Free Flow
The economic imperative for restoring immigration and labor movement in the wake of COVID-19
As many western industrial nations drifted towards protectionism if not outright nationalism in the last decade, an already constrictive environment had developed for the free movement of the labor market. The advent of the COVID-19 pandemic, however, gave such nations just the hammer they needed to further nail immigration constraints into place.
COVID-19 triggered mass unemployment globally with The Brookings Institute estimating that approximately 11.9 percent of workers were out of a job across the 20 countries they studied. That number reached almost 15 percent for the United States. And early this year, the IMF forecast that the global economy would contract by 3 percent in 2020, a worse contraction than we saw as a result of the 2008 financial crisis. But there’s little indication these immigration restrictions have helped any of the players in the global economy resolve their economic woes. Companies, for example, which have previously relied on mobile immigrant workers have themselves been stricken immobile.
Now, rather than retreating further into protectionism, the world’s economies must embrace immigration as a means to rebuilding their economies. To ensure a speedy economic recovery, the United States, in particular, should reverse its abandonment of the immigrant workforce and play a prominent role in restoring the movement of labor in the wake of the COVID-19 crisis.
Immigrant Contributions During COVID-19
It’s worth noting that this constriction upon international labor movement continued even as immigrants — both documented and undocumented — often functioned as essential workers during COVID-19, supporting the economies of these same nations. In the United States, 78 percent of undocumented immigrant workers are employed in essential jobs during the pandemic. Immigrants are also 5 percent less likely to be working from home. Consequently, the pandemic has had a disproportionate impact upon immigrant communities. Immigrants are more likely to be working in ERs, ICUs, long term care facilities where they may be exposed to COVID-19. For example, they make up over 40 percent of the long-term care workers in some of the states hit heaviest by the pandemic. And they’re likely to work longer hours.
Rather than rewarding these immigrants during the pandemic, however, the United States has taken the opportunity to penalize and even vilify immigrants, while simultaneously undermining the country’s ability to compete in the international economy and damaging relationships with our economic partners.
Dispelling Myths
To amass support for immigration during the economic recovery, we should consider a number of myths. We’ll address some of these myths as we review suggested solutions below but, first, let’s examine the biggest. The “lump of labor fallacy” suggests that there exists only a fixed amount of work in any labor economy, so if you give jobs to some people or add workers to the labor pool, then other people get no jobs. In reality, many factors affect a labor economy, and studies typically show that adding to the labor pool simply serves to create more jobs. And, despite repeated concerns, over the past 100 years, the U.S. population has grown four times over, even as it maintains its place as a world’s most powerful economy. So accessing that labor pool is not a zero-sum game.
Further, studies have shown that removing barriers to labor movement could increase global gross domestic product (GDP) by as much as 50 to 150 percent. But even small changes improving mobility can prompt significant economic improvement. For example, studies show that if workers from less than 5 percent of the world’s poorer regions were freed to move for better-paying jobs, the impact would exceed that of removing all barriers to merchandise trade and capital flows.
Admittedly, wage depression may contribute to making the immigrant host country more economically competitive from a trade perspective. However, although employing immigrants may place that modest downward pressure on wages, the same migration likely raises wages to a higher degree in the origin country, while boosting gross domestic product in the host country. Meaning, overall, the impacts are positive. So energies in the host country would be better spent mitigating the impact upon the affected workers through policy changes, which empower all parties involved, rather than depending upon protectionist immigration policies, which likely stunt economic growth for all in the long term.
What might such policies look like? Let’s take a look.
Policy Proposals
1. Restore and enhance skilled worker programs
First, the United States should reverse Trump’s 2017 executive order limiting H-1B visas and restore immigration for skilled workers, even if this entails more rigorous medical screening as the COVID-19 pandemic continues and eventually subsides. Under the Trump administration, the U.S. began rejecting H-1B visa applications at three times the existing rate even as application rates also declined. Stemming the influx of these skilled immigrants has triggered unintended consequences, however.
First, these restrictions made it more difficult to hire employees where they were truly needed, especially in the healthcare industry during a pandemic. Some big tech companies have also complained that the Trump administration’s restrictions actually undermined the economy and even cost Americans jobs, too. And, somewhat paradoxically, when the United States restricts H-1B visas, multinational companies do not hire more American citizens. Instead, they increase off-shoring, shifting their work to Canada, China and India.
Significantly and contrary to popular belief, immigrants create more jobs in the United States than they take. A recent Kellogg Insight study concluded that “regions of the U.S. that have historically seen more immigration have actually experienced higher gains in per-capita income.” Further, immigrants are twice as likely to found companies, large and small, than their U.S.-born counterparts. Companies, which consequently hire Americans. The Economist also noted that even micro-economic actions such as enabling foreign au pairs to return to the U.S. allows more Americans to return to work.
