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No, more immigration won’t stem inflation

The rich and powerful keep telling us we need more foreign workers to hold down wages to check inflation. This, when labor-force participation is at a near-record low, wages aren’t keeping up with inflation, and the pay of the working class is almost certainly not what’s driving inflation.

The latest to sing the we-need-more-foreign-workers song is former Walmart CEO Bill Simon. The “problem is,” he told Fox Business, “wage inflation”: “Walmart announced they’re raising their minimum wage” to “$14 an hour,” he said. “We need workers, but we need workers we can employ that are in the country legally.”

Chamber of Commerce CEO Suzanne Clark, who represents the nation’s richest company, thinks the same thing: “We need more workers,” she said, arguing allowing more immigrants “would be anti-inflationary.”

Those calling for immigration to lower wages and stem inflation are completely out of touch with the reality of the US labor force. First, Simon claims the millions of illegal immigrants who have slipped past Border Patrol or been released by the administration cannot work. The reality is lack of work authorization is not a serious impediment to working, as the law barring the employment of illegal immigrants has been unenforced for decades.

The Bureau of Labor Statistics’ monthly household survey shows explosive growth in the number of immigrants working since January 2021, when the border crisis started. (The survey does include illegal immigrants.) By November 2022, there were 1.9 million more immigrants working than in November 2019, before COVID. A significant share is recently arrived Latin Americans, many of whom are illegal immigrants.

Former Walmart CEO Bill SImon claimed that the US needs to add more workers to bring down inflation.
REUTERS/Rick Wilking

Second, the number of US-born workers is down 2.1 million over the same period. Among the native-born, there’s been a decades-long decline in the labor-force-participation rate, meaning the share of working-age people working or at least looking for work. Yes, the official unemployment rate is low, but that includes only those who have looked for work in the prior four weeks, not those of working age entirely out of the labor force. We may never return to the participation rate of the 1960s, when virtually all working-age men were in the labor force, but we could still add 6.5 million workers if the participation rate among US-born ages 16 to 64 simply returned to its 2000 level.

The reasons for the long-term decline are complex and much debated. No doubt our welfare and disability systems have played a significant role, as have declining real wages for the non-college-educated. But there is no debate that the falloff is associated with a host of social problems such as substance abuse, welfare dependency, mental-health issues, crime and even early death.

Third, the premise wage increases are the primary driver of inflation, especially for relatively low-paying jobs such as those at Walmart, is false. The BLS reports inflation-adjusted wages in 2022’s fourth quarter were lower than in 2020’s. Congressional overspending, the Federal Reserve’s low interest rates, international supply-chain disruptions and pent-up demand during COVID are all almost certainly bigger inflation drivers than wage growth. Workers, particularly less-educated ones, account for far too small a share of economic output to play much role in inflation.

Nevertheless, business leaders are not the only ones pushing immigration as a solution to inflation. A bipartisan group of 35 senators call for significantly increasing the number of low-skilled guest workers. The fact so much of the elite advocates using immigration to satisfy employers’ demands points to perhaps the biggest problem with tolerating mass illegal immigration and having such an expansive legal immigration system — it lets us ignore all the social pathologies of working-age people not working.

We should let wages rise to incentivize employment. We should also reform our welfare and disability programs to encourage work. What we should not do is allow in ever-more immigration that lets us ignore the crime, social disorder, drug abuse and other social problems that come with having so many working-age people out of the labor force.

Steven Camarota is director of research at the Center for Immigration Studies.