Immigration Economics Part II: Smaller is Worse

Over a year into the administration's anti-immigration agenda, we’re seeing the economic fallout. For the first time in at least 50 years, estimates are that we lost immigrants on net; far fewer than usual arrived and a somewhat higher than usual number left. But if anyone benefited from that shift, it wasn’t U. S.-born workers. Even against the backdrop of our weak labor market, foreign-born workers now have slightly lower unemployment rates and higher labor market participation than they did two years ago. Their wages have also ticked up. Meanwhile, reduced population growth has thrown the country’s economic benchmarks into chaos, making it harder to interpret job creation, GDP, and the health of the labor market. Chapters: 00:00:50 Announcements: Send us your anticipated Thanksgiving dinner fights 00:01:45 Retcon: Consumer sentiment update, auto-enrollment for Trump Accounts 00:07:43 Terms & Conditions: Plutocratic 00:08:42 Big Pilcrow: Immigration and the Economy 00:36:38 Executive Orders: “The media isn’t covering this” comments; best-of award for bookstore tote bags. 00:38:31 Spiritual Sponsors: Sonoratown and an IPA on tap Donate to Optimist Economy: https://optimisteconomy.com Video-curious? Watch the Optimist Economy YouTube channel⁠⁠ https://www.youtube.com/@optimist_economy. We’re also on Instagram at ⁠⁠@optimist_economy https://www.instagram.com/optimist_economy or TikTok at ⁠⁠@optimist_economy https://www.tiktok.com/@optimist_economy. Chat with other Optimists on Substack. https://substack.com/chat/4604257?utm_source=pub-nav-bar Find utility with our merch: https://merch.ambientinks.com/collections/optimisteconomy Got economic questions, concerns, or executive orders? Send them to [email protected] mailto:[email protected]

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Mitt Romney and Ted Kennedy were about as different as two politicians could be. The lanky businessman and the stout old senator, the conservative darling and the liberal icon. But did you know they once teamed up to tackle an elusive challenge? Universal healthcare.

• 0:18Speaker 00

  In season four of the Big Dig podcast, we tell the story of Romney Care and the odd couple alliance behind it. Find Mitt and Ted wherever you listen.

• 0:30Speaker 01

  Robin's going to podcast jail.

• 0:33Robin Rauzi?

  To the surprise of no one.

• 0:38Speaker 01

  The only bummer is that I'm also your cellmate.

• 0:42Speaker 01

  There's no escaping.

• 0:50Speaker 01

  Hello and welcome to Optimist Economy. I'm economist Catherine Ann Edwards.

• 0:54Robin Rauzi?

  I'm editor Robin Rousey.

• 0:55Speaker 01

  On this show, we believe the US economy can be better and we talk about how to get there, one problem and solution at a time.

• 1:08Robin Rauzi?

  This week, we're going to talk about immigration. This is our second episode on immigration, but specifically, we're going to look at what the economic data is showing us a year or more after the president's anti-immigration agenda went into full swing.

• 1:20Speaker 01

  Yes, but first announcements.

• 1:23Robin Rauzi?

  Some announcements.

• 1:24Speaker 01

  You should do yours first.

• 1:26Robin Rauzi?

  So first, I want to say thank you to a second anonymous donor for their eternal optimist-sized contribution, came into us through our website at optimist economy dot com. That really is keeping us on the air and we appreciate all the support we get from listeners.

• 1:42Speaker 01

  And just a quick note about the opposite of support, how to fight your family at Thanksgiving. Send us your questions. What do you need help with? We'll do the homework. We'll answer them and give you the talking points you need to make it through dinner. And when I say make it through Thanksgiving dinner, what I really mean is win Thanksgiving dinner.

• 1:59Robin Rauzi?

  And do me a favor. When you send those by email, put Thanksgiving in the subject line. Don't do it in the comments. Don't do it in the, send it by email to optimist dot economy at gmail dot com. That will help me a ton.

• 2:12Speaker 01

  Okay.

• 2:12Robin Rauzi?

  Okay. Retcon.

• 2:14Speaker 01

  What's yours?

• 2:15Robin Rauzi?

