January 29, 2025 • 25 mins
On this week’s Trumponomics, we look at how Trump's immigration policies will affect the nation’s economy, and especially whether it will be good or bad for American workers. Oren Cass, joins host Stephanie Flanders and Bloomberg Opinion Senior Executive Editor Tim O’Brien.
Cass, formerly with the right-leaning Manhattan Institute and founder of the conservative think-thank American Compass, is author of The Once and Future Worker: A Vision for the Renewal of Work in America.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
First, I will declare a national emergency at our southern border.
All illegal entry will immediately be halted, and we will
begin the process of returning millions and millions of criminal
aliens back to the places from which they came Boom.
Speaker 3 (00:35):
I'm Stephanie Flander's head of Government and Economics at Bloomberg,
and this week on Trumpnomics, we're asking how will President
Donald Trump's immigration crackdown affect American workers. Now, as you know,
we usually go to our in house reporters and experts
for our discussion, and this week for the home side,
we do have Tim O'Brien, senior executive editor of Bloomberg Opinion,
(00:56):
back with us, catching up with him in London for
a change, because there weren't enough opinion here in the UK.
Speaker 1 (01:00):
Hello, Tim, it's going to be here seventy. Thank you
for having me.
Speaker 3 (01:03):
And I'm delighted to also be including Orn cass Oran
is the founder and chief economist of American Compass and
author of The Once and Future Worker, a vision for
the renewal of work in America. He served as Domestic
policy director for Governor Mitt Romney's twenty twelve presidential campaign
and has been senior fellow at the Manhattan Institute for
many years, and then his prolific writing and speaking in
(01:25):
support of a more worker centric conservatism, he has definitely
helped to shape the thinking of Vice President J. D.
Vance and others on what you might call the blue
collar wing of the mega coalition. Orn Cass Welcome to
Trump Andomics. We're really delighted to have you.
Speaker 1 (01:41):
Oh thank you.
Speaker 3 (01:42):
Donald Trump told supporters last week he thought immigration was
what got him elected, even more than the cost of living,
and we've seen him follow through on that in his
first hours as president with a slew of executive actions
that are already having consequences. There are troops down at
the southern border, for example, where he has declared a
national urgency. Asylum appointments have been canceled, and refugees around
(02:04):
the world have had their travel approvals revoked. So one
way or another, we know that Donald Trump intends to
lower the number of immigrants in the US. There'll be
plenty of discussion in the months ahead of the policies
he's using to do that, whether they're too much or
not nearly enough. But what we're looking at today is
how it will affect the economy, and especially whether it
(02:24):
will be good or bad for American workers. Many businesses
do fear it will put America's exceptional recent growth and
productivity record at risk and push up inflation. Others take
a more supportive and a certainly more nuanced view of it.
Welcome to Trumpnomics, the Bloomberg podcast that looks at the
(02:46):
economic world of Donald Trump, how he's already shaped the
global economy, and what on earth is going to happen next.
There's lots of strands here, but let's start with what
(03:07):
impact do you think presidence more aggressive approach to illegal
immigration will have on the economy and workers who remain
in the US.
Speaker 1 (03:14):
Well.
Speaker 4 (03:14):
I think there will be an immediate effect and a
longer term effect. I think the immediate effect is that
we will start to see the labor market tightening significantly,
especially at the lower end. The reality is that illegal
immigration overwhelmingly goes into the labor market in a set
of low wage sectors, and those happen to be sectors
(03:36):
where working conditions are not very good, where typically we
have not seen significant investments in productivity increases because there
has always been an assumption that we can find illegal
immigrants to do the work, and so as those folks
leave the labor market, what we are going to see
is employers having to offer higher wages and better conditions
(03:58):
to attract the workers that they need, and that will
be a very good thing for workers. I think, probably
even more importantly is the medium to long run effect,
which is a real shift in the expectations of labor
market conditions. We have now been for decades running an
economy where if employers can't find enough cheap labor, they
scream labor shortage, and policy makers are supposed to respond
(04:21):
by providing more cheap labor. And that is not a
formula for economic prosperity. In fact, it is a formula
for the low productivity growth and wage stagnation that we've seen,
and so I expect to see much higher investment in productivity, gains,
in training, in bringing workers off the sidelines, all of
which is what our economy needs and what it should
(04:43):
be doing.
Speaker 3 (04:44):
If you think the short term effect is going to
be to improve working conditions, because employers are forced to
offer more to workers, I mean higher wages, short term
surely spells higher prices, So you would agree with those
who are worried about the inflationary co consequences.
Speaker 4 (05:00):
Well, I think it depends how the higher wages translate
into prices. One thing you may see, and we've seen
in the past also, is that when you bring in
some of those other workers, when you do offer higher wages,
when you do provide better working conditions, you also get
better productivity. And particularly in a competitive market, we should
expect there to be enormous pressure on employers to actually
(05:23):
find ways to get those productivity gains very quickly and
to keep prices low. I'm always a little bit puzzled
when the exact same folks who celebrate the wonders of
the free market and competitive forces then turn around and
if we're talking about immigration, say you know, oh no,
none of this works. It's all broken, Everything will be terrible.
