Research suggests temporary ban of foreign workers might hurt the economy more than it will help

On June 22, the Trump Administration issued a proclamation regarding the suspension of entry of foreign workers. As of June 24 people seeking entry through the following visa categories will face some restrictions and limitations; H-1B, H-2B, J-visa, and L-visa. Following the economic impact of the COVID-19 shutdown, the proclamation is meant to shield local workers from having to compete with foreign job seekers in the already tight labor market.

The premise of the proclamation

Due to the coronavirus, the economy has collapsed. Companies are not hiring in high numbers, ergo unemployment numbers are high. So there are essentially more people looking for jobs than there are jobs available. So, if the United States restricts the number of foreigners coming to work into the country, there will not be high competition and local workers will easily find jobs.

That is, assuming that foreigners take jobs aways from native people, barring them from the country is the best way to ensure locals are granted access to the already limited job opportunities. These restrictions will last up until the end of the year, if not extended.

There might be some truth to the statement that immigration has an impact on wages; it has a downward effect on wages. But this impact from immigration very small. Additionally, it is usually older immigrants who are more affected by newer immigrants, not local workers.

Compared to the extra benefits that immigrants contribute to the economy, restricting their entrance could prove more negative to the United States economy. Economic research suggests restricting immigrants will hurt employment and reduce demand. This might in turn hinder recovery of the economy.

This might potentially hurt the economy

Proponents of legal migration often bring up the point that immigrants steal jobs from local workers so restricting migration will reduce this occurrence. This is however not true. Immigrants have a minimal impact on unemployment. And Cutting legal immigration does not lower unemployment for local workers, but may potentially reduce employment opportunities. According to Cato;

In the past, the government has restricted legal immigration to combat recessions and high unemployment with disastrous results. President Herbert Hoover vastly reduced legal immigration in 1931 during the Great Depression. Combined with mass‐​deportations of about 500,000 Mexican workers, President Hoover’s EO had a negative effect on the wages and job opportunities of Americans at worst and no effect at best.

The best research on how cuts in immigration affect native wages and employment is by economists Michael Clemens, Ethan Lewis, and Hannah Postel, who study how the 1964 termination of the Bracero program impacted employment and wages. Specifically, Congress canceled the Bracero program to raise the wages of American farm workers by reducing the total size of the workforce—the same justification used by the Trump administration in this proclamation. They found that ending lower‐​skilled migration for farm workers had little measurable effect on the labor market for Americans who worked in those occupations except it slowed wage growth. Farmers chose to use more expensive machines to harvest crops and altered the crops they planted instead of raising wages.

Cutting immigration reduces demand

When immigrants come into the country they increase consumption income. So restricting them from the economy is essentially denying the businesses in the country extra demand for their goods and services. This has a multiplier effect:

This will reduce the number of employment opportunities as employers won’t have as many customers as they otherwise would. One estimate of this effect says that each immigrant creates 1.2 local jobs for local workers, most of them going to native workers, and 62 percent of these jobs are in non‐​traded services, from 1980–2000. As economist David Card said, immigration causes “The demand curve [to] also shift out.” Reducing legal immigration prevented that shift from occurring.

Like some of the other policies enacted in good faith restricting foreign workers from the US is bound to have negative consequences. Research has shown many times that immigrants contribute to the economy much more than they benefit. Keeping them out is denying the economy extra assets that would help the economy recover from the Covid-19 induced recession.