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Higher Immigration or Higher Interest Rates for America?

The persistence of restrictions on migrant workers and asylum seekers under President Joe Biden’s administration has exacerbated US labor shortages. The US must choose between a dynamic economy with lower interest rates and more foreigners, or a stagnant economy with high interest rates and fewer migrants.

LONDON – The US economy is demanding too many workers. There are about twice as many job vacancies across the United States as people looking for jobs. The unemployment rate remains at a historic low, and the labor force participation rate is on the rise.

Having many more job openings than workers has led to record-high quit rates and wage increases exceeding productivity growth, contributing to broad-based inflation and causing the US Federal Reserve to raise interest rates sharply in an effort to cool off the economy’s insatiable appetite for labor.

The Biden administration’s immigration policy has exacerbated these labor shortages, forcing the Fed to raise interest rates more aggressively than it otherwise would. By restricting the number of workers, the administration is limiting the economy’s potential output and reducing the level of spending that is compatible with it. Higher immigration, on the other hand, could lead to lower interest rates, increased output, and greater demand.