Fed officials say immigration would ease labor shortage

The immigration, which slowed down during the pandemic, could help alleviate the shortage of workers in U.S that has pushed job vacancies to an all-time high, according to policymakers at the Federal Reserve.

While it remains a hot political issue in the US, with some arguing that immigration comes at the expense of US jobs, two regional Fed chairmen have argued this month that it’s all a matter of “math”.

Richmond Fed chief Thomas Barkin and Minneapolis Fed chief Neel Kashkari said allowing more workers to come from abroad would help ease pressure caused by an aging population. Kashkari made his comments on the same day that Labor Department data showed a record 4.5 million people quit their jobs in November.

Many countries are trying to figure out how to close gaps in the labor market. In Japan—known for its immigration hurdles—the government had become friendlier to foreign labor in recent years, due to the need to compensate for a shrinking workforce. China, which maintains strict limits on immigration, is trying to encourage couples to have more children.

Stagnant labor force participation — attributed to more citizens opting for early retirement, as well as the ongoing pandemic keeping more people out of the workforce — has helped push job openings to record levels in recent months. Wage growth is also buoyed as companies seek to attract and retain employees amid the highest inflation in nearly four decades.

While the world’s largest economy added 6.45 million jobs in 2021 as the COVID-19 recovery accelerated, payrolls were 3.6 million below pre-pandemic levels as people stay on the sidelines, which leaves employers wondering how they will fill the positions.

Legal immigration “is a very useful adjunct to growing the workforce, which I think makes it a little bit easier to grow the economy,” Barkin said at a virtual event Jan. 13 hosted by the Virginia Bankers Association and the Virginia Bankers Association. Virginia Chamber of Commerce. “I think it would be important to have a real commitment to legal immigration on the right scale.”

The State Department reduced the number of visas in 2020 and 2021 due to the pandemic, and businesses — from factories to farms — have struggled to fill vacancies.

The lack of employee availability means companies have to give up opportunities “in part because there’s just not enough assurance that we have enough workers,” Barkin said.

It seems that the problem could get worse. The US population grew in 2021 at the slowest rate on record, expanding by less than a million people for the first time since 1937, according to Census Bureau data. The number of births has fallen every year since 2008 except 2014, and the pandemic has exacerbated the trend.

In the long term, an aging population and declining birth rate are “a serious problem for our country” and most advanced economies, Kashkari said on January 4, adding that if these demographic trends continue, they could hamper economic expansion.