By Ryan Boyle

The labor market was a microcosm of pandemic trends: demand deficits amid the shutdowns, supply deficits after the reopening, and a subsequent bout of inflation. Employment then had to cope with tight monetary policy and an unexpected surge of new workers.  It has been an unusual interval, to say the least.

The challenge facing those elected in November will be to sustain strong conditions in American labor markets.  We will need new workers as older workers retire, and we’ll need talent with the skills required to support economic growth.  The two parties are approaching this challenge from different angles.

A nation’s potential output is a combination of its number of workers and their productive capability.  The U.S. economy has stood apart from other nations for its position in both areas: workforce growth at a more rapid pace than our peers, and higher-than-average productivity growth.  The question is how to sustain this performance.

Slower growth in the labor force is all but ensured, as U.S. birth rates have fallen with little prospect for improvement.    To make the most of the workers we will have, they need to be equipped to contribute to the economy.  Trends on this front have been discouraging.

The cost of college is tremendous, and payback can feel uncertain.  President Biden’s campaign proposals for student loan debt forgiveness were inequitable and deemed unlawful.  The administration’s more compliant, targeted approach has yielded relief for fewer than five million borrowers.  Student debt has not been a campaign priority this year. 

Students who demonstrate readiness for college are poised for success.  Our concern is more on the lower end of the skills spectrum.  The pandemic harmed educational achievement in primary and secondary schools.  An estimated 21% of U.S. adults are functionally illiterate, unable to fill the opportunities the labor market presents.  Advancements in tools like artificial intelligence can bridge skill gaps, if trainable workers are ready to use them.

Education deficits are not easily or quickly remedied.  The Democratic platform calls for enhanced school program funding and universal preschool, starting at age four.  The Republican platform supports school choice and more work-experience training, but also calls for closing the Department of Education, delegating these challenges to states.   

Even a well-trained cohort of young workers will struggle to meet all the needs of a growing nation.  The U.S. economy has always depended on a steady stream of new arrivals to add to economic potential.  But immigration today is an especially sensitive issue.

The U.S. has been challenged by waves of arrivals.  The Congressional Budget Office (CBO) estimated 3.2 million newcomers last year, roughly four times the normal flow of immigrants.  Most of these entrants are surrendering and asking for asylum status, a mechanism meant for people fleeing persecution or other direct threats.  The immigration process was not designed to handle such large volumes of asylum seekers, and the court backlog stretches for at least five years.  While immigrants wait for adjudication, they are granted temporary work authorizations.

The border has been a pain point throughout the past two years.  The Title 42 pandemic policy  closed the border and deported every captured migrant immediately; its end sparked the surge of asylum seekers.  Images of masses of people at the border were gripping.  In several cities, busloads of adrift migrants brought the problem much closer to home.  Earlier this year, a bipartisan bill to restrict and expedite asylum eligibility failed to meet approval in Congress.

Migrant flows are difficult to estimate in real time, but the pace appears to have cooled this year.  After the failure of the immigration bill, President Biden issued executive orders to reduce asylum eligibility.  Mexico has also cooperated to mitigate US-bound migrant flows.  Replicating the CBO’s methodology, Oxford Economics forecasts 2.3 million arrivals this year. 

The situation is cooling but far from resolved.  The next president must define a better path forward on immigration.  In this respect, the two presidential candidates have vast differences.

A hard line on immigration was a signature of the first Trump term.  The first two points of the Republican party platform promise to not only halt immigration but turn it net negative through “the largest deportation operation in American history.”  

Mass deportation would be devastating to several sectors of the economy.  Though difficult to quantify, undocumented migrants have been estimated to account for as much as half of agricultural labor.  Recent asylum seekers helped to close labor market gaps; their removal could bring back the labor shortfalls of 2021.  Another round of wage inflation, goods shortages and poor service would ensue.

The Harris campaign strikes a more moderate tone, continuing the policies of the Biden administration—which have been a pain point for the president.  She calls for legislative action that has eluded a series of past presidents.  The reform bill that failed earlier this year could be resuscitated, if Congressional elections yield a more receptive audience. 

Greater reform is needed.  The current wave of migrants from Central and South America may subside, but geopolitical and climate risks are certain to bring more refugees of different origins.  Preparation to handle the next migrant flow can help to prevent future crises.

The economic success of the U.S. has always been supported through a large, growing workforce with a variety of skills and abilities.  The next generation of workers needs to be ready to adopt new technologies and continue innovation.  Today’s policies and outcomes have maintained the status quo, with several shortcomings.  Intelligent choices on immigration and education will be essential if the American economy is to remain strong.