Businesses are designed to operate under constraints and solve the
(05:46):
problems put in front of them. And the problem is
for our economy we have not put the problem of
provide a good product at a low price with the
workers in America as the problem to solve, And now
that is going to be the problem to solve. And
I'm actually somebody who has a lot of faith in
markets and businesses to solve that problem. It's very funny
to me that the quote free market folks are the
(06:09):
ones who run around with their hair on fires saying
if we actually let the market work, somehow everything's going
to fall apart.
Speaker 3 (06:17):
That was I find, or at least it's sort of ironic.
Is the same people who say that immigration doesn't push
down wages do insist that reduced immigration will push up prices,
which I don't know it's one way or the other.
Speaker 1 (06:30):
That's right.
Speaker 4 (06:30):
I mean, we've gone through several rounds of this, right,
because when inflation was high, of course everybody said, well,
we need to bring in more immigrants to bring down
inflation and to suppress wage growth. And then of course
when inflation is not high, they turn around and say,
well we need to bring in more immigrants. That will
have no effect on wages. I think immigration absolutely does
have an effect on wages. I think it's just important
(06:52):
to recognize that the relationship between wages and prices is
not a direct one, and that in a healthy economy,
higher wages comes alongside higher productivity gains and in fact
lower prices. That is the tradition of capitalism working well
and generating prosperity.
Speaker 3 (07:08):
There is one aspect of the economic research that I
wanted to put to you. I mean, we have a
team of economists here at Bloomberg, and you'll be interested
to hear that we don't think that cutting immigration and
expelling more illegal immigrants will raise inflation. In fact, because
of how much demand they represent, if you have a
lot of deportations, that's going to reduce consumption enough to
we actually think reduce GDP per head and even reduce inflation.
(07:33):
But for the same reason, we do think it will
hurt growth and jobs for everyone. And I don't know
you're probably aware of this, but the studies that have
been done in different counties that have had enhanced deportation programs,
they found that for every hundred migrant workers that was deported,
nine fewer jobs existed for natives because the demand of
those migrant workers was creating jobs for everyone, and the
(07:55):
native workers' wages also fell slightly. So are you not
concerned about that just directly deflationary effect and the possible
reduction and employment.
Speaker 4 (08:05):
Well, first of all, I think it's very important to
distinguish between overall GDP and GDP per capita, because there's
no question that if you remove people from a population,
absolute GDP is going to decline, at least in the
short run.
Speaker 3 (08:20):
There are on our findings is GDP per head I think,
because you're obviously aware of that issue, but this is
also about jobs for the Americans who stay behind as well.
Speaker 4 (08:29):
But just to put a fine point on the GDP
per capita point, I'm not familiar with the particular study
that you're citing, but it's really important to keep in
mind also that the illegal immigrants who would be removed
from the labor force tend to be far below the
median GDP per capita, median wage level and so forth,
(08:50):
and so removing a significant number of them from the population,
just as a sheer matter of math, I think it's
extremely unlikely to reduce GDP per capita. I think the
best examples we have of what happens when you actually
enforce the law and remove people who are in the
country illegally is from the places that have actually done
(09:11):
that at scale. And you know, you can go all
the way back to the history of the end of
the Brasero program up through Florida imposing mandatory everify and
enforcing it over the last couple of years. I know
many people who predicted that Florida's economy would suffer as
a result. I don't know anybody who would say Florida's
economy has in fact suffered as a result.
Speaker 1 (09:33):
Or in what lessons you take from Brexit in the
context of looking at other case studies. You know, one
of the arguments for Brexit, For example, Polish migrants were
taking farm jobs in Lincolnshire away from native Brits and
Brexit was imposed and the workers didn't come, and it
turned out that a lot of native laborers didn't want
(09:55):
those jobs anyway. So what do you have any lessons
real world lessons at a national level rather than a
state level from Brexit in the context of what we're
discussing about the impact of migration and restrictions.
Speaker 4 (10:11):
Well, I don't take any lessons from Brexit in this respect.
I think Brexit was an entirely different context in terms
of both what was going on in the UK beforehand.
I mean, you're talking about very large numbers of legal workers,
and you're talking about a far broader economic Whether you
want to call it a dislocation or a shift in
(10:33):
the economic relationship that the UK had with the rest
of the EU. But I also do want to challenge
this sort of basic framing of somehow jobs that native
workers won't do. I'm not aware of any job that
anybody wants to take that is poorly paid in bad conditions,
(10:54):
and frankly, I'm aware of many people who will take
just about any job that is well paid in good conditions.
I'm not sure where we've gotten this idea that employers
are entitled to have workers take jobs that certainly the
employers themselves would not take. And again, it goes back
to this mental model that we've adopted that treats labor
(11:15):
as a commodity input, like it's lumber or steel or something,
and the cheaper and more plentiful it is, the better
off we will be. That's just not true. A key
feature and function of an economy, what we need it
to do, is to create good jobs for native workers
and legal immigrants, and having large numbers of illegal immigrants
(11:37):
makes that harder, and it's not something we should be pursuing.
Speaker 1 (11:41):
I think one of the tricky things right now in
the discussion is that there are a lot of moving parts,
and a lot of them are theoretical. And in an
ideal world, yes, the economy would pay middle class wages
to everyone, so we could have a nation full of
middle class people. But the reason we don't is that
some industries thrive on low wage labor by design, and
there are jobs that some people prefer not to take.
(12:03):
But we could go down a rabbit hole on that.
Speaker 4 (12:05):
Well that that's no, I'd like to stay there for them.