  Last week, we talked about consumer sentiment and I realized there was this thing that you and I had talked about that we didn't get to in the episode, which was this idea about economic figures like GDP being essentially plutocratic versus consumer sentiment. The idea that the data that measures the economy in that world, the GDP world, $1 is one vote, and that in the consumer sentiment world, one person is one vote. We had a lot of other things to talk about, but that was one of the things that stuck with me and I wanted to make sure we sort of put that out there because it put those two things, the positive economic figures that we get from reported data and the consumer

• 2:56Robin Rauzi?

  sentiment thing, kind of, while they seem to diverge, it explained the divergence to me.

• 3:02Speaker 01

  Yeah, it's a really powerful notion that the economy is in no way democratic in the sense that like, it's just total spending.

• 3:10Robin Rauzi?

  Yeah.

• 3:11Speaker 01

  Not how much each person can afford, but how much we as a country consume. But it's not the same as you have 100 Americans buying something, here's how much they spend versus you have 100 Americans and you ask them how they're feeling. It's easy to see where the divergences would come from when you have the type of incredible inequality that we have.

• 3:30Robin Rauzi?

  Yeah, I mean, rich people spending more money doesn't make middle class and working class people feel better about the economy.

• 3:38Speaker 01

  You know, I actually had a comment on TikTok. Well, I did say this on Jon Stewart's podcast, but it like really delights me of like trickle down works. You just, you have to squeeze incredibly hard.

• 3:47Robin Rauzi?

  Yeah.

• 3:48Speaker 01

  Really get blood from that stone.

• 3:51Speaker 01

  Oh, you had another consumer sentiment, retcon.

• 3:53Robin Rauzi?

  Yes, I did. You're right. Last week, I also said that the consumer sentiment numbers were 48.1. Now, these again, were just meaningless numbers. What did you say, 11T?

• 4:04Speaker 01

  11T, yeah.

• 4:06Robin Rauzi?

  But in fact, in the window between when we recorded and now, the preliminary numbers for October came out and it was 46.3. Again, that's preliminary. One final thing is that we did get a comment on Apple Podcast reviews from a young person who's a new listener, who was saying that they needed some sort of orientation to the issues, particularly around social security. So I just want you to know that on our website, we do have a starter kit, an Optimist Economy starter kit, that includes the six most shared and recommended episodes from season one.

• 4:38Speaker 01

  Yeah, we got a young person.

• 4:41Robin Rauzi?

  Yay. You've got a retcon, too.

• 4:44Speaker 01

  I do. So we did an episode about the accounts, which shall not be named, the child development accounts, child savings accounts, Trump accounts, 401 kids, 530A accounts. They're all the same thing. We need to come up with a name, but I think for the moment, they are the kid accounts, where you have basically an investment account opened up for every kid in the US, potentially. And what we stressed in the episode is that this whole endeavor will fail unless there's auto enrollment.

• 5:17Robin Rauzi?

  Correct.

• 5:18Speaker 01

  Well, hold on to your hats, optimists. We just got auto enrollment.

• 5:22Robin Rauzi?

  I heard that.

• 5:22Speaker 01

  New guidance from Treasury has announced that there are accounts for every single kid in the US. So if you have a child under 18, they have an account and you now will be starting to get instructions on how to claim the account. Now, there's still a lot.

• 5:38Robin Rauzi?

  There's a lot of stuff.

• 5:39Speaker 01

  It's still a lot of stuff we don't understand. Like, what does it mean to claim the account? In theory, you have until the kid turns 18 to claim the account. So that means there's 70 million accounts right now. I think it's being held by the Bank of New York and they are taking the deposits. If you got the $1,000 starter and you have until the kid is 18 to claim it. They just need to go basically like, I don't know what claim means. I guess it's kind of the, there's an account, but what does it mean to access it? We're working on it. But I think this is, I wanted to stress a few things. One, this is awesome. I mean, this is just awesome that we are moving forward with wealth building that will challenge the type of wealth inequality we see because it's 70 million kids getting their own starter kit.

