Immigration critic Steven Camarota, director of research at the Center for Immigration Studies, recently seemed to challenge the idea that more immigration would reduce inflation.
One would think that more immigration would reduce inflation, based on the simple fact that more immigration would lead to more output. With more output, a given amount of money chases a higher amount of goods and services. Or, if you want to think, more accurately, about rates of growth, with increased immigration you get a higher growth rate of real output while immigration is increasing, and for a given rate of growth of the money supply, inflation falls. Inflation still may be positive but it falls.
So how does Camarota rebut this straightforward argument? He doesn’t.
You might think he argues that few of the immigrants work, but he takes pains to point out that many of them work. Indeed, that appears to be one of his main upsets.
He enters more promising territory for his case when he mentions other factors that cause inflation, writing:
Congressional overspending, the Federal Reserve’s low interest rates, international supply-chain disruptions and pent-up demand during COVID are all almost certainly bigger inflation drivers than wage growth. Workers, particularly less-educated ones, account for far too small a share of economic output to play much role in inflation.
He could be right that these are bigger factors, although my money is on money or, more exactly, the growth of the money supply. But so what if he is right? More workers means more output and now all we’re talking about is relative magnitudes, not whether increasing immigration would reduce inflation, as his sentence above seems to admit.
What’s left? He could blame the headline writer. Authors rarely get to choose their own titles for articles and nowhere in his article does Camarota say that more immigration won’t reduce inflation.
So we have two choices: (1) Camarota believes that more immigration won’t reduce inflation and he’s wrong or (2) Camarota believes that more immigration will reduce inflation but only by a little and he might be right.
HT2 Don Boudreaux.