That's not a rabbit hole. That's That is the exact
crux of the issue. Yeah, because why on earth should
we accept that some industries are designed to have bad
jobs that workers don't want to do.
Speaker 1 (12:19):
I mean, because I think the rabbit hole. The rabbit
hole would spin off of the ways in which the
wage and price dynamic and labor supply. It is never
a perfect sphere of factors influencing one another. And and
the reality is low wage jobs have always existed in
the US that sometimes are at subsistence levels or certainly
(12:43):
don't provide entry into the middle class. That has been
a true forever, regardless of the models.
Speaker 3 (12:49):
The other least the social safety net. It was one
of the things that was supposedly one of the strengths
of the US is that had a social safety net
that incentivized people to take to low paid jobs.
Speaker 4 (13:01):
Let's take economics editor at Bloomberg as an example. I
don't know of anyone who would be economics editor at
Bloomberg for thirteen dollars an hour sitting on a dusty
crate in a hot field twelve hours a day.
Speaker 1 (13:13):
But those aren't the jobs we're talking about. We're talking
about sledgehammer wielder at construction site. Why and we're talking
about hotel made or we're talking about restaurant workers at the.
Speaker 4 (13:24):
Why should they have worse job experiences than you have?
Speaker 1 (13:28):
Welluse because the market deems them to be less skilled.
Speaker 4 (13:31):
That's that's why we just a market has done that
because of the illegal immigration and the massive influx.
Speaker 1 (13:37):
Of low skill I would argue, I would argue that's
where the rabbit hole emerges.
Speaker 3 (13:41):
Bat Really, what is interesting about that and what is
kind of revealing about where you've gone with that or
is that you are you represent a strand of conservative
thinking that is very focused on the well being of workers,
and indeed, your your book was very focused on that
and a critique of a certain what you might call
in the a liberal approach to economics to immigration that
the administration has promised is one that you are in
(14:03):
principal sympathetic towards. And have you made a case for
in all the ways that you've just described. But you've
made that case not in the spirit of some of
the rhetoric of that we might say was kind of
dehumanizing of immigrants or anything else. It's very much focused
on improving the livelihoods of people here. So I just
wondered if that is one's focus, and if that's the
(14:27):
thing that one's most concerned about, as opposed to kind
of dividing Americans from each other or making people kind
of blame immigrants for everything that's wrong in society. What's
the kind of thing we should be looking for in
the administration? What will you be hoping to see the
kinds of policies, you know, for example, cracking down on
employers employing illegal immigrants, give us a guide to the
(14:47):
sort of if you care about workers, what should you
be most wanting to see the president prioritize.
Speaker 4 (14:54):
Well, I think there are a number of directions from
which we have to come out at this problem, because
it has been a problem that is fester. It has
festered for a long time. It obviously metastasized under the
Biden administration. And so one element that I think you
see is a focus from day one is just actually
stepping up border enforcement, staunching the incoming flow. And that's
(15:19):
obviously an incredibly important first step. You're not going to
reduce the level of illegal immigration and illegal workers in
America if you still have large numbers coming in. So
I would say that in a sense is step one.
I think step two, which is where you see the
Trump administration, then focusing out of the gate, is in
(15:41):
actually enforcing the law in terms of folks who already
have active deportation orders, in terms of folks who who
are have already been convicted of other crimes, and making
sure that those farks are being removed as the law requires.
And then step three that I hope we get too
quickly is actually pursuing workplace enforcement, because I think at
(16:04):
the end of the day, where the rubber meets the
road for these labor market issues is in terms of
how employers behave and whether employers are able to hire
people who are in the country illegally and not authorized
to work. And so a mandatory everify system, again, which
they've done in Florida to great effect, is a very
(16:24):
important tool that both empowers employers and holds them accountable
for only employing people who are in the country legally,
and then you need very harsh sanctions against both employers
who fail to use the system properly and against people
who try to work around it and continue to work illegally.
Speaker 3 (16:44):
I may be wrong about this, but I just haven't
heard that the folks who are coming into the administration,
and indeed sort of restoric on the campaign trail in
previous sort of eras of this discussion. I've definitely heard
people talk about Everify, and obviously the Florida example was
used a lot. Just haven't heard members of the incoming
administration talk about it very much. Is that just I've
not been listening carefully enough.
Speaker 4 (17:05):
I think it depends who who you're focused on. Vice
President Vance is certainly somebody who has talked a lot
about this employment side of things and the need for
enforcement in the labor market. I think you're certainly right
that President Trump's focus has been first and foremost on
the border and on the deportation of criminals. And that's
what you see them doing out of the gate. But
(17:26):
I think this will be a process over a number
of years, and hopefully we're headed in the right direction.
Speaker 1 (17:31):
On the deportation side of it or in right now.
We've had, you know, in the first week, small insignificant
numbers relative to what they say they want to do
the administration around deportation. The number Trump put out on
the campaign trail was eleven million. Do you have a
sense of whether or not different sectors of the economy,
(17:53):
different businesses are really positioned to adapt to a shock
of eleven million people vacating? And yeah, is there a
number you've like sort of landed on that is acceptable
and taking human rights and those issues off the table
for this particular discussion. But for example, if you moved
(18:15):
several million people simply into camps and didn't even deport
them right away, what would happen to the construction trades,
What would happen to hotels and restaurants and farms that
all depend on a lot of workers who don't have
criminal records and have wanted to be processed legally. But we,
in addition to having a poorest border, have a horrid
(18:38):
judicial system for processing those migrants in a timely and
effective way. How quickly actually you get a snap back
to those jobs just being filled right away in a
way that's also cost effective for the businesses themselves.
