Strategic immigration policy could help bolster the lackluster economy and boost rural areas by providing the necessary labor to develop more value added processing, according to a senior economist with the Federal Reserve Bank of Dallas.
Pia Orrenius contends the slowing rate of immigration is at least partially to blame for lagging economic growth in the U.S., not only in rural areas but throughout the economy as a whole.
She was a featured speaker at the recent Rural Economic Outlook Conference, hosted by Oklahoma State University's ag economics department.
While traditional immigration policy prioritized bringing in highly skilled workers, Orrenius argues changing demographics point to a greater need for medium and low skilled workers.
To back that up, she offered a sweeping overview of how the economy has changed over time, including what distinguishes the most recent economic recovery from recoveries of the past, and outlined trends in employment and education that show adjustments in immigration policy could help address some of the country's most pressing economic challenges.
Orrenius is co-author of Beside the Golden Door: U.S. Immigration Reform in a New Era of Globalization, published by the American Enterprise Institute, where she is a visiting scholar. She also previously advised the Bush Administration as a senior economist with the Council of Economic Advisers.
She explained that economic growth is generally driven by one of two things: growth in the workforce or growth in labor productivity. Both factors have lagged in the wake of the Great Recession, she said.
"Our biggest challenge in medium to long term growth is the slow-down in workforce growth, and the biggest reason for that is the aging of the American population," she said.
The ebbing workforce has hurt the economy's ability to recover from recession, she said. While the current economic expansion has been one of the longest on record, it is also the weakest of the past 50 years, she noted.
"It is the labor force growth that has been exceptionally slow in this recovery," she said. "In fact, it didn't start growing again until four or five years into the recovery."
Workforce growth is now one-seventh of what it was in the 1970s, she said.
"It used to be that growth in the labor force was higher than population growth, and that's also changed," she added.
Labor force participation rates increased up until 2000, as more women entered the workforce, but have declined since then. Men and women's labor participation is now roughly equal, she said.
The one segment of the population where labor participation is growing is in the 55 or older category, she said, but it's not enough to offset the accelerating rate of retirement.
"The retirement of the baby boomers (those born in the post World War II era from 1946 to 1964) will be devastating to the labor force," she said.
Prior to 2000, the bulk of labor growth in the U.S. came from domestic workers, but since that time immigrants have played a bigger role, she said.
That trend is expected to continue. By 2035, half of all growth in the workforce will come from immigrants and their children, she noted.
She challenged the common narrative that immigrants drive down wages for native workers, saying the growth they contribute is shared throughout the economy, although some Americans do benefit more than others.
Employment-based immigration that prioritizes the needs of fast growing industries, professions and regions could be an important solution to stalled economic growth, she added.
"The percentage of domestic workers with higher degrees is growing, and the educational attainment among Americans is rising," she pointed out. But while more of the domestic workforce is earning college degrees, the fastest job growth has been in low skilled areas, including personal care and food preparation and service.
While the country's temporary worker program was traditionally used to attract highly skilled positions in areas like medical research, computer software development and engineering, it might make more sense to shift instead toward prioritizing workers for occupations like construction or agriculture, she said.
Food processing, along with agritourism and general entrepreneurship, are the best opportunities rural communities have for growing their local economies, according to Sarah Low, director of economic and entrepreneurial development at the University of Missouri and another speaker at the conference.
But Low expressed concern that lack of labor in rural areas is restricting development of more processing, even though it is a natural fit.
"Economists like me see that there are other countries that are better at producing low value commodities. We need to be adding value to what we do," she said.
That's especially true in light of heightened demand for locally crafted products, goods and services, she said.
"Food manufacturing is the next phase of the local food movement," she said.
Communities need to think beyond cottage foods like pickles and jams to mid-sized 50-employee plants making bread or pasta, brewing or distilling, to bring in money and add jobs, she said.
Instead of processing sugar, a bulk, low-value commodity, why not make wine, which has a distinctive identity that is often tied to a place or an experience?
"The growth is in experience-based kinds of things. That's where the higher dollars are," she said.
In Orrenius' view, the U.S. has done a commendable job of encouraging high labor participation rates among immigrants and refugees, many of which are employed in food and agricultural processing. But she also argues burdensome regulation and poor planning could impede future growth if adjustments aren't made to account for changing demographics.
"After 2035, the only way to increase labor growth will be with immigration," she said.