Labor shortage is a demographic and immigration issue

  • Fewer immigrants coming to the United States may contribute to labor shortages.
  • JPMorgan’s David Kelly said “significant demographic issues” are a factor.
  • Employers who cannot adapt their business or find workers may have to close, Kelly told Insider.

Accelerating immigration could be a way out of the labor shortage.

That’s according to David Kelly, chief global strategist for JPMorgan’s asset management division.

“If we accelerated the immigration of people based on job skills and labor demand, among other things, if we increased the number of people allowed to immigrate to the United States based on the skills they bring to the market, we could fix this huge excess labor demand problem pretty quickly,” Kelly told Insider.

But that may not be easy to achieve.

“I think the problem is that both sides are treating immigration like a political balloon, and so you’re not going to get the kind of compromise needed to increase the number of legal immigrants in the United States while we’re suffering from this. massive labor shortage,” Kelly said. mentioned.

The United States is facing a historic labor shortage, with workers changing careers and quitting their jobs as companies try to retain or hire enough workers to meet demand. With high levels of departures and openings in the country, employers are struggling.

Immigration has slowed dramatically in recent years, due to the pandemic and more restrictive policies under former President Donald Trump’s administration. According to an analysis of Census Bureau data by Jason Lalljee and Andy Kiersz of Insider, if immigration trends from 2011 to 2016 had continued, about 2 million more immigrants would have entered the country between 2017 and 2020.

Immigrants could have filled many of these vacant jobs. Kelly said “the largest segment of immigrants are teenagers, 20s and 30s.”

Kelly also looked at census data to see what immigration looked like over time.

“According to census estimates, net immigration to the United States, both legal and illegal, has been about 360,000 a year for the past two years, down from more than 1 million a year in the middle of the last decade,” Kelly wrote in a recent Weekly post. “This decline reflects both stricter immigration policies and the pandemic, which has reduced legal immigration and caused some recent immigrants to return to their countries of origin.”

There is also a backlog of green card applications for immigrants based on family and employment. Kelly said processing green cards could take months or years. According to a Cato Institute analysis of the employment backlog, there were approximately 1.4 million employment-based immigrants awaiting work visas in 2021.

Businesses will have to adapt to labor shortages or risk failure

Without being able to find talent to meet demand, Kelly said some businesses may close. “It’s very Darwinian,” he said, adding that “those who can use labor effectively will succeed and those who can’t adapt to this environment will fail.”

One way they could adapt is to turn to robots, as some North American companies did last year, and find ways to automate the workplace.

“More expensive labor should also drive further productivity gains as companies use labor-saving technologies and business practices to make up for the lack of workers,” Kelly wrote in the note.

Employers who need to hire more workers to meet demand can also tap into talent pools that are often overlooked. For example, they can look to the growing number of retirees considering returning to the workforce, a trend pointed out by Indeed Hiring Lab’s Nick Bunker. Employers could also reach out to people with disabilities who may be overlooked, especially if companies don’t have interview and workplace accommodations in place.

But the labor shortage is not something that can be fixed in an instant, “and because it will persist, I think wage growth is going to be strong until the next


Average hourly wages for production and non-supervisory workers, which Kelly says makes up about 80% of the workforce in the United States, have already been strong. these workers rose 6.7% year-over-year for three consecutive months, from March 2022 data.

It’s not just immigration that has an impact on the labor shortage. Kelly found that the population growth of Americans between the ages of 18 and 64 has been slow.

“The total number of Americans ages 18-64 has grown by only 930,000 over the past three years, or 0.2% per year,” Kelly wrote in the note. “This very low growth rate reflects the aforementioned aging of the baby boom generation and a sharp drop in immigration.”

“There are a lot of significant demographic issues behind” the labor shortage, Kelly said.

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