Speaker 4 (18:52):
Well, I think there are a few things going on here,
but I actually think that the market's ability to adapt
to this very quickly is quite high. You know, I
would point based on what well, I would point to
two things. One is, I think it's very funny that
when the economy goes into a recession, let's say you
see employers lay off millions of workers much more quickly,
(19:14):
and everyone just sort of shrugs and says, that's the
business cycle. In fact, we, in fact, we do see
very large swings in the labor market over time and
in very short periods of time in some instances. But
I also think that the aftermath of COVID is a
good illustration of this, where we had labor market shocks
(19:36):
probably in order of magnitude at least larger than what
we're talking about now. Were there challenges for employers, Were
there times when when there were disruptions in various local markets. Absolutely.
Speaker 1 (19:48):
The government also spend quite a bit of stimulus money
to keep consumer demand high and to keep businesses afloat.
So actually the full effect of those job losses weren't effect,
weren't felt.
Speaker 4 (20:00):
I'm not sure what that has to do with your question,
which is whether employers could cope with disruptions in the
labor market and workers coming in and out. And the
reality is that in the aftermath of COVID there was
a dramatic short term shortfall in labor market participation, and
you saw widespread concern about labor shortages and employers complaining
(20:22):
that they couldn't hire and find anywhere near the workers
they needed. And one thing that happened was that wages
went up a good deal and a lot of people
were brought in off the sidelines. But at the end
of the day, the market is an extraordinarily flexible one.
I mean, let's keep in mind just how many millions
of workers enter and exit the labor market every year anyway.
(20:46):
And so what I find, again so peculiar is this
attitude that you know people it's you said, like, oh,
these people they're just they're waiting to be processed. They
do not have a right to be in the country.
They crossed the border legally. They know that they crossed
the border illegally.
Speaker 1 (21:03):
Employers wanted them to work for them.
Speaker 4 (21:05):
That makes it legal.
Speaker 1 (21:07):
I'm not saying it makes it legal. I'm saying people
were winking and nodding at the inefficiency of the processing system,
which I agree with you needs to be fixed. But
they weren't regarded whole cloth as economic balls and chains
or as a pox upon the functioning of the economy.
Speaker 4 (21:24):
Yeah, I'm not sure how we decide which laws we
do have to follow in which we don't based on
why employers want that, again, is not how markets work.
The way that a well functioning market democracy should be
operating is that we have laws establishing who can enter
the country under what conditions. We enforce those laws, and
we expect employers and people trying to immigrate to the
(21:47):
country to comply with them. And that seems to me
to be a much better formula for capitalism and broad
based prosperity than the crazy situation that we've had with
this sort of vague hand waiving encouragement in recent decades.
Speaker 3 (22:03):
They do have a different status if they're even if
they've crossed the border illegally, if they're seeking asylum, a
refugee status. I think that they do have, they're not
I think they're not technically illegal. But can I just
ask you about the skilled immigration because a lot of
evidence around US innovation, the production of patents, and contribution
(22:24):
to the productivity of companies has shown that you get
very good return on your investment from a lot of
skilled immigrants that we've had, and that seems particularly front
and center at the moment when you think of the
aggressive competition with China, that the administration has called for
an investment in AI and all these things. A colleague
(22:45):
was pointing out to me the Ohio State Dashboard of
engineering enrollment. Half of the students who are applying for
graduate degrees in engineering are international. Are you on the
Elon Musk side of the argument when it comes to
some of those skilled vas or are you worried about
the impact of that immigration for workers at home.
Speaker 4 (23:05):
Well, I think you've just blurred a few issues together there.
I don't know of anyone, frankly, who is saying that
we should not have skilled immigration. And obviously, we have
always had an immigration system that brings large numbers of
people into the country legally every year, and I think
reorienting that toward focusing on people with highly valuable skills
(23:29):
who are likely to succeed in the US economy is
exactly the way to make that system work well. The
question of temporary visas like H one B is entirely different,
and even Elon Musk has conceded the H one B
program is poorly structured and widely abused. And so I
don't think the temporary visa programs the way that we
(23:50):
are operating them at all achieve those very important benefits
that you were describing. I think they are yet another
way that employers have found to gain the system and
create lower quality jobs at lower wages.
Speaker 3 (24:04):
Would you want to see that skilled immigration, the more
permanent immigration go down over the course of the next
few years in this new environment.
Speaker 1 (24:14):
No.
Speaker 4 (24:14):
What I would like to see is US actually get
the system under control so that immigration is limited to
legal immigration, and we then use our level of legal
immigration to focus on bringing in those who will make
the greatest contributions to the country.
Speaker 3 (24:28):
Or and Cass, thank you very much for joining us.
Speaker 1 (24:30):
It was my pleasure.
Speaker 4 (24:31):
Thank you.
Speaker 3 (24:33):
I appreciate your patience as we go through all these
questions on immigration, and that there clearly is a very
wide agenda here which we'll be looking at sort of
week to week. Thanks for listening to Trump Andomics from Bloomberg.
