USA: Economists hope a rebound in immigration helps curb inflation

Of note, temporary workers as a way to both address labour shortages and reduce wage pressures:

When the crowds return to Funland this summer, they’ll find familiar rides like the Fire Engines and the Sea Dragon at this small beachside amusement park.

For the first time since the pandemic began, many of those rides and games will be staffed by student guest workers from around the world.

“They are truly important to the success of our business,” said Chris Darr, the personnel manager at Funland. “We saw last year, we couldn’t fill the positions that we had.”

The number of guest workers and immigrants coming to the United States is slowly climbing again after steep declines during the pandemic. Tens of thousands of international students are back at resort towns and amusement parks. The Biden administration has released more visas for seasonal guest workers, and it’s automatically extending work permits for others.

Economists say that should ease labor shortages — and some, though not all, think it could help calm inflation too.

“Hopefully if this trend continues, and maybe accelerates, we will see the easing of some of the shortages,” said Giovanni Peri, an economics professor at the University of California, Davis.

Businesses in Rehoboth Beach rely on seasonal guest workers

Employers in Rehoboth Beach are clearly glad to have these temporary student workers back. Without them, Darr says, he couldn’t hire enough people to keep Funland open every day.

“Especially at the end of the summer, early August, we lose college students, we lose high school students back to sports and theater programs,” said Darr, a fourth-generation member of the family that owns the park.

For decades, he says, Funland has relied on students coming to the U.S. on J-1 visas. But the program was all but shut down in 2020. The numbers were up last year, though still far short of pre-pandemic levels.

“Without the J-1 visa program, we wouldn’t be able to open half of the stuff that is in the park,” he said.

This summer, Darr is expecting about two dozen student guest workers — including 21-year-old Morgan Bennett, a student from Jamaica.

“There was a listing of all the different places that I could have worked,” Bennett said. “When the person had told me the type of job that I would have encountered, I just said yes!”

The State Department says the number of participants in its summer work travel program is rebounding toward pre-pandemic levels. Roughly 30,000 participants have started the program already this year, according to a State Department official, with about 50,000 more in the pipeline. That would put the program at roughly three-quarters of its enrollment in 2019, when more than 108,000 visas were issued.

More guest workers could help ease labor shortages

Overall, the U.S. economy is about two million working-age immigrants short of where it would have been if not for the pandemic and the Trump administration’s cuts, according to Peri. He says that’s contributed to a tighter labor market, putting pressure on employers to raise wages — and in turn, prices.

“If these shortages loosens up — so if there are more workers — this should also reduce the inflationary pressures,” Peri said. That’s especially true, he says, in industries that depend heavily on immigrant labor, like hospitality.

“We were 32 employees short last summer,” said Susan Wood, who owns the Cultured Pearl Restaurant and Sushi Bar in Rehoboth Beach. “It was torture. I mean all of our staff work six, seven days. They killed themselves.”

“I worked 183 days straight at the front desk, and my husband worked more than that in the kitchen,” she said.

Wood is also participating in the J-1 visa program this year. Without those international student workers, she says, her year-round staff worked a lot of overtime last summer, driving her labor costs way up.

“We had to raise prices,” Wood said. “We raised prices because of payroll, but not nearly as much as we had to raise prices because of food costs.”

Some economists doubt that more immigration will cure inflation

The costs of food and energy are still rising fast. Economists say that’s contributing to inflation across the economy — and some are skeptical that a partial rebound in the number of guest workers and immigrants will have a measurable impact.

“I don’t think it’s going to do much to fix our inflation problem,” said Ramesh Ponnuru, the editor of the National Review, and a fellow at the American Enterprise Institute, a conservative think-tank in Washington.

Ponnuru argues that inflation right now is largely caused by problems in the supply chain, and that simply bringing immigration back to pre-COVID levels won’t solve those problems.

“We need an immigration policy designed with our economy’s interests in mind. We don’t have that,” Ponnuru said. “And just toggling that so that you have more of a dysfunctional immigration policy seems to me to be a mistake.”

Temporary guest workers are already making an impact on the bottom line at Thrasher’s French Fries in Rehoboth Beach. General manager Dean Shuttleworth is expecting about a dozen international student workers this summer, which means that he’ll have enough staff to reopen another location across the street that’s been shuttered since the pandemic began.

“[Memorial Day] weekend was the first time we opened our 26 Rehoboth Avenue store up in two years,” Shuttleworth said.

“Last year, we had the volume up. We were extremely busy,” he said. “So I’m in pretty good shape this year.”

Source: Economists hope a rebound in immigration helps curb inflation

Immigration Cannot Significantly Reduce Inflation

Of note. Many of the arguments also apply to the Canadian context:

Many immigration advocates have recently called for increasing the number of immigrants allowed into the country to fill lower-wage jobs in order to decrease wages by increasing the supply of workers, thereby lessening inflation. In this post, we attempt to roughly estimate the possible impact of immigration-induced reductions in wages on consumer prices. We focus our analysis on the lower-wage sectors of the economy that primarily employ workers without a bachelor’s degree (the less-educated) because many of those advocating for more immigration have specifically called for more workers in these sectors. Our analysis shows that reducing wages for the less-educated is not an effective means of controlling inflation because such workers earn relatively little and as a result account for only a modest share of economic output. There is also the equally important question of whether reducing the wages of workers who are the lowest-paid is sound public policy.

Among our findings:

  • Reflecting their relatively modest average compensation, workers without a bachelor’s degree account for an estimated 25 percent of GDP. This means that even a substantial reduction of 10 percent in their wages could likely reduce consumer prices by only an estimated 2.5 percent. More educated workers and capital account for most of the economy.
  • If we look at just lower-wage occupations done primarily by those without a bachelor’s degree, we find that they account for only 22 percent of GDP. As a result, a 10 percent reduction in wages in these occupations could reduce prices by only an estimated 2.2 percent.1
  • It might be possible to reduce wages in specific occupations by dramatically increasing the number of workers in relatively few occupations. But since individual lower-paid occupations account for only a tiny share of the economy, the impact on overall consumer prices would be correspondently tiny. For example, the compensation earned by construction and extraction workers is only 2.2 percent of GDP, for cleaning and maintenance it is 1 percent, for food preparation and serving it is 1.1 percent, and for healthcare support it is 0.9 percent.
  • Prior to Covid, workers, including those without a bachelor’s degree, have generally seen their wages decline or grow very little for more than two decades, so reducing their wages by admitting more immigrants can be seen as unfair and unwise.
  • More than one in seven of these less-educated workers are currently eligible to receive cash payments from the Earned Income Tax Credit and Additional Child tax Credit — the nation’s largest cash assistance programs for low-wage workers. Reducing the wages of such workers could undo some of these important efforts to help low-income workers.
  • Nearly two-thirds of all children in poverty in America are dependent on a worker who does not have a bachelor’s degree. Using immigration to reduce wages for less-educated workers has significant negative implications for American’s low-income children.

Source: Immigration Cannot Significantly Reduce Inflation