The Effect of COVID-19 Immigration Restrictions on Post-Pandemic Labor Market Tightness

Abstract

During the COVID-19 pandemic, there were unprecedented shortfalls in immigration. Concurrently, as the economic recovered, the labor market was tight, with the number of vacancies per unemployed worker reaching two, more than twice its pre-pandemic average. In this article, we investigate whether these two trends are connected. We find no evidence to support the hypothesis that the immigration shortfalls caused the tight labor market, for two reasons. First, while there was a deficit of about two million immigrant workers at the peak, 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 construct a shift-share instrument to examine the causal impact of the immigration restrictions and still find no evidence supporting the hypothesis that they were the underlying cause of increased labor market tightness.

Publication
Forthcoming, Federal Reserve Bank of St. Louis Review