It was hosted by me Stephanie Flanders, with special thanks
(24:54):
to our guests Orncass and Tim O'Brien. Trump and Noomics
is produced by Summer Saudi and Most and with help
from Chris Martlou. Sound designed by Blake Maples. Brendan Francis
Newnham is our executive producer. To help others find the show,
please give us five stars wherever you listen to podcasts
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
First, I will declare a national emergency at our southern border.
All illegal entry will immediately be halted, and we will
begin the process of returning millions and millions of criminal
aliens back to the places from which they came Boom.
Speaker 3 (00:35):
I'm Stephanie Flander's head of Government and Economics at Bloomberg,
and this week on Trumpnomics, we're asking how will President
Donald Trump's immigration crackdown affect American workers. Now, as you know,
we usually go to our in house reporters and experts
for our discussion, and this week for the home side,
we do have Tim O'Brien, senior executive editor of Bloomberg Opinion,
(00:56):
back with us, catching up with him in London for
a change, because there weren't enough opinion here in the UK.
Speaker 1 (01:00):
Hello, Tim, it's going to be here seventy. Thank you
for having me.
Speaker 3 (01:03):
And I'm delighted to also be including Orn cass Oran
is the founder and chief economist of American Compass and
author of The Once and Future Worker, a vision for
the renewal of work in America. He served as Domestic
policy director for Governor Mitt Romney's twenty twelve presidential campaign
and has been senior fellow at the Manhattan Institute for
many years, and then his prolific writing and speaking in
(01:25):
support of a more worker centric conservatism, he has definitely
helped to shape the thinking of Vice President J. D.
Vance and others on what you might call the blue
collar wing of the mega coalition. Orn Cass Welcome to
Trump Andomics. We're really delighted to have you.
Speaker 1 (01:41):
Oh thank you.
Speaker 3 (01:42):
Donald Trump told supporters last week he thought immigration was
what got him elected, even more than the cost of living,
and we've seen him follow through on that in his
first hours as president with a slew of executive actions
that are already having consequences. There are troops down at
the southern border, for example, where he has declared a
national urgency. Asylum appointments have been canceled, and refugees around
(02:04):
the world have had their travel approvals revoked. So one
way or another, we know that Donald Trump intends to
lower the number of immigrants in the US. There'll be
plenty of discussion in the months ahead of the policies
he's using to do that, whether they're too much or
not nearly enough. But what we're looking at today is
how it will affect the economy, and especially whether it
(02:24):
will be good or bad for American workers. Many businesses
do fear it will put America's exceptional recent growth and
productivity record at risk and push up inflation. Others take
a more supportive and a certainly more nuanced view of it.
Welcome to Trumpnomics, the Bloomberg podcast that looks at the
(02:46):
economic world of Donald Trump, how he's already shaped the
global economy, and what on earth is going to happen next.
There's lots of strands here, but let's start with what
(03:07):
impact do you think presidence more aggressive approach to illegal
immigration will have on the economy and workers who remain
in the US.
Speaker 1 (03:14):
Well.
Speaker 4 (03:14):
I think there will be an immediate effect and a
longer term effect. I think the immediate effect is that
we will start to see the labor market tightening significantly,
especially at the lower end. The reality is that illegal
immigration overwhelmingly goes into the labor market in a set
of low wage sectors, and those happen to be sectors
(03:36):
where working conditions are not very good, where typically we
have not seen significant investments in productivity increases because there
has always been an assumption that we can find illegal
immigrants to do the work, and so as those folks
leave the labor market, what we are going to see
is employers having to offer higher wages and better conditions
(03:58):
to attract the workers that they need, and that will
be a very good thing for workers. I think, probably
even more importantly is the medium to long run effect,
which is a real shift in the expectations of labor
market conditions. We have now been for decades running an
economy where if employers can't find enough cheap labor, they
scream labor shortage, and policy makers are supposed to respond
(04:21):
by providing more cheap labor. And that is not a
formula for economic prosperity. In fact, it is a formula
for the low productivity growth and wage stagnation that we've seen,
and so I expect to see much higher investment in productivity, gains,
in training, in bringing workers off the sidelines, all of
which is what our economy needs and what it should
(04:43):
be doing.
Speaker 3 (04:44):
If you think the short term effect is going to
be to improve working conditions, because employers are forced to
offer more to workers, I mean higher wages, short term
surely spells higher prices, So you would agree with those
who are worried about the inflationary co consequences.
Speaker 4 (05:00):
Well, I think it depends how the higher wages translate
into prices. One thing you may see, and we've seen
in the past also, is that when you bring in
some of those other workers, when you do offer higher wages,
when you do provide better working conditions, you also get
better productivity. And particularly in a competitive market, we should
expect there to be enormous pressure on employers to actually
(05:23):
find ways to get those productivity gains very quickly and
to keep prices low. I'm always a little bit puzzled
when the exact same folks who celebrate the wonders of
the free market and competitive forces then turn around and
if we're talking about immigration, say you know, oh no,
none of this works. It's all broken, Everything will be terrible.
Businesses are designed to operate under constraints and solve the
(05:46):
problems put in front of them. And the problem is
for our economy we have not put the problem of
provide a good product at a low price with the
workers in America as the problem to solve, And now
that is going to be the problem to solve. And
I'm actually somebody who has a lot of faith in
markets and businesses to solve that problem. It's very funny
to me that the quote free market folks are the
(06:09):
ones who run around with their hair on fires saying
if we actually let the market work, somehow everything's going
to fall apart.