• 6:24Speaker 01

  There are so many more questions than answers right now, but getting auto enrollment, what did someone tell me last night when we were talking about it? It moved the ball from our end zone to the five yard line. Now, did I say that correctly, knowing that I'm not a huge football fan? I feel like I got, I feel like I'm there. But he was like, you know, there are still lots of equity concerns. There are still lots of things that we want to check for, but we're there. And so I, I am hopeful that despite the name, that when the Democrats are in power again and reasonable people are running our country, that they will claim ownership of these accounts because it is a long time democratic proposal, that it will be moved into the future in the ways that we want.

• 7:06Speaker 01

  The gas is the reason we got auto enrollment was because of Michael Dell.

• 7:12Robin Rauzi?

  Oh, yeah.

• 7:13Speaker 01

  In the first basically year of voluntary enrollment, the number of people from low income households that enrolled was like enough to round down to zero. And so the, the auto enrollment came from the people who don't want to give money to middle class and wealthy kids and were like, I'm not spending my donation trying to get people to open accounts. You need to do it. That opens up a whole other can of worms of like, who are they giving money to? And can like the donation money be kind of accelerating inequality? But it's like, this is the thing about inequality. It's a hydro. You cut off one hedge, you have to go for the next one. And so like the auto enrollment was like the biggest worst head. And now we have to go for all the little ones. The second announcement is that there was really some alarming news that possibly wealthy

• 7:55Speaker 01

  people could donate stock directly into the accounts, which would have some real ethical issues involved. So that is the next kind of battle. But I guess for the optimists, the fight continues and we just had a really big victory.

• 8:11Robin Rauzi?

  Great. Terms and conditions is our next chapter. We're now so far from my term, it doesn't matter anymore.

• 8:18Speaker 01

  You should say it.

• 8:19Robin Rauzi?

  Okay. The term and condition that I have is plutocratic. Plutocratic means related to being governed by the wealthy. I didn't actually look this up because I didn't know what it meant, but I did think that, again, for our younger listeners, plutocratic, good word to know. And it came up this week because of my aforementioned retcon about economic figures being plutocratic.

• 8:42Speaker 01

  I actually don't know if I knew what plutocratic meant. Like if it's like autocratic, plutocratic, it might have put them on like the same kind of category of like bad.

• 8:52Robin Rauzi?

  Bad.

• 8:53Speaker 01

  Badcratic.

• 8:55Robin Rauzi?

  We're going to take a quick break where there will be probably no ad.

• 8:58Speaker 01

  You know what? We're going to take a dramatic pause.

• 9:00Robin Rauzi?

  We're going to take a pause. And someday, someone is going to put a sponsorship here. If you would like to find out about sponsoring this show, reach out. We'll tell you more.

• 9:13Speaker 01

  Okay, so we're back and we are talking about immigration. Our prior episode on immigration, I tried to walk through like, what are the basic economics? And they're kind of easy because it's like, bigger is better.

• 9:26Robin Rauzi?

  Mm-hmm. I think that was the title of the episode.

• 9:28Speaker 01

  Yeah, bigger is better. Today's episode is smaller is worse. What happens when we lose immigrants that should have arrived but didn't to the United States? And so that's what we're going to talk about. Now, this is actually our second attempt to try and record this episode. The first attempt, we made it halfway through and we were so depressed.

• 9:47Robin Rauzi?

  And angry.

• 9:48Speaker 01

  And angry. We're like, and I'm optimistic, I don't know why. Like, it was just, it was a very tough episode, so we canned it and we're like, we're going to come back and we need to come up with a set of ground rules for what we're talking about.

• 10:00Robin Rauzi?

  Right.

• 10:01Speaker 01

  So there are two sides of the immigration narrative in the United States now and probably for all of our history. The first is nativist, racist, hateful rhetoric about who belongs here, about what we look like or should look like. And this rhetoric is spilling directly into how immigration enforcement is being conducted with raids and quotas and Americans being murdered on the street or in their car. That is all kind of of the same like generation of like, when you condition people to hate and then you arm people to go find them, like violence is the inevitable result. We're not going to talk about that because we can't talk about it without both depressing

• 10:46Speaker 01

  ourselves and like punching a hole in the wall and getting so mad. What we want to talk to you about, optimist, is the other side of the immigration story, which is the economic one, that the, that we need to have protectionism for American workers and that immigrants take our jobs and they harm our economy and that our economy would be better off if immigrants weren't here. So the, the companion lie to, we would have a better country if we were all, you know, blond-haired WASP, is we would have a better economy if immigrants weren't here.

