How Will Trump’s Immigration Raids Affect American Workers?
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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.

I'm Stephanie Flanders, head of government and economics at Bloomberg. And this week on Trumponomics, 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, back with us, catching up with him in London for a change because there weren't enough opinions here in the UK. Hello, Tim. It's good to be here, Stephanie. Thank you for having me. And I'm delighted to also be including Oren Kass. Oren, thank you so much for joining us.

Oren 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 2012 presidential campaign and has been senior fellow at the Manhattan Institute for many years.

And in his prolific writing and speaking in 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 MAGA coalition.

Oren Kass, welcome to Trumponomics. We're really delighted to have you. Oh, thank you. 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 emergency, asylum appointments have been cancelled and refugees around 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 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 Trumponomics, the Bloomberg podcast that looks at the 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 impact do you think the president's more aggressive approach to illegal immigration will have on the economy and workers who remain in the U.S.? Well, 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 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 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 workers

If employers can't find enough cheap labor, they scream labor shortage and policymakers are supposed to respond 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 be doing.

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 consequences?

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 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 say,

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 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 ones who run around with their hair on fire saying if we actually let the market work, somehow everything is going to fall apart. The ones that I find weird, or at least it's sort of ironic, is the same people who say that it's

immigration doesn't push down wages do insist that reduced immigration will push up prices, which I don't know if it's one way or the other. That's right. 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 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. There is one aspect of the economic research that I wanted to put to you and 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

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. 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 there's studies that

have been done in different counties that have had enhanced deportation programmes. They found that for every 100 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 native workers' wages also fell slightly. So are you not concerned about that just directly affecting

deflationary effect and the possible reduction in employment? 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. On our findings, it is GDP per head, I think, because you were obviously aware of that issue. But this is also about jobs for the Americans who stay behind as well.

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.

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

is from the places that have actually done that at scale. And, you know, you can go all the way back to the history of the end of the Bracero program up through Florida imposing mandatory E-Verify 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. Or in what lessons do 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 those jobs anyway.

So do you have any lessons, you know, 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?

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 the economic relationship that the UK had before.

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. 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 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 makes that harder. And it's not something we should be pursuing. I think one of the 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.

But we could go down a rabbit hole on that. I'd like to stay there for a moment. That's not a rabbit hole. That is the exact crux of the issue. Because why on earth should we accept that some industries are designed to have bad jobs that workers don't want to do? Because I think 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 the reality is low wage jobs have always existed in the U.S. that sometimes are at subsistence levels or certainly don't provide entry into the middle class. That has been a true forever, regardless of the models.

Not least because of the level of the social safety net. It was one of the things that was supposedly one of the strengths of the US is that it had a social safety net that incentivized people to take low paid jobs. Well,

Let's take economics editor at Bloomberg as an example. I don't know of anyone who would be economics editor at Bloomberg for $13 an hour sitting on a dusty crate in a hot field 12 hours a day. 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 maid or we're talking about restaurant workers. Why should they have worse job experiences than you have?

Well, because the market deems them to be less skilled. That's why wages... But the market has done that because of the illegal immigration and the massive influx of low-skilled workers. I would argue that's where the rabbit hole emerges. But I tell you what, what is interesting about that and what is kind of revealing about where you've gone with that, Oren, is that you represent a strand of...

of conservative thinking that is very focused on the well-being of workers. And indeed, your book was very focused on that and a critique of a certain, what you might call a neoliberal approach to economics. The approach to immigration that the administration has promised is one that you are in principle sympathetic towards and have 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 that we might say was kind of dehumanising 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 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 sort of

If you care about workers, what should you be most wanting to see the president prioritize? 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 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 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 actually enforcing the law in terms of folks who already have active deportation orders, in terms of folks who have already been convicted of other crimes and making sure that those folks are being removed as the law requires.

And then step three that I hope we get to quickly is actually pursuing workplace enforcement. Because I think at 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 e-verify system, again, which they've done in Florida to great effect,

is a very 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. 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 rhetoric on the campaign trail,

In previous sort of eras of this discussion, I've definitely heard people talk about E-Verify 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? I think it depends 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 I think this will be a process over a number of years and hopefully we're headed in the right direction.

On the deportation side of it, Oren, 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 had put out on the campaign trail was 11 million. Do you have a sense of whether or not different sectors of the economy, different businesses, are really positioned to adapt to a shock situation

of 11 million people vacating. Or five, let's say. Yeah, like is there a number you've 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 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 porous border, have a horrid judicial system for processing those migrants in a timely and effective way. How quickly actually you get a snapback to those jobs just being filled right away in a way that's also cost effective for the businesses themselves.

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 to— 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. And everyone just sort of shrugs and says that's the business cycle. 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 probably an order of magnitude at least larger than what we're talking about now. Were there challenges for employers? Were there times when there were disruptions in various local markets? Absolutely. The government also spent 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 felt.

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 that they couldn't hire and find anywhere near the workers they needed. And one thing that happened was that 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. And so what I find, again, so peculiar is this attitude that, you know,

You know, people, it's funny 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 illegally. They know that they crossed the border illegally. The employers wanted them to work for them. That makes it legal? 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.

Yeah, I'm not sure how we decide which laws we do have to follow and which we don't based on what 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 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-waving encouragement in recent decades. 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 they do have – I think they're not technically legal. But can I just ask you about –

There's skilled immigration because a lot of evidence around US innovation, the production of patents and contribution 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 centre 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 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 visas? Or are you worried about the impact of that immigration for workers at home?

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 who are likely to succeed in the U.S. economy is

is exactly the way to make that system work well. The question of temporary visas like H-1B is entirely different. And even Elon Musk has conceded the H-1B program is poorly structured and widely abused. And so I don't think the temporary visa programs, the way that we are operating them at all achieve those very important benefits that

that you were describing. I think they are yet another way that employers have found to game the system and create lower quality jobs at lower wages. But would you want to see that skilled immigration approach

this more permanent immigration go down over the course of the next few years in this new environment? No, 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. Oren Kass, thank you very much for joining us. It was my pleasure. Thank you.

I appreciate your patience as we go through all these questions on immigration. And there clearly is a very wide agenda here, which we'll be looking at sort of week to week. Thanks for listening to Trumponomics from Bloomberg. It was hosted by me, Stephanie Flanders, with special thanks to our guests, Oren Kass and Tim O'Brien.

Trumponomics is produced by Samasadi and Moses Andam with help from Chris Martlew. Sound design 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. MUSIC PLAYS