Speaker 3 (06:17):
That was I find, or at least it's sort of ironic.
Is the same people who say that immigration doesn't push
down wages do insist that reduced immigration will push up prices,
which I don't know it's one way or the other.
Speaker 1 (06:30):
That's right.
Speaker 4 (06:30):
I mean, we've gone through several rounds of this, right,
because when inflation was high, of course everybody said, well,
we need to bring in more immigrants to bring down
inflation and to suppress wage growth. And then of course
when inflation is not high, they turn around and say,
well we need to bring in more immigrants. That will
have no effect on wages. I think immigration absolutely does
have an effect on wages. I think it's just important
(06:52):
to recognize that the relationship between wages and prices is
not a direct one, and that in a healthy economy,
higher wages comes alongside higher productivity gains and in fact
lower prices. That is the tradition of capitalism working well
and generating prosperity.
Speaker 3 (07:08):
There is one aspect of the economic research that I
wanted to put to you. I mean, we have a
team of economists here at Bloomberg, and you'll be interested
to hear that we don't think that cutting immigration and
expelling more illegal immigrants will raise inflation. In fact, because
of how much demand they represent, if you have a
lot of deportations, that's going to reduce consumption enough to
we actually think reduce GDP per head and even reduce inflation.
(07:33):
But for the same reason, we do think it will
hurt growth and jobs for everyone. And I don't know
you're probably aware of this, but the studies that have
been done in different counties that have had enhanced deportation programs,
they found that for every hundred migrant workers that was deported,
nine fewer jobs existed for natives because the demand of
those migrant workers was creating jobs for everyone, and the
(07:55):
native workers' wages also fell slightly. So are you not
concerned about that just directly deflationary effect and the possible
reduction and employment.
Speaker 4 (08:05):
Well, first of all, I think it's very important to
distinguish between overall GDP and GDP per capita, because there's
no question that if you remove people from a population,
absolute GDP is going to decline, at least in the
short run.
Speaker 3 (08:20):
There are on our findings is GDP per head I think,
because you're obviously aware of that issue, but this is
also about jobs for the Americans who stay behind as well.
Speaker 4 (08:29):
But just to put a fine point on the GDP
per capita point, I'm not familiar with the particular study
that you're citing, but it's really important to keep in
mind also that the illegal immigrants who would be removed
from the labor force tend to be far below the
median GDP per capita, median wage level and so forth,
(08:50):
and so removing a significant number of them from the population,
just as a sheer matter of math, I think it's
extremely unlikely to reduce GDP per capita. I think the
best examples we have of what happens when you actually
enforce the law and remove people who are in the
country illegally is from the places that have actually done
(09:11):
that at scale. And you know, you can go all
the way back to the history of the end of
the Brasero program up through Florida imposing mandatory everify and
enforcing it over the last couple of years. I know
many people who predicted that Florida's economy would suffer as
a result. I don't know anybody who would say Florida's
economy has in fact suffered as a result.
Speaker 1 (09:33):
Or in what lessons you take from Brexit in the
context of looking at other case studies. You know, one
of the arguments for Brexit, For example, Polish migrants were
taking farm jobs in Lincolnshire away from native Brits and
Brexit was imposed and the workers didn't come, and it
turned out that a lot of native laborers didn't want
(09:55):
those jobs anyway. So what do you have any lessons
real world lessons at a national level rather than a
state level from Brexit in the context of what we're
discussing about the impact of migration and restrictions.
Speaker 4 (10:11):
Well, I don't take any lessons from Brexit in this respect.
I think Brexit was an entirely different context in terms
of both what was going on in the UK beforehand.
I mean, you're talking about very large numbers of legal workers,
and you're talking about a far broader economic Whether you
want to call it a dislocation or a shift in
(10:33):
the economic relationship that the UK had with the rest
of the EU. But I also do want to challenge
this sort of basic framing of somehow jobs that native
workers won't do. I'm not aware of any job that
anybody wants to take that is poorly paid in bad conditions,
(10:54):
and frankly, I'm aware of many people who will take
just about any job that is well paid in good conditions.
I'm not sure where we've gotten this idea that employers
are entitled to have workers take jobs that certainly the
employers themselves would not take. And again, it goes back
to this mental model that we've adopted that treats labor
(11:15):
as a commodity input, like it's lumber or steel or something,
and the cheaper and more plentiful it is, the better
off we will be. That's just not true. A key
feature and function of an economy, what we need it
to do, is to create good jobs for native workers
and legal immigrants, and having large numbers of illegal immigrants
(11:37):
makes that harder, and it's not something we should be pursuing.
Speaker 1 (11:41):
I think one of the tricky things right now in
the discussion is that there are a lot of moving parts,
and a lot of them are theoretical. And in an
ideal world, yes, the economy would pay middle class wages
to everyone, so we could have a nation full of
middle class people. But the reason we don't is that
some industries thrive on low wage labor by design, and
there are jobs that some people prefer not to take.
(12:03):
But we could go down a rabbit hole on that.
Speaker 4 (12:05):
Well that that's no, I'd like to stay there for them.
That's not a rabbit hole. That's That is the exact
crux of the issue. Yeah, because why on earth should
we accept that some industries are designed to have bad
jobs that workers don't want to do.
