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Migration declines worsen worker shortages, inflation: Pandemic trends squeeze the economy

A steep decline in net international migration during the pandemic subtracted a lot of potential workers from the U.S. economy. It was bound to have ripple effects.
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WASHINGTON — First, it was Washington, D.C., and New York City. Later, it was Martha’s Vineyard, Massachusetts. In the last few weeks, the great immigration debate has reached new levels, as Republican governors from Arizona, Florida and Texas have been shipping asylum-seekers to more liberal-leaning Democratic enclaves. Behind their moves has been a simple argument: The people coming over the border are a problem to be dealt with. 

But a closer look at the numbers around immigration and the country’s labor force, particularly since the Covid pandemic began, raises questions about that theory of the case.

Even before the pandemic, net international migration into the U.S. had been slowing, according to the census.

In 2015 and 2016, the U.S. had a net international migration gain of more than 1 million people. It dipped to about 930,000 in 2017 and to just over 700,000 in 2018. By 2020, the year the pandemic arrived, it was under 500,000. And last year, the figure dropped to about 247,000.

That’s a massive and sudden decline that, among other things, subtracted a lot of potential workers from the U.S. economy, and it was bound to have ripple effects. Some of those impacts were masked by the disruptions of the pandemic, when businesses were shuttered and unemployment rates spiked.

But one of the primary hallmarks of the rebooting U.S. economy has been a worker shortage, resulting in a plethora of “help wanted” signs in the windows of retailers, restaurants and other businesses across the country.

You can see the signs of the shortage in the Bureau of Labor Statistics’ Labor Force Participation Rate. 

The number for August was 62.4%, 1 percentage point lower than where it stood in February 2020. One percentage point might not sound like a lot, but it equals about 2.6 million fewer people with jobs or actively looking for jobs compared to February 2020.

And that 62.4% number is historically low. The last time the Labor Force Participation Rate hit that number (pre-pandemic) was for one month in September 2015. Before then, you have to go all the way back to the late 1970s to find a number that low.

The post-Covid challenges are particularly pronounced in some of the country’s bigger cities, according to the Bureau of Labor Statistics.

In metropolitan Boston, the civilian labor force number is still down by about 45,000 workers from where it was in February 2020 in BLS data. In metro Washington, a bigger area, the labor force is almost 170,000 workers down from where it was in February 2020. And in metro New York City, the labor force figure is down by almost 400,000 from where it was pre-pandemic.

And it’s not all Northern cities. Metropolitan Miami is down by about 21,000 workers from where it was pre-pandemic. 

In Boston, Washington and Miami, the unemployment rate was at or below the national figure in the latest set of data. At the very least, the numbers suggest those are very tight labor markets that could probably use an infusion of potential workers.

And new workers are crucial to the larger U.S. economy beyond the current labor shortage.

The U.S. has an aging population, an aging labor force and a declining birthrate. Those factors combine to affect a host of government programs, but the impacts could be the most profound on Social Security, which relies on a steady stream of new workers to keep paying into the system to keep it afloat. 

The problem becomes apparent when you look at the ratio of workers per Social Security recipient.

Back in 1960, there were 5.1 workers for every Social Security recipient. The number declined steadily through the 1970s and the 1980s, and it is now 2.8 workers for every recipient, according to the Social Security Administration. Over the next 30 years, the number is forecast to dip to about 2.2 workers for every recipient.

The math isn’t very complicated. At some point, longer lifespans and lower birthrates combine to create a massive problem for the program. Without more workers in the economy, the day of reckoning is likely to come sooner.

To be clear, the governors who moved the asylum-seekers, Florida’s Ron DeSantis, Arizona’s Doug Ducey and Texas’ Greg Abbott, were trying to make political points or pulling political stunts, depending on your point of view. Bus and plane loads of immigrants were shipped to other locales without consulting or coordinating with the local governments. The goal was to create chaos.

But the larger idea behind all the buses and planes — that the asylum-seekers are problematic or a nuisance — may miss a larger truth. The data suggests the U.S. sorely needs workers right now. 

And once they get settled in, the immigrants whom the governors are shipping to bluer political lands may turn into assets for those communities and the larger U.S. economy.