May 4, 2023
Forbes recently published an article featuring Patricia Cortes, Associate Professor in Markets, Public Policy, and Law, discussing her research revealing that reducing inflation is possible by increasing immigration levels.
Expanding legal channels for temporary workers and admitting more family and employment-based immigrants is one of the best ways to reduce inflation, economists say. Research also shows that increased legal admissions can reduce illegal entry. It is not new to economists that a lack of immigrants can reduce Americans’ purchasing power and contribute to inflation.
According to her research conducted in 2008, Cortes states, “The net effect of immigration on natives’ purchasing power . . . depends not only on wage but also on price effects.”
The cost of immigrant-intensive services, such as housekeeping and gardening, drops by 2% when the share of low-skilled immigrants in the labor force increases by 10%, Cortes found. “Low-skilled natives and low-skilled immigrants are not perfect substitutes [in production] . . . therefore, a low-skilled immigration shock should affect mostly the wages of other low-skilled immigrants and have little effect on the wages of low-skilled natives.” The connection between migration and inflation illustrates how immigrants also improve labor market responsiveness to local changes in demand and supply.