immigrants are taking jobs away from Americans may ring true if you just look at the headline numbers. Last year, for example, immigrants represented 18.1% of the U.S. civilian labor force, which was up from 17.4% in 2021. But what detractors are not saying is that there were at least two jobs available in 2022 for every person looking for a job in America.

Immigrants are also working at jobs that Americans don’t want to do. A greater share of immigrants works in service fields, production, transportation, material moving, natural resources, construction, and maintenance. They typically make less money (only 87% of what native-born workers make) and work at different jobs.

Of course, there are exceptions to every rule. Plenty of immigrants with skills that are in high demand and low supply such as plumbers, carpenters, electricians, bricklayers, nurses, doctors, and in technology areas are providing critical services to the economy. Roughly 56 Fortune 500 CEOs (11%) are immigrants from 28 different countries, and almost half the companies in that index were founded by American immigrants or their children.

And what about the claim that immigrants are “taking over the country?” Right wing radicals predict that they will soon account for the majority of people in the U.S. The truth is that the size of the immigrant population in the U.S. has remained roughly the same over the past two decades. Foreign-born inhabitants account for just 13.6% of the U.S. population, according to the Migration Policy Institute, which is somewhat below the pre-Pandemic total. 

And while we at home bicker over immigration policy, many nations across the globe with aging populations have moved to open their borders to additional workers. Both skilled and unskilled immigrants have been sought and welcomed by governments despite historical immigration restrictions and/or anti-foreign sentiment among their populations. As our foreign competitors move to fulfill their employment needs, the U.S. seems to be going in the opposite direction, despite most voters’ positive attitudes toward immigration.

Back in 2021, a Gallup poll found that 75% of Americans surveyed considered immigration to be good for the country. However, at the same time, the majority polled felt that illegal immigration was a significant threat to national security. A separate poll by Data for Progress found that 69% of voters also supported a path to citizenship for undocumented immigrants if they meet certain requirements.

You would think that with this underlying support among voters that legislators would have a fertile field to compromise and pass a modern, effective immigration policy. If so, it would be the first time in more than three decades and long overdue.

Instead, Washington continues to choose division and political partisanship. Given the demographics in the U.S., if we ever want to solve our labor shortage and, at the same time, reduce inflation, expanding our immigration policies is the only way to accomplish that.

Bill Schmick is a founding partner of Onota Partners, Inc., in the Berkshires.  Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners, Inc. (OPI).  None of his commentary is or should be considered investment advice.  Direct your inquiries to Bill at 1-413-347-2401 or e-mail him at bill@schmicksretiredinvestor.com .Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.