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The Economy

Recent Immigration Slowdown May Have Helped Reverse Decades-Long Decline in Labor-Force Participation

An immigration officer administers the oath during a swearing-in of newly naturalized United States citizens in a parking lot in Santa Ana, Calif., July 29, 2020. (Mike Blake/Reuters)

On the homepage today, I discussed the recent slowdown in immigration (legal and illegal) and mentioned that it probably helped American workers. There is no question that the number of new arrivals fell and growth slowed in the immigrant population after 2016. This falloff has been accompanied by a significant improvement in labor-force participation among native-born Americans — particularly among the less-educated. To be sure, many factors impact labor-force participation, which is the share of working-age people holding a job or looking for one. But it is clear that in last few years, the share of Americans in the labor force has improved, after declining steadily for decades.

Labor-force participation is a commonly used measure of labor-market attachment because, unlike unemployment, it does not fluctuate as much with the business cycle. This is because those who lose their jobs, but continue to look for work, remain in the labor force. A decline in labor-force participation is therefore troubling because it means more working-age people are not even seeking work.

Figure 1 uses the March supplement of the Current Population Survey (CPS) going back to 1962. The figure shows that there has been a decline in labor force participation among prime-age men (25 to 54) for more than half a century. But that decline actually reversed in recent years. The focus on prime-age men is common among researchers because most people are in the labor force by age 25 and very few retire before age 55. Moreover, men typically stay in the labor force, even when they have children. The recent reversal of a trend stretching back decades is profoundly important because, as AEI’s Nicholas Eberstadt has repeatedly pointed out, there are a host of negative outcomes, for the men and society in general, associated with so many not working.

The increase in labor-force participation began in 2015, with most of the improvement coming after 2016, as immigration fell. Of course, labor-force participation can and does fluctuate and is impacted by many things. But the pre-COVID-19 upturn is the most sustained period of improvement in labor-force participation among prime-age men since 1962. At the very least, it means that the notion that there is no way to reverse the long-term decline in labor-force participation is incorrect.

The CPS did not identify immigrants and native-born workers on a regular basis until 1994. Figure 2 shows labor-force participation among prime-age men using the monthly CPS from the fourth quarter of each year starting in 1994. By looking at the fourth quarter instead of the CPS in March, as in Figure 1, we can see labor-market trends right up until the time COVID-19 hit. Figure 2 shows that the improvement in recent years among natives is primarily among those who do not have a college education. This is certainly good news, as the decline in labor-force participation has generally been more pronounced among the less-educated.

In two recent reports (see here and here), I made the case that Trump administration policies very likely account for much of the slowdown in immigration, even in the face of a strong economy. As for the improvement in labor-force participation, three key observations can be made: First, declining labor-force participation is not inexorable. Some American workers who are on the sidelines can, in fact, be drawn back into jobs. Second, things clearly improved for American workers even as immigration slowed. So the idea that very high levels of immigration are required to increase opportunities for Americans is invalid. Third, recent trends in labor-force participation are consistent with the possibility that American workers benefit when there is less immigration. In sum, the strong economy coupled with lower levels of immigration that characterized the first years of the Trump administration seems to be the best of all worlds for American workers, at least with regard to labor-force participation. Perhaps policy-makers should strive for this situation in the future.

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