The Unspoken Factor Fueling the U.S. Labor Shortage

The shortage of available workers in hospitality and healthcare sectors of the US economy can only partially be blamed on the “Great Resignation”. Yes, the Great Resignation does point to a possible resurgence of the long-dormant US Labor Movement and an increase in worker mobility as pay scales are forced higher by short supply of talent. However, the stubborn shortfall in workers interested in leisure, hospitality and healthcare jobs may be due to an unspoken reality: an immigrant shortage.

It is a fact that immigration to the United States has dropped dramatically, and this is having negative ramifications for the US job market. The slowdown in immigration began under the Trump administration with its marked hostility toward immigrants in general and policies designed to heavily restrict immigration. Immigration then ground to a near standstill with the onset of COVID-19. According to analysts, the tougher immigration policies and the overhanging effect of the pandemic have kept immigration levels much lower than they have been historically. According to US Census Bureau data, immigration peaked in January 2016 with more than one million immigrants entering the country. In 2021, only 247,000 immigrants entered the US.

Economists calculate that the U.S. workforce has 2 million fewer immigrants today than it would have if immigration levels were what they were before the pandemic. And because immigrant labor typically fills roles in low-paying, lower-skilled areas like hospitality, foodservice and retail, these industries are predictably the ones feeling the labor shortage most acutely.

The healthcare industry is another field where the missing immigrant labor is being felt. According to research from Williams College economist, Tara Watson, one in five nurses and one in four health aide positions are inhabited by immigrant workers. Add to this supply challenge the “burnout factor” wherein COVID stresses are driving healthcare workers out of the field and it is not hard to identify why openings have been especially hard to fill in the healthcare field.

Moneywatch’s Irina Ivanova points out that immigrant families have historically been a strong driver of population growth. The American population had already been in decline before the stark drop off in immigration. The additional downward trend in population growth driven by the removal of new immigrants from the economy only serves to exacerbate the problem. CBS News notes that the absence of immigrants may also have wider reaching impacts, resulting in a less dynamic job market on the whole as immigrants generally tend to be younger and more likely to start new, small businesses which are the engine of the U.S. economy.

For employers in these fields – hospitality/leisure, retail, healthcare – the timing and outlook is unfortunate. However, the argument could be made that the reliance on immigrant labor had allowed these industries to keep their labor costs artificially low as compared to other industries where immigrant labor was not as prevalent. So, according to the laws of supply and demand, it is likely that wages will have to rise for workers in these sectors in order for positions to be filled by domestic workers who are rejecting these openings at the pay rates employers had grown accustomed to offering for this work. For some employers, survival may not be in the cards.

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