Furthermore, while countries like Australia, the United States, China and Malaysia have penalized or even denied immigrants labor during this time period, Japan — long known for its protectionist employment policies — has shown signs of moving towards encouraging an influx of immigrant workers. So the U.S. may now find itself competing with that economic superpower for skilled immigrant workers in the future.
Over half of America’s billion-dollar startups were founded by immigrants, creating on average over 1200 jobs each time. As former U.S. Ambassador to the U.N. Samantha Power recently noted in Foreign Affairs, “Ensuring that this trend continues — and doing more to advertise it — will demonstrate to people around the world that it is far too soon to bet against American dynamism.”
As COVID-19 continues to recede, yes, restoring the flow of skilled workers may require careful screening, but right now U.S. policy is a blunt force instrument, which is not doing companies, immigrant workers, or even Americans any favors.
2. Enable legal, taxable work for undocumented immigrants already in the country
The United States should resolve its long-standing issue with the undocumented immigrants living within its borders for the good of its own economy. The U.S. should enable paths to citizenship for some undocumented immigrants and, a means for safe and legal employment for many more. Such explicit permissions to work could be implemented via streamlined access to temporary work visas or some new form of permit.
This action wouldn’t simply resolve an ongoing human rights conundrum. Economists typically agree the U.S. would benefit in several ways if work for undocumented immigrants were legalized. The effects would include increasing the number of jobs, the amount of federal, state, and local taxable income, the total individual income for all Americans, and the GDP for the United States.
A path to citizenship for undocumented immigrants is not nearly as controversial among American as our divided political landscape might suggest. Seventy three percent of Americans, for example, support a path to citizenship for undocumented essential workers providing services during the coronavirus pandemic. Nor need one espouse an “open borders” policy to enable legal status for those immigrants who have been living here for a reasonable, pre-determined amount of time.
Additionally, the U.S. should establish a related program to earmark a portion of immigrant taxes for related programs. As an incentive for all Americans to support this program, this new income could provide education or access to training in skills or trades for low-income American citizens, especially in areas benefiting from higher concentrations of migrant labor. In a climate where college debt forgiveness is a hot topic, dedicating this tax money to provide access to a free or discounted university education could enable all Americans to better contribute and compete in a global economy.
Even a program simply providing legal papers to work within the United States could bring many undocumented immigrants out of the shadows and enable them to work both more jobs and longer hours. Undocumented immigrants already contribute billions of dollars in taxes, including significant support for social security and Medicare benefits they are unable to access. Enlisting their help during the post-COVID recovery period would help with increases in taxes and significant contributions to the GDP.
Such a policy should also reinstate and extend the Deferred Action for Childhood Arrival (DACA) policy, ensuring a path to citizenship for these immigrant children, who often know no other country as their own and experience the United States as their home.
According to a Center for American Progress study, reinstating DACA would immediately add $22.7 billion to the United States’ GDP with a cumulative increase over 10 years of some $281 billion. That figure grows, too, if half of the DACA applicants complete educational requirements to attain lawful permanent status. If extended to the whole population, who might eventually be eligible, those gains could approach a trillion dollars. This action would also eventually raise income of the average American by anywhere from $82 to $273 per annum.
3. Establish a special work visa for Mexican citizens
The United States should establish a special work visa for Mexican citizens to ensure the free flow of migrant work and re-establish damaged ties with Mexico, the border country we have long depended upon for cheap and mobile manual labor.
The United States should address the historical context for this dependency, too. Created to address a labor shortage during World War II, The Bracero program ensured a pipeline of some 4.6 million migrant workers remained open to the U.S. for over two decades. The program failed historically because although it enabled immigration employment, it treated these immigrants merely as capital. The working conditions for braceros were notoriously inhumane, as was their treatment, as they received poor wages, housing, food, and medical treatment. Though some of the intentions for ending the Bracero program may have been good, the dissolution of the program removed a legal means for migrants to work within the United States and triggered the current market for hiring undocumented immigrants, despite the availability of H-2A temporary agricultural work visas, which are notoriously difficult to qualify for.
Notably, when the Bracero program ended, neither job opportunities nor wages improved for the remaining U.S. farm workers. More recently, The Cato Institute found that despite H-2A jobs offering pay on average 57 percent higher than all state’s minimum wages, American citizens take only 1 out of 20 of H-2A jobs and most who take them typically quit. Still, over these past decades of so-called “illegal immigration,” American companies have maintained their interest in cheap labor coming across the border, while any criticism of these dynamics typically focuses upon vilifying the impoverished migrants simply pursuing the employment dangled before them.
Opening this pipeline for manual labor again via a new special visa for Mexican citizens would reduce the number of illegal border crossings and fill jobs Americans typically avoid. The aforementioned taxes levied from these migrant workers could apply here to developing new local work programs, such as infrastructure for notably affected areas, including border towns and agricultural communities, as well as the sort of education assistance programs suggested above.
