Labour squeeze: Is immigration the answer to widespread worker shortages?

Several years after a financially strapped New York City was denied federal assistance in 1975, it commenced a period of economic revival mostly remembered in terms of zealous, broken-windows policing and a deep cleanse of Times Square.

But the real key ingredient? Immigrants.

An influx of newcomers led to a population turnover in the 1990s that was nearly double the average in the country’s other big cities. That shored up New York’s headcount and fueled a remarkable rebound. By the end of the decade, nearly half of the adults living there were foreign-born, and the city was running a significant budget surplus.

As countries now seek to avoid the worst of a predicted global economic slowdown, many are smacking head-first into a shared obstacle: too few workers. Some are turning the dials on immigration restrictions in response and embracing more foreign-born labour in an echo of 1990s-era New York. But in other places, that isn't a readily available option.

The calculated use of nationalism and prejudice can hinder meaningful immigration reform and, in certain cases, has aggravated worker deficits – drawing a bright line under the practical shortcomings of xenophobia.

Countries that have been able to make adjustments include Portugal, which created a new type of visa to draw in more foreigners to work in sectors like construction and tourism. Spain relaxed immigration rules to fix its labour shortage, and Canada will welcome more than 1.3 million permanent residents in the next few years, including via a new “targeted selection process.” Germany, faced with $85 billion in annual costs due to a worker shortage, is simplifying its immigration system.

Australia, which has been “in the grip” of a nationwide shortage, recently expanded the number of permanent migration visas it makes available. But that only followed a transition to a new government, which inherited a serious visa backlog.

In other places, meaningful change may be slower to materialize. And that risks further undermining a global interconnectedness that’s provided greater opportunity and growth for decades, according to the most recent Chief Economists Outlook.

In the UK, which severed a primary source of foreign labour from the European Union with its 2016 Brexit vote, immigration remains a delicate issue. The Home Secretary recently resigned partly due to concerns that the government won’t further restrict migrants, now that it’s faced with its own worker shortage (she’s since been reappointed).

The US is also dealing with populist currents; advocates for expanding access to work visas in order to ease labour shortages risk being dragged into debates about security and identity. Legal work-related immigration has fallen by a third since 2020.

In all of these countries, COVID-19 has left its own mark by reshuffling workforces – and all of the pieces don’t seem to have yet fallen back into place.

One type of worker has been re-joining local labour pools and helping address shortages, but maybe not under ideal circumstances. Many older people are finding they have no choice but to go back to work due to the rising cost of living, as part of what’s been dubbed the “great unretirement.”

As decision-makers try to address this dislocation, they have to strike a delicate balance, avoiding the appearance of short-changing the native population but also attracting the workers they need. The “specialty occupation” H-1B work visa in the US is a good example. Businesses say they need more, politicians see the danger in greenlighting them.

One thing that places with worker shortages share: their homegrown populations are getting old, and not everyone may be in a position to “unretire” anytime soon. The ageing of Europe's healthcare workers, in particular, was noted in a recent report published by the WHO, which found that 40% of doctors were 55 or older in many of the countries it surveyed.

Having to replenish the workforce occasionally is not a new concept. In the UK, for example, the Windrush Generation of immigrants from the Caribbean helped rebuild the country’s weakened economy after World War II.

And now that one credit rating agency is predicting a "1990-style" recession in the US, it’s worth recalling not just the role of immigration in the economic revival that was getting underway in New York City in that year – but also its role in bolstering the country’s financial strength for centuries.

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