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Where Did the Workers Go? The Effect of COVID Immigration Restrictions on Post-Pandemic Labor Market Tightness

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Abstract

During the COVID pandemic there were unprecedented shortfalls in immigration. At the same time, during the economic recovery, the labor market was tight, with the number of vacancies per unemployed worker reaching 2.5, more than twice its pre-pandemic average. In this paper, we investigate whether these two trends are linked. We do not find evidence to support the hypothesis that the immigration shortfalls caused the tight labor market for two reasons. First, at the peak, we were missing about 2 million immigrant workers, but this number had largely recovered by February 2022 just as the labor market was becoming tight. Second, states, cities, and industries that were most impacted by the immigration restrictions did not have larger increases in labor market tightness. We build a shift-share instrument to examine the causal impact of the immigration restrictions and still find no evidence to support the hypothesis that the immigration restrictions were the underlying cause of increased labor market tightness.

Suggested Citation

  • Maggie Isaacson & Cassandra Marks & Lowell R. Ricketts & Hannah Rubinton, 2024. "Where Did the Workers Go? The Effect of COVID Immigration Restrictions on Post-Pandemic Labor Market Tightness," Working Papers 2024-003, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:97626
    DOI: 10.20955/wp.2024.003
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    1. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
    2. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    3. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    4. George J. Borjas, 2021. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 9, pages 235-274, World Scientific Publishing Co. Pte. Ltd..
    5. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    6. Kristin F. Butcher & Lucas Cain & Camilo Garcia-Jimeno & Ryan Perry, 2023. "Immigration and the Labor Market in the Post-Pandemic Recovery," Chicago Fed Letter, Federal Reserve Bank of Chicago, vol. 0, pages 1-8, October.
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    More about this item

    Keywords

    immigration; labor market tightness; COVID-19; wages;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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