The labor market is said to be “tight” if vacant jobs are plentiful and available workers are scarce. It is said to be “loose” if the opposite holds true. Gauging the degree of labor market tightness or looseness requires measures of vacancies and available workers.
Hannah Rubinton, an economist at the St. Louis Fed, describes a few possible causes of today’s tight labor market, including lower immigration caused by pandemic restrictions. She calculates the number of missing workers, unfilled positions and which groups stayed out of the workforce during the COVID period. She also analyzes which industries and states had a large number of missing workers. Turns out, states with the tightest labor markets aren’t the same ones most affected by immigration restrictions. So, what’s the cause? The views expressed in this video do not necessarily reflect those of the St. Louis Fed or the Federal Reserve System.
00:00 - Did immigration restrictions tighten the US labor market?
01:27 - Was lower immigration a big factor?
03:00 - Industries most affected by missing immigrant workers
03:27 - Demand for workers is behind labor market tightness
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During COVID, the border almost completely shut down. So before COVID, there were about 14 million non-citizen workers in the labor force and during COVID, that number fell to 12 million. So there were two million fewer immigrant workers in the labor force. At the same time, during the recovery from the COVID pandemic, the labor market has been unprecedentedly tight. So if you were an unemployed worker today, there's about 1.8 job openings for you to choose from. Whereas, before the pandemic, that number was closer to one.
So economists have been discussing and researching what are the underlying causes of this labor market tightness. Some prominent explanations have been early retirements during COVID, the decline in female labor force participation, and these missing immigrant workers. So in recent research, I wanted to explore whether these missing immigrant workers can be the underlying cause of the increase in labor market tightness during the COVID recovery.
So how do we measure the number of missing workers due to these COVID-era pandemic restrictions in immigration? So what we're going to do is we're going to take the trend in non-citizen workers from before the pandemic, and we're going to project it forward. We project it forward as if there had been no disruptions or immigration restrictions during COVID. And then we take the difference between that projected number of immigrant workers and the actual number of immigrant workers, and that's our measure of the missing workers due to these COVID-era restrictions.
So the first is because of the evidence during the economic recovery. So even as the number of missing workers has recovered and gone back to its pre-pandemic trend, the labor market remains tight. So at the peak of the COVID recession, in June 2020, we are missing about two and 1/2 million immigrant workers. And that number has since recovered.
So in the past few months, if you take an average, we're missing about 200,000 workers due to these immigration restrictions, yet at the same time, the vacancy-to-unemployment rate has not recovered.
So the second reason that we conclude that immigration restrictions during COVID were unlikely to be the underlying cause of labor market tightness, is because of evidence from specific states and industries. So in particular, I asked whether states that had the biggest impact of these COVID-era immigration restrictions were also the states that had the largest increase in labor market tightness. And in general, the answer is no.
So for example, the states that have the biggest increase in labor market tightness are states like South Dakota, Alabama, and New Hampshire. And these are not the states that were most affected by these immigration restrictions, such as Nevada and Arizona. So similarly, there was no correlation between the industries that were most affected by the COVID-era immigration restrictions and the industries that had the biggest increase in labor market tightness.
What does this all mean? In our work, we find that COVID-era immigration restrictions are unlikely to be the underlying cause of labor market tightness. Instead, it seems more likely that demand for workers from firms is just unprecedentedly high. So the number of job openings is still 80% higher than it was during the pre-pandemic economy.
So we want to emphasize that even though the immigration restrictions are unlikely to be the underlying cause of labor market tightness, that doesn't mean it's not one avenue that could help alleviate labor market tightness in the future.
26 июн 2024