• 11:18Robin Rauzi?

  Right.

• 11:19Speaker 01

  We're going to talk about the second one.

• 11:20Robin Rauzi?

  Yeah, I do want to just note that, I mean, I think that in the 2024 election, there was also both of those things as part of the debate, but there was also sort of just a general rule of law and control of the border that I think was almost the tipping point. So in other words, I do think there's a lot of racist stuff in the immigrant debate, but I also think that there were some people who were absolutely swayed on this issue, but not because they were racist, because there was a lot of craziness at the border, particularly as the pandemic wound down. And also maybe like a, whether or not it's legitimate or not, a cost of public services to immigrants strand. But we're going to focus on the jobs and wages piece of this.

• 12:04Speaker 01

  So the US lost immigrants last year in 2025, and we are on track to lose immigrants again in 2026. Most of this loss does not come from deportation or even self-deportation. It is from the halted arrival of typical flows into the country that are being shut down. So one of the big ones was, I think it was spouses that are typically let in, that you have all kinds of visa programs, all kinds of, you know, access to the United States via certain pipelines, and those are what are shutting down. And that is the biggest driver of having 2025 be the first year, I don't know how far it goes back, that we actually had, we actually lost immigrants.

• 12:47Robin Rauzi?

  Right. Yeah, and they, I mean, this was just in the news this last week. The Trump administration had tried to add a $100,000 fee on H1B visas. They've rekindled that fee in a new form. And they've also announced that they're basically shutting down the H1B visa to, to green card pipeline for tech companies that they say are abusing it. So it's not just sort of shutting down the border. There's all these legal, long-term legal paths to immigration, which, again, we can debate whether or not they have been good or bad or well-managed, but anyway, those are also just being cranked shut, every one of those pipelines.

• 13:26Speaker 01

  Yes, so the US became simply a lot harder to reach in 2025.

• 13:31Robin Rauzi?

  Yeah, maybe less desirable.

• 13:33Speaker 01

  Maybe less desirable and similar in 2026. So, so what did this do? I mean, the argument that a protectionist anti-immigrant would make for the economics of not having immigrants is that this would be good for US workers.

• 13:49Robin Rauzi?

  Right.

• 13:50Speaker 01

  That now we have fewer people competing for the jobs, so this is going to be to the benefit of US workers. And that is absolutely not what has happened. What has happened is that it has been to the benefit of the immigrants who are still here. So the Census Bureau and various surveys ask about nativity, and it's a residence and a birth question of like, last year, did you live in this county? Did you live in the same county in a different state? Did you live in a different state? Did you live in a different country? And they'll also ask if you were born in the US and your, your state of birth.

• 14:21Robin Rauzi?

  Mm-hmm.

• 14:22Speaker 01

  And so from this, we have like very clear measures of nativity. We do not have clear measures of status.

• 14:29Robin Rauzi?

  By nativity, you mean where someone was born?

• 14:32Speaker 01

  Yes.

• 14:33Robin Rauzi?

  Okay.

• 14:34Speaker 01

  So we don't know their citizenship, right? Because half of immigrants are US citizens, more than half. So you could come from the other country, become a citizen, and so you are still an immigrant, but you're an immigrant citizen. That's about half of immigrants. So we don't know if they're a citizen. All we know is whether or not they were born here.

• 14:51Robin Rauzi?

  Mm-hmm.

• 14:53Speaker 01

  The decline in immigration is benefiting the immigrants that are still here.

• 14:57Robin Rauzi?

  Right.

• 14:58Speaker 01

  And they have less unemployment and they have higher employment and they even have higher wage growth because the labor market is segregated in so many ways, between the jobs that men and women do, between the jobs that native-born and foreign-born workers do. And getting rid of immigrants or having a reduction in immigrants didn't suddenly make a lot of native-born workers take those jobs. It really just took a labor pool for a set of occupations and made it smaller, so those workers are, they're benefiting. And most of the gains to a decline in immigration have gone to the immigrant population.

