Though sometimes elusive, a winning economic recipe is relatively straightforward: mix capital with labor in a free economy and watch growth result. A former businessman, Trump won his presidency by promising to make this recipe in bulk.
There’s a problem though: America is running low on labor due to declining birth rates. Normally the nation overcomes this setback with a melting-pot substitute, specifically adding foreign workers to make up for the shortage. But Trump’s going in the other direction.
Getting tough on immigration and thereby reducing the labor supply, according to a new Wells Fargo study, could reduce growth.
An influx of foreign workers has partially offset slipping American labor rates that slumped to their lowest ebb in 2016. Even that hasn’t been enough though. While the U.S. experienced average growth rates of 3.5 percent during the latter half of the 20th century, the authors of the study suggest there’s a direct correlation between lower labor supply and anemic growth rates below 3 percent.
It’s not that the world’s huddled masses aren’t yearning to get to work. They are. As the authors explain, the 2008 recession coupled with increased immigration enforcement have made entering the United States less appealing.
But the foreign-born workers lucky enough to already be in America have kept their nose to the proverbial grindstone. Today they make up half the growth in the labor supply, working on both low and high-skill ends of the career level. For instance, as the study points out, they’re pushing a mop as a janitor or developing phone apps as a computer program. Either way, they’re helping plug the gap in the labor force.
Does this mean that Trump will send the economy into a nose dive with tougher immigration enforcement? Not necessarily. Everyone remembers that Trump promised “a big, beautiful wall.” In the coming immigration debate, the focus should be on the big, beautiful door he promised to place in the middle.
While designing a new immigration strategy, Trump must make certain to keep that door as wide as possible. In the rush to keep bad hombres out, the president must make certain to let good ones in. Otherwise, he’ll accidentally exacerbate the labor problem and hurt the economy he hopes to help.
Philip Wegmann is a commentary writer for the Washington Examiner.
