Federal Reserve Chairman Discusses U.S. Economy and Immigration
Jerome Powell, the Federal Reserve Chairman, stated during a House hearing that the United States can bolster its economy through enhanced productivity among workers, even with a decrease in immigration. He articulated this point during a three-hour session with the House Financial Services Committee, where he highlighted two main factors impacting economic growth: workforce expansion and productivity levels.
Powell explained that while having a larger working population is beneficial, productivity—essentially output per hour—is what really drives growth. In his view, increasing productivity could offset a reduced labor force, which means that fewer workers could still achieve high output in various sectors.
His remarks come amid ongoing discussions within the federal government about shifting away from the economic growth strategies employed since 1990. Powell’s approach suggests focusing more on productivity through innovation and technology rather than relying solely on an influx of immigrants to foster growth.
During the hearing, Rep. Maria Salazar (R-FL) pressed Powell to endorse a more pro-immigration stance. She pointed to her proposed legislation aimed at reinstating policies from before the Trump administration that would allow for an increase in migrant workers and white-collar visa holders.
This proposed legislation appears to echo older strategies that sought to boost consumer spending in the U.S. with cheaper labor sourced from developing countries. However, Powell noted that while there is a demand for immigrant labor, there are viable alternatives, such as investing in technology to enhance employee productivity.
Salazar continued to argue that the U.S. needs to bring in foreign workers given the declining birth rates among Americans. This sentiment aligns with broader pro-immigration arguments from various lawmakers.
In response, Powell emphasized the potential for increased productivity through technological investments but cautioned that these enhancements often require time to materialize. He explained that while artificial intelligence could lead to significant productivity gains, the realization of these benefits might take longer than anticipated.
Powell maintained that it’s not the Fed’s role to influence immigration policy, asserting, “Those who make immigration laws can weigh those considerations.” He suggested that Salazar consult with the Congressional Budget Office for further analysis on the impacts of productivity versus immigration.
Salazar continued to support the idea of revitalizing worker immigration, indicating that it could lead to higher total economic output. Many officials echo this stance, advocating for an increase in migrant populations to promote economic growth, even though this strategy has had mixed results in other contexts, such as Canada and the UK, where citizens’ earnings have not kept pace with economic growth.
Contrarily, countries like China have adopted more effective high-tech policies to ensure substantial economic progression without relying heavily on labor migration.
In the U.S., while Trump had partially shifted away from widely accepted immigration policies by tightening border controls, legal immigration persists at significant levels. Yet there has been a noticeable rise in wages for blue-collar jobs as a result of reduced immigration flows. In Nebraska, for example, some meatpacking jobs have seen wage increases, leading to improved working conditions for some American workers.
Angela Jones, a worker in North Platte, Nevada, expressed her satisfaction with her new job at a meatpacking facility, noting a substantial pay increase compared to her previous roles. This shift illustrates the broader changes in the labor market that some believe could lead to more favorable outcomes for American workers.