Speaker 1 (12:19):
I mean, because I think the rabbit hole. The rabbit
hole would spin off of the ways in which the
wage and price dynamic and labor supply. It is never
a perfect sphere of factors influencing one another. And and
the reality is low wage jobs have always existed in
the US that sometimes are at subsistence levels or certainly
(12:43):
don't provide entry into the middle class. That has been
a true forever, regardless of the models.
Speaker 3 (12:49):
The other least the social safety net. It was one
of the things that was supposedly one of the strengths
of the US is that had a social safety net
that incentivized people to take to low paid jobs.
Speaker 4 (13:01):
Let's take economics editor at Bloomberg as an example. I
don't know of anyone who would be economics editor at
Bloomberg for thirteen dollars an hour sitting on a dusty
crate in a hot field twelve hours a day.
Speaker 1 (13:13):
But those aren't the jobs we're talking about. We're talking
about sledgehammer wielder at construction site. Why and we're talking
about hotel made or we're talking about restaurant workers at the.
Speaker 4 (13:24):
Why should they have worse job experiences than you have?
Speaker 1 (13:28):
Welluse because the market deems them to be less skilled.
Speaker 4 (13:31):
That's that's why we just a market has done that
because of the illegal immigration and the massive influx.
Speaker 1 (13:37):
Of low skill I would argue, I would argue that's
where the rabbit hole emerges.
Speaker 3 (13:41):
Bat Really, what is interesting about that and what is
kind of revealing about where you've gone with that or
is that you are you represent a strand of conservative
thinking that is very focused on the well being of workers,
and indeed, your your book was very focused on that
and a critique of a certain what you might call
in the a liberal approach to economics to immigration that
the administration has promised is one that you are in
(14:03):
principal sympathetic towards. And have you made a case for
in all the ways that you've just described. But you've
made that case not in the spirit of some of
the rhetoric of that we might say was kind of
dehumanizing of immigrants or anything else. It's very much focused
on improving the livelihoods of people here. So I just
wondered if that is one's focus, and if that's the
(14:27):
thing that one's most concerned about, as opposed to kind
of dividing Americans from each other or making people kind
of blame immigrants for everything that's wrong in society. What's
the kind of thing we should be looking for in
the administration? What will you be hoping to see the
kinds of policies, you know, for example, cracking down on
employers employing illegal immigrants, give us a guide to the
(14:47):
sort of if you care about workers, what should you
be most wanting to see the president prioritize.
Speaker 4 (14:54):
Well, I think there are a number of directions from
which we have to come out at this problem, because
it has been a problem that is fester. It has
festered for a long time. It obviously metastasized under the
Biden administration. And so one element that I think you
see is a focus from day one is just actually
stepping up border enforcement, staunching the incoming flow. And that's
(15:19):
obviously an incredibly important first step. You're not going to
reduce the level of illegal immigration and illegal workers in
America if you still have large numbers coming in. So
I would say that in a sense is step one.
I think step two, which is where you see the
Trump administration, then focusing out of the gate, is in
(15:41):
actually enforcing the law in terms of folks who already
have active deportation orders, in terms of folks who who
are have already been convicted of other crimes, and making
sure that those farks are being removed as the law requires.
And then step three that I hope we get too
quickly is actually pursuing workplace enforcement, because I think at
(16:04):
the end of the day, where the rubber meets the
road for these labor market issues is in terms of
how employers behave and whether employers are able to hire
people who are in the country illegally and not authorized
to work. And so a mandatory everify system, again, which
they've done in Florida to great effect, is a very
(16:24):
important tool that both empowers employers and holds them accountable
for only employing people who are in the country legally,
and then you need very harsh sanctions against both employers
who fail to use the system properly and against people
who try to work around it and continue to work illegally.
Speaker 3 (16:44):
I may be wrong about this, but I just haven't
heard that the folks who are coming into the administration,
and indeed sort of restoric on the campaign trail in
previous sort of eras of this discussion. I've definitely heard
people talk about Everify, and obviously the Florida example was
used a lot. Just haven't heard members of the incoming
administration talk about it very much. Is that just I've
not been listening carefully enough.
Speaker 4 (17:05):
I think it depends who who you're focused on. Vice
President Vance is certainly somebody who has talked a lot
about this employment side of things and the need for
enforcement in the labor market. I think you're certainly right
that President Trump's focus has been first and foremost on
the border and on the deportation of criminals. And that's
what you see them doing out of the gate. But
(17:26):
I think this will be a process over a number
of years, and hopefully we're headed in the right direction.
Speaker 1 (17:31):
On the deportation side of it or in right now.
We've had, you know, in the first week, small insignificant
numbers relative to what they say they want to do
the administration around deportation. The number Trump put out on
the campaign trail was eleven million. Do you have a
sense of whether or not different sectors of the economy,
(17:53):
different businesses are really positioned to adapt to a shock
of eleven million people vacating? And yeah, is there a
number you've like sort of landed on that is acceptable
and taking human rights and those issues off the table
for this particular discussion. But for example, if you moved
(18:15):
several million people simply into camps and didn't even deport
them right away, what would happen to the construction trades,
What would happen to hotels and restaurants and farms that
all depend on a lot of workers who don't have
criminal records and have wanted to be processed legally. But we,
in addition to having a poorest border, have a horrid
(18:38):
judicial system for processing those migrants in a timely and
effective way. How quickly actually you get a snap back
to those jobs just being filled right away in a
way that's also cost effective for the businesses themselves.
