One factor adding fuel to America’s inflation fire has been rising wages, stemming from shortage of workers that was in part driven by Trump-era immigration policies and rhetoric that amounted to hanging a “not-welcome” sign at the U.S. border.
Fresh data suggest, however, that help could be on the way in the form of a surge of new immigrants coming to the U.S., driven by the lure of high pay and more immigration-friendly policies put forward by President Joe Biden, immigration analysts and economists say.
In recent years, net migration to the U.S. — both illegal and legal — hit multi decade lows, according a December analysis from the Census Bureau.
This analysis only includes immigration levels through the end of last June, but preliminary data from the Department of Homeland Security show a four-fold increase in the number of immigrants obtaining lawful permanent resident status from the first quarter of 2021 to the fourth.
Illegal immigration appears to be on the rise as well, according to a recent analysis by the Center for Immigration Studies, a think tank that advocates for lower levels of immigration. It estimates the population of unauthorized immigrants currently in the U.S. rose by 1.13 million during 2021, after a net decline in 2019 and 2020.
Center for Immigration Studies
“It looks like that brief era of lower immigration has quickly come to an end,” Jason Richwine, resident scholar at CIS told MarketWatch, adding that there appears to have been a “Trump effect” wherein a combination of anti-immigrant rhetoric and executive actions triggered a decline in immigration that was subsequently exacerbated by the COVID-19 pandemic.
He attributed the recent rise in illegal immigration to President Biden’s decision to end the remain-in-Mexico policy which forced asylum seekers to leave the U.S. while their claims are processed, as well as plans to eliminate COVID emergency measures that have enabled border officials to more expeditiously turn away migrants at the southern border.
Though former President Donald Trump was famously an opponent of illegal immigration, it’s unclear how much of the decline in net migration to the U.S. was due to his policies versus the COVID-19 epidemic, according to Julia Gallet, senior policy analyst at the Migration Policy Institute, an immigration-focused think tank.
The Trump administration used its executive authority to restrict immigration of low-income migrants and generally applied greater scrutiny to green-card applicants which “gummed up the process,” Gallet told MarketWatch.
“At the same time we didn’t see a huge, immediate drop in legal immigration because for every denied application there’s another person waiting in line,” she said. “There’s always another person ready to apply.”
The global COVID-19 pandemic likely did more to slow all forms of immigration than any specific policy put in place by President Trump, Gallet said, because it made it either impossible or very difficult for applicants abroad to participate in required in-person interviews at U.S. embassies or consulates in their countries of origin.
With COVID-19 restrictions easing and a Biden State Department that looks more favorably on immigration, it’s likely we’ll see a subsequent increase in legal immigration, she added.
A rebound in immigration levels could be an important antidote for broad structural forces that are driving the labor-market shortage and putting upward pressure on prices, according to economist Charles Goodhart, formerly of the Bank of England.
Goodhart co-authored a book published in 2020 called “The Great Demographic Reversal” which argued that the last thirty years of subdued inflation and interest rates can be attributed primarily to the rise of the Chinese workforce and its integration into the global economy, as well as the fall of communism in Eastern Europe, which enabled citizens of the former Soviet Union and its satellites to enter the global workforce.
In an interview with MarketWatch, Goodhart argued that higher levels of immigration are necessary for the U.S. to counteract a rapid decline of birthrates in the U.S., a primary factor in slowing population growth and rising inflation. The U.S. population grew at a rate of just 0.2% in 2021, its slowest pace in history, according to the Census Bureau.
“Immigration is very important to the U.S., without it, the working age population would start shrinking very soon,” Goodhart said. “The issue now really is whether an increased scale of immigration would be politically acceptable,” he added, noting that both the election of Donald Trump in the U.S. and the Brexit vote in Britain were powered in-part by anti-immigration sentiment.
Unlike the U.K. decision to leave the European Union, however, President Trump wasn’t able to force changes to underlying laws in the U.S., which remain friendly to immigration, Richwine of the Center for Immigration Studies noted. U.S. law allows the issuance of up to 675,000 permanent immigrant visas each year and places no limit on the admission of U.S. citizen’s children under 21, parents and spouses.
St. Louis Federal Reserve President James Bullard echoed Goodhart’s views in a discussion at the University of Missouri Thursday. “I think we could do a lot better at managing demographic factors instead of letting demographic factors happen to us,” Bullard, who is a voting member of the Fed’s interest-rate setting committee, said. “We have too many retirees and not enough young people, so you could fix the age distribution” by setting immigration policies to target migrants of a certain age cohort, he added.
Goodhart argues that the U.S. will face higher inflation in the coming decades regardless of its immigration policies, because of the retiring of the baby boom generation in the U.S. and Europe and a shrinking working age population in China, the world’s largest supplier of labor. But could policies friendly to immigration in the U.S. put it in a better position to fight inflation than Europe and Japan? “The answer to that is yes,” he said.