Immigration Critics Overlook the Good It Does, per State Street

Art by Melinda Beck

Immigration is a hot topic during this political season. Former President Donald Trump, the Republican nominee for president, has criticized his Democratic opponent, Vice President Kamala Harris, for a surge of migrants over the U.S.-Mexico border, numbers which dipped this year after the administration of President Joe Biden tightened access. Both candidates vow to restrict future inflows.

Still, critics of border crossings overlook the economic good that an influx of immigrants has created, according to Michael Arone, chief investment strategist at State Street Global Advisors for its U.S. SPDR business. “Immigration is a political football,” he noted in a commentary. “Regrettably, many people underappreciate the role that increasing immigration has played in stabilizing the post-pandemic labor market without” fueling inflationary pressures.

Limits on migration during the Trump Administration—it dipped to 750,000 annually over Trump’s four-year span, , down from around 1 million historically—“combined with the post-pandemic challenges contributed to extreme supply/demand imbalances in the labor market in 2021,” he wrote.

But migration traffic increased to 2.5 million in 2023 and is on pace to reach the same level this year, Arone added. “The rise in immigration over the past couple of years has helped the labor market achieve greater equilibrium without stoking wage inflation,” Arone wrote.

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He pointed to a survey by Empirical Research Partners showing that for low-skill service positions, where wage growth peaked at 8.5% in 2022, it currently is 4.2%. The labor market is “moderately tight,” he stated.

This moderation of wage growth has helped slow the pace of inflation, Arone observed. The Consumer Price Index’s increase decelerated to 2.9% in July from a recent peak of 9.1% in June 2022 (the August CPI reading will be released on Wednesday). The Federal Reserve is expected to decrease its policy short-term rate, now effectively 5.33%, when it meets September 17 and 18.

To Arone, a lot of the talk about immigration has been “senseless fear-mongering.” In his view, the “positive economic impacts from increased immigration start from gainful employment but rapidly extend to greater entrepreneurship, innovation, consumption and fiscal contributions.”