• 15:33Robin Rauzi?

  Could this be because people who were here as immigrants and who weren't working or who didn't have good jobs left and that the people who are left in this pool just represent a higher number of people who are employed? Does that make sense?

• 15:47Speaker 01

  Hmm, like cream skimming?

• 15:49Robin Rauzi?

  Yeah, you've taken out people from the survey pool who are less likely to have jobs or likely to have the lower-paying jobs.

• 15:57Speaker 01

  Yeah, so, so is this a composition effect? Like, are these benefits that are accruing to foreign-born workers, is that because the pool of who is foreign-born and still here is different? I would argue no, because their unemployment rate has gone down. So the-

• 16:16Robin Rauzi?

  Yeah, again, I think like, my question would be, is that composition effect? Yeah.

• 16:20Speaker 01

  Yeah, the composition effect would be harder to square with a falling unemployment rate.

• 16:24Robin Rauzi?

  Hmm.

• 16:25Speaker 01

  Because the unemployment rate is only capturing people who want to work. So if you lost a lot of foreign-born people who weren't working, that would be like, how would the US unemployment rate be changed if 10 million retirees moves to Costa Rica? It wouldn't be changed at all because they're not included in the calculation. They're not in the denominator. You have to be looking for work. So the decline in the unemployment rate is probably the clearest indicator that it's not a composition effect.

• 16:52Robin Rauzi?

  Okay.

• 16:53Speaker 01

  So the biggest takeaway is the economy is slowing down, the labor market is slowing down, but the bright spots in the labor market in terms of populations that are doing okay are in fact foreign-born.

• 17:08Robin Rauzi?

  I still don't know if I understand the mechanics of why it is that, you know, like you were saying, immigrants, when they leave, American-born workers don't necessarily take those jobs. Assuming somebody's filling those jobs, they're also still going to immigrants. Do you have any sense of the mechanisms that are at work with that?

• 17:29Speaker 01

  Oh yeah, there's a ton. It applies to so many parts of our labor market, not just native versus foreign-born. Like, you can imagine, I always say foreign-burn.

• 17:41Robin Rauzi?

  Foreign-burn. Get real Texan there.

• 17:44Speaker 01

  Oh, farm-burn, immigrants, yeah, so the foreign-born, God, [BLEEP]. Okay, hold on. Foreign-born, um-

• 17:53Robin Rauzi?

  Get a little bit of [BLEEP] there.

• 17:56Speaker 01

  Yeah, I really got to put in the effort. So that's because workers aren't perfectly fluid across occupations in either their preferences or their skills. So what does that mean? I don't want to take any job there is. I have a preference over the job that I want to take. I'm not qualified for every job that there is. There are certain things I can do and certain things that I can't. And the mobility across occupations in the US is not super high.

• 18:23Robin Rauzi?

  People don't necessarily very often switch from sales to construction.

• 18:29Speaker 01

  Right. Because we're not cogs in the machine. I mean, I know we're all little worker bots, but we actually are still humans underneath. And we, we have preferences over the jobs we take. We have networks that get us into jobs.

• 18:41Robin Rauzi?

  Yeah, that's the thing. Like, I wouldn't think that those preferences necessarily would align with country of origin, right? Or-

• 18:48Speaker 01

  You know, okay, yes, so I think preferences, skills, networks.

• 18:53Robin Rauzi?

  Right.

• 18:54Speaker 01

  All three of these, so like, you know, if I were thinking about this like a heartless economist who has some worker bot, I drop someone into the economy and they should just go wherever they can get the highest wage. That is what makes sense in an economic model. I will always go to whatever job will give me the highest wage. So why doesn't that happen? That should happen. I should just, if there is a job that will pay two cents more, I should go take it, right? It's always workers sort to the highest wage job they can get. What gets in the way of someone not taking the highest paid job they can get?

• 19:25Robin Rauzi?

  They don't like it.

• 19:26Speaker 01

  They don't like it. Yeah, that's one. That's one that I think we can all empathize with of like, you know, sure, I could sell my soul and go, you know, become some, I don't want to say a profession in case one of the listeners is.

• 19:39Robin Rauzi?

