Research suggests temporary ban on foreign workers will hurt the economy

On June 22, the Trump Administration issued a proclamation stating that anyone 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,

What is the reasoning behind this proclamation?

The coronavirus pandemic, and related restrictions, have upended the economy, raising unemployment. This proclamation is meant to shield local workers from having to compete with foreign job seekers in what is already a tight labor market. That is, assuming that foreign workers take jobs from native workers, barring them from the country would mean more job opportunities for local workers.

But will this help?

Research estimates that immigration does have some negative impact on wages. However, these effects are small and are also more concentrated on older, existing immigrant workers. That is, newer immigrants usually reduce the wages for older immigrant workers and not local workers.

Immigrants, however, contribute to the economy significantly in a number of ways. Thereby restricting their entry into the country could actually do more harm than good to native workers.

How restricting immigration could hurt the economy

Immigrants who work in the country and live here spend their money here. Their spending increases the demand for goods and services, which creates jobs and incomes for the local population. Restricting immigration will therefore restrict incomes, jobs, and growth.

Research, for example, has estimated that between 1980 and 2000 each immigrant has “created 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”. Other research has also found restricting immigration of low-skilled farm workers incentives farmers to use expensive machines, instead, which negatively affected wages for local farm workers.

The American economy is not a fixed-size pie, and immigrants do not take from locals. Rather, immigrants contribute to expanding the pie for everyone. Restricting their entry now, especially when the economy needs to recover is a terrible idea.