The deportation economy is backfiring on American workers, top economist warns

As the US economy struggles to regain its footing, a stark reality is emerging: the deportation economy is having a devastating impact on American workers. Despite the unemployment rate dropping, the labor force is shrinking, and the numbers are telling a concerning story. The economy lost a staggering 23,000 jobs last month, yet the unemployment rate continued to decline, raising questions about the true state of the labor market.

Background & Context

The US labor market has been a topic of discussion for years, with the effects of the pandemic still being felt. However, a new dynamic has emerged, one that is leaving many economists and policymakers scrambling to understand its implications. The deportation economy, fueled by the Trump administration's policies, is having a profound impact on the workforce, particularly in sectors dominated by immigrant labor.

The healthcare industry, for example, has been a pillar of the weak labor market for the past three years, but in July, it added a mere 22,000 jobs, a far cry from its average monthly gain of 36,000 for the year prior. Social assistance, including daycare and services for the elderly and disabled, also slowed, sparking concerns about the impact on the most vulnerable members of society.

Key Details

According to Diane Swonk, chief economist at KPMG, the sectors most affected by the deportation economy are those that rely heavily on immigrant labor. In 2022, 28% of direct care workers in the US were immigrants, up from 21% in 2011, according to research by PHI, a leading organization that studies the direct care workforce. As the aging population continues to grow, the industry will need to fill nearly 1 million new positions over the next decade, a challenge that seems increasingly insurmountable.

Swonk noted that the timing could hardly be worse, as state-level cuts to Medicaid, the largest payer for long-term care, are set to exacerbate the labor shortage. "Even as some employers lose those workers, we're not going to be able to afford to replace them at the wages necessary," she warned. "That means rationing, or more people doing unpaid care at home."

What Experts Say

The burden of unpaid care is already weighing heavily on native-born workers, with an estimated $1 trillion worth of unpaid care provided annually. Family caregivers, who are already shouldering a significant load, are now facing an even greater challenge, with 59 million Americans providing an average of 27 hours of care per week. This is equivalent to roughly 24 million full-time workers, according to the AARP's most recent Valuing the Invaluable report.

Bill Adams, chief US economist at Fifth Third Bank, sees the same dynamic at play, with the unemployment rate falling "for the wrong reason." Immigration, he noted, had compensated for the aging of the workforce in the first few years of the post-pandemic expansion, but that's no longer the case.

Key Takeaways

• The deportation economy is having a devastating impact on American workers, with the labor force shrinking despite the unemployment rate dropping.
• The healthcare industry, in particular, is being hit hard, with a significant decline in job growth in July.
• Immigrant labor is essential to the US workforce, particularly in sectors such as direct care and social assistance.
• The burden of unpaid care is falling heavily on native-born workers, with significant consequences for the economy and society as a whole.

What This Means For You

The deportation economy is a pressing issue that affects us all, particularly those who are caring for loved ones or struggling to find employment. As the labor market continues to shrink, it's essential that policymakers and business leaders take action to address the root causes of this crisis.

One solution is to provide support for family caregivers, including access to affordable childcare and respite care services. This would not only alleviate the burden on native-born workers but also help to ensure that the US workforce remains strong and competitive.

Ultimately, the deportation economy is a symptom of a larger problem – a lack of comprehensive immigration reform that addresses the needs of both workers and employers. It's time for policymakers to put aside partisan differences and work towards a solution that benefits everyone.