  Something that you wouldn't like.

• 19:41Speaker 01

  Yeah, something you wouldn't like. They could pay me more, but I wouldn't like it. Or, you know, I'm not qualified for that job or not suited for it. Like, it has a skill set that I don't have.

• 19:50Robin Rauzi?

  Right.

• 19:50Speaker 01

  Or I don't want to have. Like, it kind of mixes with preferences of both what I can do and what I want to do at a job. Or I just don't know about it.

• 19:58Robin Rauzi?

  Right, right.

• 19:59Speaker 01

  And, and all three of those will result in occupational sorting, is what we call it, where different groups within the labor market tend to cluster in specific jobs. And it's easiest to see with men and women.

• 20:14Robin Rauzi?

  Sure.

• 20:15Speaker 01

  That there are men jobs and there are women jobs, not because we assign them that way, because they tend to, tend to just end up that way because of preferences and skills and networks. And networks is one that's really fascinating because, I mean, the estimates vary because the survey data isn't as good, but I mean, I've seen it as low as one-third but as high as two-thirds of how did you get this job? And they say through a friend.

• 20:40Robin Rauzi?

  Yeah, yeah.

• 20:41Speaker 01

  Where your network matters incredibly for the types of jobs that you are exposed to. And a lot of times, this is studied in relation to economic mobility, that you have like really high achieving kids who just don't know what are the elite jobs to apply for, because it's their parents' network that ends up influencing what they do or their parents' profession. So the kind of the fourth one that's in there that's kind of blended with network is knowledge. So it's like preference skills, network knowledge, how do you end up in the job you have?

• 21:12Robin Rauzi?

  Right.

• 21:13Speaker 01

  Well, all of those will be true for men and women, but they're also going to be true for native-born and foreign-born.

• 21:21Robin Rauzi?

  Right, right. So I'm a roofer and I'm from Central America and we need more roofers. And so I talk to people in my neighborhood, or I talk to people in my church, or I talk to people that my family knows and some more people from, from my community are in that, drawn into that profession.

• 21:42Speaker 01

  Yes.

• 21:42Robin Rauzi?

  Okay.

• 21:43Speaker 01

  So the big economic effect, I think, is the like foreign-born workers are benefiting from the decrease in their supply.

• 21:51Robin Rauzi?

  Right. So where are we, where do we see that and how do we know it?

• 21:55Speaker 01

  Uh, well, so we see that in their unemployment rate and their employment rate and their wages. It's a market, you're reducing supply, it increases, it's not enough for demand, and so the wages go up.

• 22:06Robin Rauzi?

  Do we see it at any granular, you can't say foreign-born, I can't say granular.

• 22:12Speaker 01

  Granular foreign-born level? Foreign-born granular with the foreign-born.

• 22:18Robin Rauzi?

  I mean, I just feel like what I've read about where they're really feeling the loss of immigrant workers are agriculture, of course, healthcare and construction.

• 22:29Speaker 01

  And childcare.

• 22:30Robin Rauzi?

  Childcare.

• 22:31Speaker 01

  So the other way that we can see the effect on the economy is that we are seeing occupation-specific shortages. Childcare workers, construction workers, healthcare support and tech jobs, agricultural workers, all of those would have occupation-specific shortages because they were immigrant-dominated occupations.

• 22:54Robin Rauzi?

  Immigrant-dominated, does that mean majority immigrant?

• 22:57Speaker 01

  Uh, they don't have to be, not necessarily majority, but a concentration of foreign-born in the occupation or in the specific field, if you want to think of it that way.

• 23:07Robin Rauzi?

  Sure. So what are you seeing on the wage side?

• 23:12Speaker 01

  So the wage side, let me pull up the exact number. We can estimate the wage gap. We do this all kinds of ways. The average black wages as a share of average white wages, white women wages as a share of white male wages, women as a share of men, right? Where you have this concept of someone's earning a whole dollar and other people are earning some percentage of it.

• 23:34Robin Rauzi?

  Mm-hmm.

• 23:35Speaker 01

  Gender wage gap, racial wage gap.

• 23:37Robin Rauzi?

  Yeah.

