Minneapolis Fed President: let immigration meet labor demand to boost economy

November 11, 2022

A steady stream of immigrants will be important to the funding future of entitlement programs in the U.S. and for the health of the economy as a whole, the president of the Federal Reserve in Minneapolis told an audience in Brookings this week.

President Neel Kashkari shared those insights at South Dakota State University on Wednesday evening during a conversation about inflation, the labor market, and the economy.

Demographic trends point to challenges
The U.S. faces major economic hurdles, Kashkari told the crowd, particularly as people have fewer children.

“We’ve been able to supplement our growth with immigration throughout our history,” Kashkari said. “And the question is whether we are willing to embrace that going forward. For one, I hope we are, because it’s a very powerful way to continue driving our economy.”

More workers would help uphold some major entitlement programs, such as Social Security and Medicaid, Kashkari said. Current workers are paying for retiree benefits, rather than banking funds for their own retirement.

“As our society is aging, that ratio is getting imbalanced and these programs run into a challenge,” he said.

Resolving that labor force issue is what Kashkari considers the number one way to boost the U.S. economy. In light of lower birth rates, the clearest path to a wider labor force “is fixing our immigration system so that we have an immigration system that meets the needs of our economy,” Kashkari said.

Kashkari said the pandemic pushed more people to retire early, and to drop out of the workforce altogether.

“Inflation comes from more demand for goods and services than there is the supply of goods and services,” Kashkari said. “Because we’re missing all these workers, our economy’s potential to supply goods and services is lower than it otherwise would have been.”