Successful labor markets depend upon a free flow of available labor supply in order to not create artificial shortages and to properly balance wages. The US stands to learn a significant lesson in this basic economic principle over the next few years. Some will benefit from a severe labor shortage, while the majority of people will find it financially very painful.
As of the time I am writing this, Hurricane Irma has not quite yet found its way to the shores of the US. So, for the purposes of this writing, I will assume that forecasts of the event are accurate, as are the predictions of the scope of damages. So, we have Hurricane Harvey that has decimated large parts of the Texas coast, Hurricane Irma that will have decimated large parts of Florida, and we have huge segments of some five or so states in the Northwest and West Coast burning to the ground. All of this includes large portions of housing, commercial structures, and infrastructure on the order the US has not seen in a very long time in terms of sheer scope.
It is a very inopportune time to be tossing out significant labor pools when there will be such an enormous undertaking in rebuilding efforts across the nation. Yet, sentiment exists, particularly in conservative circles, to deport undocumented aliens en masse. President Trump’s reversal of DACA is one example, as are his previous orders to law enforcement to deport any undocumented alien that commits any infraction of law – including things so much as a minor moving violation or even jaywalking. These issues magnify a coming severe shortage in labor caused by all of the damage brought by natural disasters whose results are due to hit in the coming couple of months.
Harvey has produced property losses that are estimated to be between $45 and $65 billion. The extent of the damages of wildfires in the northeast are not yet known, as the fires are ongoing and have been since July – smoldering millions of acres that include potentially hundreds of billions in damages to structures and property. Damages for Irma are not yet known and probably won’t be for a couple of weeks. All of this will likely be in excess of over $400 billion worth of rebuilding that needs to be done in multiple states all at once.
This requires more labor than the US has at its disposal. As people in the construction industry and trades flock to fat opportunities in these damage stricken areas, other places will experience severe shortages and drastic increases in costs of construction and structure repairs. Without enough labor to offset the required additional needs in the market, housing costs and housing shortages will become a nightmare for people who may already be on the verge of not being able to afford their current housing. Homelessness will increase. Housing will become a more significant percentage of expenses for people in need of new housing, resulting in less disposable income for the purchases of consumer goods. Some of these effects will be offset in consumer demand for those that prosper from these events, but the majority of people will suffer.
This is not the time to deport badly needed sources of labor, and this is not the time for restrictive immigration policy. As the presidential administration seeks to curb immigration and continues with policy to deport as many undocumented aliens as possible, the US will suffer the consequences. In the meantime, Americans should pray that their housing costs are locked in, that they have current affordable housing, and that they do not need any sort of repairs to their property. They might also pray that the results of these labor shortages do not cause awful effects in other areas of the economy. Americans should brace themselves for the negative consequences of the obsession with deportation and restrictive immigration policies. Such severe labor shortages are not a good thing, especially when brought about artificially.
This post was written by Danny Chabino.
The views expressed here belong to the author and do not necessarily reflect our views and opinions.
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