• 23:37Speaker 01

  Uh, and so on. So we do have a foreign-born wage gap. And if you don't control for like occupation or anything like that and make it a sophisticated comparison, the gap had a big jump towards closing in 2025. So in 2024, just if you look at the earnings of foreign-born workers as a percent of native-born workers, it was 84 cents on the dollar. Eighty-four point one, to be specific. Just a year later, it was eighty-five point seven.

• 24:08Robin Rauzi?

  And that's a big change in one year.

• 24:10Speaker 01

  That's a pretty significant change for one year. Now, it's a small population, you're making an estimate, like they can move around and, you know, the, the upshot there is that foreign-born workers still make less on average than native-born workers. It's, it's just that the percentage between them dropped. And part of that is because the wages of foreign-born workers got improved relative to, to native-born because the overall labor market story that's going on in the background is that our labor market is getting weaker. And it's been getting weaker since the summer of 2022. So the backdrop of all of this is not a booming labor market, but rather a kind of a bustin' one.

• 24:45Robin Rauzi?

  Mm-hmm. Is that also, I mean, what's keeping workers born in the US from filling these jobs?

• 24:54Speaker 01

  Well, I mean, the same thing, skills, preferences, network, knowledge, right? If we just do, and then there's, and then there's the frictions. The friction is something that like, any time between you lose a job and you start another one, anything in between would be a friction. We would think of it as like search friction, like you can only apply for so many jobs in a day, or you have to find a job that matches. Unemployment is associated with a lot of frictions. So do you want the job? Can you do the job? Do you know about the job? And then how do you find that job? All of those are part of the labor market, like it's just all the time.

• 25:28Robin Rauzi?

  Yeah.

• 25:29Speaker 01

  But we don't really normally have this type of labor market experience where we just get rid of a very small set of people and then see what happens.

• 25:37Robin Rauzi?

  I mean, I guess the reason I'm asking this is that if that was the promise or that was the political campaign rhetoric, that we're going to push these people out of this country and therefore out of the labor market, and this is going to create more jobs, was this ever going to work? Is there some sort of way that it was that in an ideal world, it would have worked?

• 26:01Speaker 01

  Well, it's a double hit because bigger is better. So if we're missing people, we're missing part of the economy.

• 26:08Robin Rauzi?

  Yeah.

• 26:09Speaker 01

  And if we're missing a million people, then we're missing a million people's consumption, which means we're missing a million people's contribution to the size of the economy overall. That's a lot of growth to lose. And then the second hit is that because of the composition of our labor market and how people end up in the jobs and occupations that they end up in, you're also getting hit in that like, we were willing to lose part of our economy in order to like reallocate workers into some jobs, we lost part of the economy, we don't have the reallocation because that's not how people work. It's like a double hit.

• 26:40Speaker 01

  Over the next 15 years, there will be hundreds of papers on what is going on in the labor market right now.

• 26:48Robin Rauzi?

  Yeah.

• 26:49Speaker 01

  And what is going on in households that have immigrants, in mixed-status households, what happened to their labor force participation, why there were occupational shortages. I mean, I like to think of economics research often as detective work for things like this, where like, this is the case and they'll spend a decade solving it. And we'll learn all kinds of new things about workers and preferences and skills and networks and all of that. But the overall story is the one, the big markers are the ones we see first. And the big markers are showing us that we made our economy smaller because we lost people and it was not to the benefit of native-born workers because the labor market doesn't

• 27:33Speaker 01

  really see, it's not really like that. The labor market doesn't divide people up by their gender or their nativity. It really just divides them up by their skills and the jobs they have. And so this like cross-cut of like foreign-born, it just didn't make any sense. To the degree that like treating people like that would never make any sense, but.

• 27:56Robin Rauzi?

  Yeah, it's interesting. I mean, what I don't know, what you just said seemed a little bit in conflict with the idea that that there actually are these separate pools of of workers.

• 28:04Speaker 01

  But it's like, it's not top down, it's bottom up, right? Like, I don't assign people to jobs. And I don't have native jobs and foreign born jobs and then men jobs and women jobs and white jobs and black jobs. Like, there's no one like sorting people in assigning them to roles. That is just like, you know, technical economics term, that's just how the cookie crumbles. When you have a lot of people that look different and live in different places and have different experiences and like out they go in the world. And the notion of anti-immigration being a successful economic policy for a certain set of people, you'd have to be sorting and we don't like, we don't have that type of autocratic control over the labor market.

