Money & The Economy

Companies Increasingly Turning To Cheap Foreign Labor As Rising Costs Take Their Toll

Business owners are increasingly utilizing foreign-born migrant labor to meet their working needs as sky-high inflation pushes up the costs of business, according to The Wall Street Journal.

The U.S. had a net gain of 3.3 million migrants in 2023, far higher than the average of around 900,000 throughout the 2010s, according to the WSJ. The dependence and availability of cheap foreign labor is leading many business owners to tap into the pool of migrant workers instead of investing in their operations through mechanization, while also propping up companies that would typically have engaged in restructuring due to low profitability.

“Once industry is organized in a certain way and the structure encourages employers to recruit migrants, it can be very hard to turn back,” Martin Ruhs, professor of migration studies in Florence, Italy, told the WSJ. “In some cases, policymakers should ask, does it make sense?”

The share of the workforce made up of foreign-born workers has risen from 16% in 2011 to 18% 10 years later, according to the WSJ. Around three-fourths of farmworkers and 30% of construction and mining workers in the U.S. are foreign-born.

Productivity has slowed dramatically in the U.S. for agricultural technology, increasing 1.4% from 2001 to 2010 to just 0.1% from 2011 to 2019, according to the WSJ. Other countries that have not seen such a huge influx of migrants, like Korea and Japan, have seen greater increases in productivity for agriculture.

The trend of growing foreign labor dependence is pronounced across many western countries, especially in Australia and Canada, which have seen their percentage of foreign-born workers grow from 29% and 23% in 2011 to 32% and 29% in 2021, respectively, according to the WSJ.

Western countries are also experiencing a steady decline in birthrates, with the U.S. averaging only 12 births per 1,000 people, compared to 14.2 in 2000. Without an increase in birth rates, greater productivity or more immigration, a smallerworking population will be forced to support the economy.

The European Union’s working-age population is expected to decline by 20% through 2050, according to the WSJ. Governments may turn to methods of bolstering workforce participation, like having workers postpone retirement, to ensure economic stability.

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