The Myth Busting Economist by Larry Malone

A New Way of Thinking about Immigration

It’s been many weeks since I’ve last been myth busting, and it’s because I became a first time grandparent! Our son and daughter-in-law have decided that my grandson should call me Proffy, so we’ll see how that works out in a couple of years.

Our last busted myth concerned the minimum wage, which we discovered is basically irrelevant since a 4.1 percent unemployment rate means we are enjoying the fruits of a full employment economy. That’s good news for workers, as extraordinary low unemployment creates a “seller’s market,” where folks seeking work have lots of choices while employers battle headaches in trying to find good help.

Jobs are plentiful and workers are scarce, and not because people are sitting home living off of handouts from the government. At the end of my last column, I promised a solution to solving our worker shortage. The fix comes from a charged-up word we’ve heard on a daily basis for the past few years—immigration. So let’s go bust one of the biggest myths of all when it comes to encouraging a strong and thriving economy.

We start with some irrefutable historical facts. The average unemployment rate in the United States over the past 50 years was 6.3 percent. That’s 1.3 percent above our 5 percent full employment rate. When the unemployment rate is 6.3 percent, we are probably in or recovering from a recession. And that’s been the average for each of 50 years.

But since December 2015, as the Federal Reserve Chart for the Unemployment Rate shows (below), only the shutdown of the entire national economy during COVID produced a six-month period from March to August 2021 where the unemployment rate was above 5 percent. The last nine years have been incredibly good to most workers, but problematic for employers, since it’s been hard to find workers. That’s why wage and income growth have been so strong—employers have had to pay more to get reliable, qualified workers.

Even now, any local employer you’d ask would likely say that they could use more help. The worker shortage hurts them and all of us, as consumers. Fewer workers means more shortages and disruptions in the supply of needed items, and this contributed to the inflation we saw once our vaccines brought COVID under control.

So how do we solve what is fast becoming a chronic labor shortage and continue to grow an inflation-free economy? We could, as one vice presidential candidate suggests, encourage more pregnancies. But the U.S. birthrate has been declining in recent years, which means there will be fewer workers in the future. Even if we saw a sudden spike of babies in strollers, the Future Workers of America born nine months or later from today won’t join the workforce until sometime after the year 2042.

Meanwhile, employers are telling us that they need help NOW, so a more immediate solution is required. The simple fix is to invite more willing workers from elsewhere in the world to join us. That requires a (shall we say?) friendlier and more welcoming attitude regarding immigration. But such a solution flies in the face of the hostile rhetoric uttered every day by certain prominent figures, and perpetuates one of the most harmful myths of all regarding the American economy.

I’m sure that some readers are already getting riled up about the solution. But hear me out as I bring up a few more irrefutable historical facts.

The population of the United States in 1900 was 76.2 million. Just 20 years later, in 1920, it had surged to 106 million. A big part of the increase was the addition of more than 15 million immigrants from 1900 to 1915.

Our current federal policy, the Immigration and Nationality Act, allows for just 675,000 permanent immigrant visas each year. That would get us another 10 million immigrants 15 years from now, which is 5 million less than entered the U.S. in the 15 years after 1900. And let’s not forget that our current population is 336 million, not 76 million—which means there are FIVE times more Americans in 2024 than there were in 1900. That’s why the simplest, fastest solution to our shortage in workers is to allow entry to many, many more qualified immigrants.

So what else makes more LEGAL immigration a good idea? As we’ve seen in this “busting the immigration myth” column, the worker shortage would subside and inflation would be checked. More importantly, we should also expect a surge in economic growth similar to what happened between 1880 and 1920. Those four decades had the strongest growth of any in our nation’s history, and they coincided with what might be called “a free market open border approach to immigration.” As whole industries spawned, they absorbed the new arrivals, and cities like Utica, Binghamton, Gloversville, Cobleskill, Norwich, and Oneonta thrived.

While some will always conjure fear about open borders, we should all be willing instead to accept and encourage a significant increase in the number of legal immigrants who would be willing to help make America great again.

Larry Malone is professor emeritus of economics at Hartwick College.