Report

Immigration in US – For a labor-market-driven immigration system

The U.S. labor market will be buffeted by at least three major sets of changes over the next few decades. The country will see major shifts in the following characteristics of the market:

1. Demographics. The native-born population and workforce will age and shrink, and the presence of racial and ethnic minorities in the workforce will rise; this is due in part to declining birth rates and the retirement of baby boomers, as well as contin­ ued immigration.

2. Automation. While the technology-driven mass unemployment feared in some cir­ cles will not materialize, worker displacement rates will likely rise, and more work­ ers will need to make major skill adjustments, especially among the less educated.

3. Alternative Staffing. The traditional employer-employee relationship will become less common as firms rely more heavily on independent contractors and other forms of outsourced human resource functions (with workplaces becoming increasingly “fissured” among multiple employers). More broadly, companies will likely continue the trend of instituting a set of workplace practices that focuses primarily on lower­ ing labor costs rather than investing in worker skills and quality.

Together, these forces will generate some rising productivity and perhaps higher average earnings. But they will also lead to rising inequality between skilled and unskilled workers, lower economic growth, and a shrinking workforce as displaced workers and those facing lower wages withdraw from the labor market. Employers will also more frequently encoun­ ter tight labor markets as demand for workers shifts rapidly toward new sectors, or jobs in existing sectors require new skills, and workers need time to obtain the education and train­ ing to meet demand.

In this context, increased immigration can provide many benefits to the U.S. economy. It can benefit consumers by helping to reduce the costs and increase the availability of important goods and services, especially those such as health and elder care where demand will rise rapidly as the population ages. Immigration can also contribute some balance to the federal budget as baby boomers retire and pay much lower taxes while drawing heavily on Social Security and Medicare. And finally, it can raise economic growth by replenishing a labor force that would otherwise diminish.

The precise impact of immigration on the U.S. economy and its workers, however, will vary depending on the industries they enter and the characteristics of the workers involved. Highly educated immigrants will make especially notable contributions to economic produc­ tivity and dynamism by making it easier for employers to fill jobs requiring high or spe­ cialized skills, and also by launching start-ups and otherwise driving innovation. But in some contexts, less-educated immigrants appear to be substitutes for native-born workers without a college education-precisely those workers who have been hardest hit by other forces, such as technological change, globalization (e.g., imports and labor offshoring), and the weakening of unions; in such cases, immigra­ tion can add a bit to the earnings inequality that is already rising in the United States, though the scale of this effect is hotly disputed.

In light of these labor market dynamics, and in the current highly polarized political environ­ ment, the country should aim for immigration reforms that are economically sensible but also politically achievable. An economically sensible policy would at least modestly increase overall immigration, while also shifting the composi­tion of admissions somewhat toward more-skilled and labor-market-driven immigration (relative to less-skilled and family-driven immigration). To some extent, this shift in the skill levels of newcomers is already occurring, as flows of relatively less-skilled immigrants from Latin America (and especially Mexico) have declined while more-educated immi­ grants from Asia have become a larger share of admissions. These trends should be reinforced by immigration policy changes.

The components of “comprehensive immigra­tion reform” defined in previous years-re­ ducing illegal immigration through greater enforcement efforts at U.S. borders and in the workplace, ensuring sufficient legal immigra­ tion to meet U.S. economic needs, and a path to legal status for the country’s current unauthor­ ized immigrants- should remain the central goals of future reforms. But any changes in immigration policy should also be tied to a broader policy agenda to help raise the skills and earnings of workers without college de­ grees, whether they are immigrants or native born. Crucially, immigration policy should al­ low the flexibility to make future adjustments, given that the economy’s skill needs are likely to continue changing in ways that are difficult to predict.

Chosen excerpts by Job Market Monitor. Read the whole story at Immigration and the U.S. Labor Market: A Look Ahead | migrationpolicy.org

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