The inflationary spike in the United States over the last few months has the Biden administration scrambling to find ways to ease price levels. While its ability to do so is limited, a series of White House policy changes in early 2022 will boost the number of technology-worker immigrants and could help ease technology prices and give the economy a boost.

The administration will allow foreign students on a J‑1 visa to remain in the United States for up to three years to work and undertake practical training. The J‑1 visa typically covers scholars participating in research exchange programs, and current regulations only permit 12 months of practical training. Biden also expanded the number of fields eligible for this opportunity. The administration also increased the range of skills and expertise that will qualify a worker to receive an O‑1A visa, which goes to persons of extraordinary ability in the fields of science, business, education, or athletics.

Lost workers / In the last two years, the pandemic has exacerbated what was already a tight labor market. There are now 1.5 million fewer workers participating in the U.S. economy than there were before the pandemic, and a sizable fraction of that loss appears to be permanent. This worker exodus has exacerbated supply issues currently plaguing the U.S. economy, which show few signs of abating. (See “Supply-Chain Myths,” p. 26.)

Firms across a wide variety of industries are struggling to attract qualified applicants as well as retain current employees. The Bureau of Labor Statistics (BLS) reports that a record number of workers quit their jobs in March, yet new jobless claims in April were at historic lows. Most of the reduction in labor force participation rates appears to be from older workers who left their jobs, either because COVID made working less attractive or the stock market boom allowed them to accelerate their retirement date. Women’s employment has also fallen precipitously in the last two years, but this may be a transitory phenomenon owing to pandemic-induced child-care issues.

While restaurants and food producers — two industries that tend to hire workers with relatively little education and training — have had noticeable troubles maintaining employment levels, labor shortages are occurring all across the skills spectrum. Many of the hardest-to-fill positions are in health care, a field hit particularly hard by the repeated waves of the pandemic. COVID has also exacerbated demand for software developers and a variety of other high-skilled occupations.

Growing demand, constrained supply / The latter categories are all areas in which foreign-born workers have traditionally taken a high proportion of jobs, largely because universities — for a variety of reasons — have not been able to train enough U.S.-born workers to meet demand. More than half of all the master’s degrees in computer science and in engineering awarded by U.S. postsecondary institutions in 2019 were to nonresident aliens.

As part of its nativist agenda, the Trump administration made it considerably more difficult for foreigners to migrate to the United States to work or obtain an education. The pandemic further obstructed this migration, and so far those numbers have not rebounded as COVID begins to recede. The reduction in the number of foreign-born workers is especially problematic because the current demographic patterns in the United States — and elsewhere — suggest that heightened labor scarcity may soon become a permanent condition. A BLS study projects a steady decline in labor force participation rates in the next 40 years, as the tail end of the baby boom reaches retirement age. A recent private sector analysis suggests that the pandemic served to accelerate this decline.

Helping immigrants, helping ourselves / The Biden administration’s actions will help to increase the ability of the United States to retain these high-skilled graduates in the workforce, although the number of new workers this will add will be slight compared to overall demand. Our own research suggests that the order will be especially helpful to firms located away from the densely populated coasts, as immigrants tend to be more amenable to moving to where there are available jobs. This will also help create and retain jobs in such places for U.S. workers. This reality goes against the reflexive — and facile — story often put forth by opponents of immigration, which is that increased numbers of foreign workers will take away jobs from U.S.-born workers.

Americans are unaccustomed to thinking about labor scarcity, but that may be about to change. Boosting the number of skilled immigrants would help to address that problem while lessening the pressures that labor demand might have on price levels and income inequality. The Biden administration’s efforts don’t offer a complete solution to a complex problem, but they are a step in the right direction.

Readings

  • “A Look at the Future of the U.S. Labor Force to 2060,” by Mitra Toossi. U.S. Bureau of Labor Statistics, September 2016.
  • “Estimating the Economic Impacts of DACA,” by Ike Brannon and M. Kevin McGee. Working paper, September 5, 2019.
  • “The Demographic Drought: Bridging the Gap in Our Labor Force,” by Ron Hetrick, Cassondra Martinez, and Hannah Grieser. Emsi Burning Glass, February 23, 2022.