Impact of COVID-19 Immigration Restrictions on the US Labor Market and Skill Demand.
Published:
Abstract: Immigrants constitute an increasingly significant portion of the U.S. population and workforce. By March 2019, approximately 39 million foreign-born working-age individuals were in the U.S., making up 18.4 percent of the working-age population. The COVID-19 pandemic and subsequent border closures and immigration ban reversed this trend, reducing the number of working-age foreign-born individuals by over 2 million in 2020 compared to pre-pandemic projections.
This paper explores the impact of COVID-19 border closures and immigration restrictions on U.S. labor markets. Using data from the monthly Current Population Survey (CPS) and Burning Glass’s (BG) online job postings, our methodology employs panel regression, difference-in-differences (DiD), and an event-study design, leveraging both the geographic and temporal variation in the foreign-born share before and after immigration restrictions.
I analyze changes in immigrant demographics by education, gender, region, and occupation, as well as the effects on native employment, wage growth, and employers’ skill demand. I find that the drop in immigration increased native employment and decreased foreign-born employment, suggesting a substitution effect and leading to disproportionate wage growth. This overall substitution effect contrasts with the within-occupation findings, where immigration restrictions reduce native employment. Additionally, immigrant shortages accelerated firms’ adoption of new technologies and automation over time, significantly altering skill requirements in affected regions and occupations.