Conclusion
Of course, any proposed solutions must consider these tangled historical dynamics carefully and systemically to address the issues with nuanced solutions — rather than resorting to the same traditional programs and restrictions, which actually grossly impact or even villainize immigrants and do little or nothing to assist Americans, either.
By committing to a renewed freedom of movement for immigrant labor, the United States can ensure itself a speedier economic recovery from the COVID-19 pandemic and from the Trump administration’s immigration blunders of the past few years. Immigrant workers are proven to increase the GDP and generate more taxable income to support programs such as social security. Not only do they often work jobs American citizens will not, but they also create new companies and new jobs, as a result. If the U.S. doesn’t welcome these immigrants, other economies eventually will.
Though focused on the United States, these principles apply to economies in varying degrees the world over. We live within a complex economic system and the actions we engage in here ripple across the world’s web, for better or worse.
This essay was originally written for Professor Edward Price’s International Political Economy class at NYU in the Fall of 2020. Many thanks to Professor Price for his help and guidance in developing this piece.
Further Reading
Anderson, Stuart. “Immigrants and Billion-Dollar Companies,” NFAP Policy Brief, October 2018.
Azoulay, Pierre, et al. “Immigrants to the U.S. Create More Jobs than They Take,” Kellogg Insight, 5 October, 2020.
Bier, David J. “H-2A Visas for Agriculture: The Complex Process for Farmers to Hire Agricultural Guest Workers,” The Cato Institute, 10 March 2020.
“Bittersweet Harvest: The Bracero Program 1942–1964,” National Museum of American History.
“The Bracero Program,” UCLA Labor Center.
Center for American Progress Action Fund and Hart Research Associates, “Winning the Immigration Debate During COVID-19,” Center for American Progress, 2020.
Clemens, Michael A. “Economics & Emigration: Trillion-Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, Volume 25, Number 3, Summer 2011, pp.83–106.
Clemens, Michael A., et al. “Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion,” American Economic Review, Vol. 108, №6, June 2018, pp. 1469–87.
Coyne, Christopher. “Immigration Reform Is Key in the Recovery from the COVID-19 Crisis,” Mercatus Center, George Mason University, 19 May 2020.
Glennon, Britta, “How Do Restrictions on High-Skilled Immigration Affect Offshoring? Evidence from the H-1B Program,” The Cato Institute, 23 September 2020.
Hinojosa-Ojeda, Raul and Sherman Robinson. “Essential But Disposable: Undocumented Workers and Their Mixed-Status Families, Modeling COVID-19 Economic Impacts and Government Relief Policies by Race and Immigration Status in Los Angeles County, California, and the United States,” Institute for Research on Labor Employment, UCLA, 10 August 2020.
Hinojosa-Ojeda, Raúl, et al. “Undocumented During COVID-19: Essential for the Economy but Excluded from Relief,” UCLA, 10 August 2020.
Lee, Caroline, et al. “Long-Term Care Facilities Must Prioritize Immigrant Workers’ Needs To Contain COVID-19,” Health Affairs, 18 September 2020.
Liu-Farrer, Gracia. “Post-Pandemic Japan Will Attract the World,” Foreign Affairs, 24 July 2020.
Lynch, Robert and Patrick Oakford. “The Economic Effects of Granting Legal Status and Citizenship to Undocumented Immigrants,” Center for American Progress, 20 March 2013.
Mobarak, Ahmed Mushfiq. “Does Immigration Create Jobs?” Yale Insights, 30 March 2017.
Organisation for Economic Co-operation and Development. “What is the impact of the COVID-19 pandemic on immigrants and their children?” OECD.org, 19 October 2020.
Ortega, Francesc, et al. “The Economic Benefits of Passing the Dream Act,” Center for American Progress, September 18, 2017.
Power, Samantha. “The Can-Do Power,” Foreign Affairs, January/February 2021.
Roberts, Nina. “Undocumented immigrants quietly pay billions into Social Security and receive not benefits.” Marketplace, 28 January 2019.
Rothwell, Jonathan and Hannah Van Drie. “The effect of COVID-19 and disease suppression policies on labor markets: A preliminary analysis of the data,” The Brookings Institute, 27 April 2020.
Semotiuk, Andy J. “New Fast-Tracked U.S. Regulations Threaten To Restrict H1B Visas Again,” Forbes, 30 September 2020.
“Tearing up the welcome mat: When Covid-19 recedes, will global migration start again?” The Economist, 1 August 2020.
“What is the impact of the COVID-19 pandemic on immigrants and their children?” OECD.org, 19 October 2020.
Williams, Byerica, et al. “Inclusive Approach to Immigrants Who Are Undocumented Can Help Families and States Prosper,” Center on Budget and Policy Priorities, 19 December 2019.
“World Economic Outlook, April 2020: The Great Lockdown,” IMF, April 2020
