Inflation has been a major concern for many Americans, even as recent reports show that prices are starting to cool off. The Federal Reserve (often called “the Fed”) has been working hard to control inflation without causing a recession, but there’s a simple solution they might be overlooking: increasing immigration.
The Labor Shortage and Its Impact on Inflation
In the past year, businesses across the U.S. have struggled with labor shortages. As of July, there were 10.7 million job openings in the country, while only about 5.7 million Americans were unemployed. This creates a big gap—about two jobs for every worker. Even if every unemployed person found a job today, there would still be 5 million open positions.
Goldman Sachs estimated that to bring inflation down to the Federal Reserve’s target of 2%, the number of open jobs would need to decrease by about 2.5 million. The Fed’s solution so far has been to raise interest rates, which works by slowing down wage growth and discouraging business expansion. But this also reduces the number of new jobs and can lead to a slowdown in the overall economy.
There are many reasons for the labor shortage: the “Great Resignation” (where many people left their jobs during the pandemic), the closure of schools, the collapse of childcare and elder care industries, and the long-term effects of COVID-19. Over one million Americans died from COVID, and 25% of them were of working age. But one key reason for the shortage could be solved: the lack of immigrant workers.
The Pandemic’s Impact on Immigration
From March 2020 to July 2021, the U.S. government issued about 1.2 million fewer visas to adult immigrants, refugees, and temporary foreign workers compared to pre-pandemic levels. By the end of 2021, the U.S. had about 2 million fewer working-age immigrants than it would have had if immigration patterns had remained the same.
Industries that relied more heavily on immigrant workers in 2019 experienced significantly higher rates of job vacancies in 2021. For example, industries with 10% more immigrant workers than others in 2019 had a 3% higher rate of unfilled jobs the following year.
The Critical Role of Immigrants in U.S. Agriculture
Immigrant workers play a vital role in many sectors, particularly agriculture. In fact, 73% of the agricultural workforce in the U.S. is foreign-born, while immigrants make up less than 14% of the country’s total population. This over-representation of immigrants in farming is due to decades of fewer Americans entering or staying in agricultural work.
For example, between 2002 and 2014, the number of full-time farm workers in the U.S. dropped by nearly 22%. As a result, farmers across the country have struggled to hire enough workers to harvest crops. In California, millions of dollars worth of crops, like strawberries and broccoli, were left unharvested in 2017 due to a lack of workers. Similarly, in 2020, Florida’s watermelon harvest went to waste because workers were delayed at the U.S.-Mexico border. In Wisconsin, 30,000 full-time farm jobs were open in July 2022 alone.
The Importance of Immigrant Workers in the Farm Workforce
As labor shortages worsened, the U.S. agricultural industry became more reliant on immigrant workers, including those hired through the H-2A visa program. This program allows farmers to bring in foreign workers temporarily if they can’t find enough U.S. workers. Between 2015 and 2020, the number of H-2A applications increased by 87%, with 256,000 H-2A workers hired in 2019.
However, the H-2A visa only permits workers to stay for seasonal work, typically up to ten months. This doesn’t meet the needs of many farmers, especially those in industries like dairy and livestock farming, where workers are needed year-round. As a result, 47% of farmers report being unhappy with the program, citing that it’s time-consuming, expensive, and doesn’t meet their staffing needs.
A recent study by Texas A&M University found that increasing the number of immigrant farm workers could lower food prices and raise wages in the agricultural sector. Despite this, the U.S. Department of Labor (DOL) has proposed new rules that would make it harder for farmers to hire these workers, adding additional paperwork and delaying the process by several months.
The Cost of Labor Shortages and Delays
The delays and complications farmers face when hiring workers through the H-2A program only drive up the cost of food, contributing to rising grocery prices and inflation. At the same time, the gap between available workers and unfilled jobs remains wide, which also fuels inflation.
A Solution: The Farm Workforce Modernization Act
Instead of making it harder for farmers to hire workers, the Biden administration should support the Farm Workforce Modernization Act (FWMA), which is currently under negotiation in the Senate. This bill, which has already been passed twice in the House of Representatives, would allow farmers to hire H-2A workers year-round instead of just for seasonal work. It would also create a pathway to legal status for some farm workers, which is not available under the current system.
The FWMA would modernize the agricultural workforce system in the U.S., making it easier for farmers to find workers and reducing the inflationary pressures caused by labor shortages.
The Role of Immigrants in Lowering Inflation
With nearly two open jobs for every available worker, immigrants would not be taking jobs away from Americans. Instead, they would be filling crucial positions across many industries, including agriculture. Allowing immigrants to fill these gaps—both in farming and other sectors—would help reduce food prices, ease labor shortages, and slow down inflation.
By embracing immigration as a tool to strengthen the economy, the U.S. can address both the labor shortage and inflation at the same time, benefiting workers, consumers, and businesses alike.