Speaker 4 (18:52):
Well, I think there are a few things going on here,
but I actually think that the market's ability to adapt
to this very quickly is quite high. You know, I
would point based on what well, I would point to
two things. One is, I think it's very funny that
when the economy goes into a recession, let's say you
see employers lay off millions of workers much more quickly,
(19:14):
and everyone just sort of shrugs and says, that's the
business cycle. In fact, we, in fact, we do see
very large swings in the labor market over time and
in very short periods of time in some instances. But
I also think that the aftermath of COVID is a
good illustration of this, where we had labor market shocks
(19:36):
probably in order of magnitude at least larger than what
we're talking about now. Were there challenges for employers, Were
there times when when there were disruptions in various local markets. Absolutely.
Speaker 1 (19:48):
The government also spend quite a bit of stimulus money
to keep consumer demand high and to keep businesses afloat.
So actually the full effect of those job losses weren't effect,
weren't felt.
Speaker 4 (20:00):
I'm not sure what that has to do with your question,
which is whether employers could cope with disruptions in the
labor market and workers coming in and out. And the
reality is that in the aftermath of COVID there was
a dramatic short term shortfall in labor market participation, and
you saw widespread concern about labor shortages and employers complaining
(20:22):
that they couldn't hire and find anywhere near the workers
they needed. And one thing that happened was that wages
went up a good deal and a lot of people
were brought in off the sidelines. But at the end
of the day, the market is an extraordinarily flexible one.
I mean, let's keep in mind just how many millions
of workers enter and exit the labor market every year anyway.
(20:46):
And so what I find, again so peculiar is this
attitude that you know people it's you said, like, oh,
these people they're just they're waiting to be processed. They
do not have a right to be in the country.
They crossed the border legally. They know that they crossed
the border illegally.
Speaker 1 (21:03):
Employers wanted them to work for them.
Speaker 4 (21:05):
That makes it legal.
Speaker 1 (21:07):
I'm not saying it makes it legal. I'm saying people
were winking and nodding at the inefficiency of the processing system,
which I agree with you needs to be fixed. But
they weren't regarded whole cloth as economic balls and chains
or as a pox upon the functioning of the economy.
Speaker 4 (21:24):
Yeah, I'm not sure how we decide which laws we
do have to follow in which we don't based on
why employers want that, again, is not how markets work.
The way that a well functioning market democracy should be
operating is that we have laws establishing who can enter
the country under what conditions. We enforce those laws, and
we expect employers and people trying to immigrate to the
(21:47):
country to comply with them. And that seems to me
to be a much better formula for capitalism and broad
based prosperity than the crazy situation that we've had with
this sort of vague hand waiving encouragement in recent decades.
Speaker 3 (22:03):
They do have a different status if they're even if
they've crossed the border illegally, if they're seeking asylum, a
refugee status. I think that they do have, they're not
I think they're not technically illegal. But can I just
ask you about the skilled immigration because a lot of
evidence around US innovation, the production of patents, and contribution
(22:24):
to the productivity of companies has shown that you get
very good return on your investment from a lot of
skilled immigrants that we've had, and that seems particularly front
and center at the moment when you think of the
aggressive competition with China, that the administration has called for
an investment in AI and all these things. A colleague
(22:45):
was pointing out to me the Ohio State Dashboard of
engineering enrollment. Half of the students who are applying for
graduate degrees in engineering are international. Are you on the
Elon Musk side of the argument when it comes to
some of those skilled vas or are you worried about
the impact of that immigration for workers at home.
Speaker 4 (23:05):
Well, I think you've just blurred a few issues together there.
I don't know of anyone, frankly, who is saying that
we should not have skilled immigration. And obviously, we have
always had an immigration system that brings large numbers of
people into the country legally every year, and I think
reorienting that toward focusing on people with highly valuable skills
(23:29):
who are likely to succeed in the US economy is
exactly the way to make that system work well. The
question of temporary visas like H one B is entirely different,
and even Elon Musk has conceded the H one B
program is poorly structured and widely abused. And so I
don't think the temporary visa programs the way that we
(23:50):
are operating them at all achieve those very important benefits
that you were describing. I think they are yet another
way that employers have found to gain the system and
create lower quality jobs at lower wages.
Speaker 3 (24:04):
Would you want to see that skilled immigration, the more
permanent immigration go down over the course of the next
few years in this new environment.
Speaker 1 (24:14):
No.
Speaker 4 (24:14):
What I would like to see is US actually get
the system under control so that immigration is limited to
legal immigration, and we then use our level of legal
immigration to focus on bringing in those who will make
the greatest contributions to the country.
Speaker 3 (24:28):
Or and Cass, thank you very much for joining us.
Speaker 1 (24:30):
It was my pleasure.
Speaker 4 (24:31):
Thank you.
Speaker 3 (24:33):
I appreciate your patience as we go through all these
questions on immigration, and that there clearly is a very
wide agenda here which we'll be looking at sort of
week to week. Thanks for listening to Trump Andomics from Bloomberg.
It was hosted by me Stephanie Flanders, with special thanks
(24:54):
to our guests Orncass and Tim O'Brien. Trump and Noomics
is produced by Summer Saudi and Most and with help
from Chris Martlou. Sound designed by Blake Maples. Brendan Francis
Newnham is our executive producer. To help others find the show,
please give us five stars wherever you listen to podcasts
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