Policy report

Immigration and the U.S. labor market: a look ahead

Immigration Labour market Skilled migration United States of America

In the coming decades, the U.S. labor market will experience major transformations that challenge the country’s economic growth and competitiveness. The native-born workforce will age and shrink as baby boomers retire and birth rates decline. Technological innovations, though unlikely to result in mass unemployment as some observers fear, will displace some workers, particularly in low-skilled occupations. And traditional employer-employee relationships are becoming less common as contracting, outsourcing, and other alternative staffing arrangements spread.

While these forces may bring some productivity increases, they are also likely to result in rising inequality between skilled and unskilled workers, lower economic growth, and mismatches between the skills workers have and those that are increasingly in demand. What role, this think piece by a former chief economist for the U.S. Labor Department asks, can immigration play in mitigating these undesirable economic outcomes and supporting U.S. economic growth?

Immigration could help employers hire for hard-to-fill positions, and it could reduce the costs and increase the availability of goods and services, especially in growing sectors such as health and elder care. But while immigration may benefit employers and workers with complementary skills, particularly at the high end of the skills spectrum, it can negatively affect some low-skilled workers, who have already been hard hit by technological change, globalization, and weakening labor unions. Reforms of immigration policy to support economic growth should thus be paired with a broader agenda and investments to raise the skills and earnings of workers without college degrees, whether native born or immigrant.

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