Lack of Immigrant Workers Contributing to Inflation Woes

The current labor shortage is driven by multiple factors such as early retirements, lack of affordable child care for workers, population trends, and Covid fears. However, as we noted last Fall, the Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis has documented that the immigration policies of the Trump administration exacerbated the problem.
Washington Post: "Immigration inflows slowed sharply during the Trump administration and then collapsed under the combination of Trump-era policies and pandemic-driven closures. The number of visas issued by the State Department’s Foreign Service posts, for example, fell by more than 60 percent between fiscal years 2016 and 2020. There are millions fewer immigrants here today than would have been the case if pre-Trump trends in immigration had continued."
The Biden administration has reversed many Trump-era immigration restrictions, but the backlog of visa requests and renewals is daunting. In the meantime, the labor shortage is contributing to higher prices as businesses compete for a shrinking pool of workers by raising wages and benefits. That's driving up consumer prices.
ABC News: The U.S. has, by some estimates, 2 million fewer immigrants than it would have if the pace had stayed the same, helping power a desperate scramble for workers in many sectors, from meatpacking to homebuilding, that is also contributing to supply shortages and price increases.
“These 2 million missing immigrants are part of the reason we have a labor shortage,” said Giovanni Peri, an economist at the University of California at Davis, who calculated the shortfall. “In the short run, we are going to adjust to these shortages in the labor market through an increase in wages and in prices.”
By: Don Lam & Curated Content