U.S. Risks Decline And Stagnation Without Immigrants

The U.S. labor force will shrink, and America risks stagnation and declining living standards without immigrants, according to new research. Immigrants can boost the U.S. working-age population and offset America’s falling birthrate and the retirement of Baby Boomers. U.S. elected officials must decide whether to change immigration laws and policies to bolster America’s labor force and prevent decline.

A Shrinking Labor Force?

“Without continued net inflows of immigrants, the U.S. working-age population will shrink over the next two decades and by 2040, the United States will have over 6 million fewer working-age people than in 2022,” concluded a study by economist and University of North Florida Professor Madeline Zavodny for the National Foundation for American Policy (NFAP). “Announcements of high-profile layoffs and concerns about the impact of artificial intelligence (AI) obscure America’s continuing need for additional workers at the top and bottom of the skill distribution. International migration is the only potential source of growth in the U.S. working-age population in the coming years.”

Analyzing data from the Current Population Survey and the Job Openings and Labor Turnover Survey, Zavodny found that international migrants represented the only source of growth in the U.S. working-age population in 2021 and 2022. Without an increase among the foreign born, the total working-age population in the United have declined by nearly 0.5% in 2021 and by 0.03% in 2022.

Due to a Supreme Court ruling on executive authority, stopping legal immigration is not theoretical. During the Trump administration, presidential proclamations issued in 2020 blocked the entry of most immigrants and temporary workers to the United States. Donald Trump also significantly reduced the number of refugees admitted and enacted policies that restricted family immigrant. Trump leads the polls among Republican primary voters for the party’s presidential nomination.

The Need For Workers Will Continue

News stories about layoffs in well-known companies obscure the ongoing need for workers in the U.S. economy. Many layoffs came after increased hiring to expand capacity during the Covid-19 pandemic. News reports rarely focus on hiring at smaller companies or long-term trends.

“Technological change, including ongoing advances in generative AI, is unlikely to eliminate the need for additional workers,” writes Zavodny. “In the long run, technological progress raises labor demand by increasing productivity and incomes. In the short to medium run, domestic workers are unlikely to be sufficient to meet labor demand as federally funded infrastructure projects roll out and domestic semiconductor production ramps up.

“The U.S. will need workers with specialized skills that are in short supply and take years of education and training to acquire. Now and in the future, the U.S. will still need workers, and it risks not having enough of them, particularly those with desired skills, absent additional immigration.”

A lack of workers has already hampered plans to increase semiconductor manufacturing in the United States. “TSMC Chairman Mark Liu said construction [of a new plan] in Arizona is hampered by a shortage of skilled workers and that the company might have to bring in experienced technicians temporarily from Taiwan,” reported the Wall Street Journal. “He said this would delay the start of mass production of 4-nanometer chips in the first factory until 2025.”

The Semiconductor Industry Association (SIA) has warned “the United States faces a significant shortage of technicians, computer scientists, and engineers.” Economists and business analysts have concluded it is difficult to “reshore” operations in any industry without sufficient educated and trained employees.

Fewer Workers, More Inflation

Zavodny notes a falling U.S. population will mean fewer workers to produce goods and services. However, an aging population will keep demanding goods and services that require labor. The result is likely to be shortages and price pressures, including inflation.

Immigrant labor entering the U.S. labor force after the end of Trump administration restrictions and Covid-19 visa policies made it easier for the Federal Reserve to fight inflation without harming the overall economy, reports Jeanna Smialek in the New York Times. “Hiring has been able to chug along at a solid clip without further overheating the labor market because job seekers are becoming available to replace those who are getting snapped up,” she writes.

Japan provides a glimpse of a future where growth stagnates as labor and population decline. “In January, prime minister Fumio Kishida said that addressing the birthrate was “now or never” and warned, ‘Our nation is on the cusp of whether it can maintain its societal functions,’” writes Gavin Blair of the Guardian. “Japan’s aging population is already affecting nearly every aspect of society. More than half of all municipalities are designated as depopulated districts, schools are closing and more than 1.2 million small businesses have owners aged about 70 with no successor.” Japanese residents declined by over 800,000 in the past year, according to CNN.

Is Stagnation in America’s Future?

“A shrinking population means fewer people to generate new ideas that lead to technological progress and long-run growth,” writes Zavodny. A recent NFAP study concluded immigrants founded or cofounded 65% of the top AI companies in the United States, while 70% of full-time graduate students in AI-related fields are international students.

Immigrants have supported U.S. population growth during the past half-century. The role of immigrants will become more pronounced as baby boomers continue to leave the labor force and U.S. births fall, according to the data. The numbers show only through sustained or increased immigration can the U.S. working-age population continue to grow.

“A shrinking working-age population can easily lead to economic stagnation or even falling living standards for a nation,” concludes Zavodny.