• 28:44Robin Rauzi?

  Right.

• 28:45Speaker 01

  So of course it was going to backfire in your [BLEEP] in face like, like I, I don't know, I just, it's, yeah.

• 28:52Robin Rauzi?

  Okay.

• 28:52Speaker 01

  I'm trying to like, not cuss too much because last time that was like part of like what got us to the bad place was was our like, why don't I just let my anger out?

• 29:02Speaker 01

  Roll, roll.

• 29:05Robin Rauzi?

  Well.

• 29:06Speaker 01

  The points I really wanted to make, I think I made, which were smaller is worse. And people are people, not cogs in a machine, as much as economists would probably love that. You know, and that that complicates this story and shows just how ignorant this type of policy is on some level. But I think the other part of it is it is happening at a really, really specific time in our labor market that is historically bad. And the consequences of what is going on are not just limited to the economy is smaller and also that foreign born have kind of benefited from being in sudden short supply. It is also making it harder for us to interpret our economy.

• 29:50Speaker 01

  Because everything in our economy is a moving target.

• 29:54Robin Rauzi?

  Sure.

• 29:54Speaker 01

  Think of it as like the balloon that's like kind of slowly filling with air and every benchmark we have is relative to like how quickly that air is filling. So how many jobs do we need to add in a month? How how fast should our economy be growing? All of these things are predicated on population size. On some basic level, our economy is a reflection of the number of people in it. Well, when you start attacking that, it is very unclear how to interpret whether our economy is hitting marks.

• 30:23Robin Rauzi?

  The benchmarks are just useless now. Yeah.

• 30:26Speaker 01

  Yeah, the benchmarks are totally useless. So I know in the sentiment episode, I mean, I know that your first thing is going to think is like, it's not hitting Marcus, my life sucks. Or my, you know, I can't afford how like, I know those benchmarks. I mean, like even the macro benchmarks of what we need to hit, those also get really hard to interpret.

• 30:43Robin Rauzi?

  Yeah. Did you look at that?

• 30:46Robin Rauzi?

  Was it was Dallas Fed or St. Louis Fed story? Report or blog post about how many jobs we need to add? It had these estimates of what they thought was even happening with the levels of immigration. And, you know, it's just, we just don't even know. And not just because of whether or not the government wants to report it. Like, if you're here on a green card and you decide to move away, there's no requirement that you tell the government that you left. Right? That we have no idea. And so, you know, you're trying to find what the benchmarks should be in terms of, all right, how many jobs do we need to add for the growing population? We don't even know.

• 31:23Speaker 01

  Yeah. And in the era we're in, it's really easy to like, write that off of like, it doesn't even matter what jobs you add because I still can't afford this, or I'm having trouble with this. But it does matter because the cascading consequences of losing confidence in the economy, you know, this goes back to the consumer sentiment of like, where do you think we're going to be in a year?

• 31:42Robin Rauzi?

  Yeah.

• 31:43Speaker 01

  Now, if you tell me we add 25,000 jobs.

• 31:45Robin Rauzi?

  Right.

• 31:46Speaker 01

  Where I think we'll be in a year really depends on whether or not I think that that's number is hitting the mark or not. The short answer is nobody knows how many jobs we need to be adding because we don't know what our population is doing because we're attacking our population growth.

• 31:59Robin Rauzi?

  You know, we also don't know how many people are being arrested, detained and deported. And by the way, shout out to the deportation data project based partly here at UCLA in Los Angeles. You know, they're, they're doing Freedom of Information Act data requests constantly to try to find out what's actually been happening on the forcing people out of the countryside of this question. And really doing, doing God's work on that.

• 32:28Speaker 01

  It's feels like so heartless to reduce this back to the economy, but it has an economic effect. I mean, I think a lot of people would be under the impression like, I'm native born, I kept my job. And so sure, like they're messing with the foreign born population, but that's not going to affect me. It absolutely affects you. That we are attacking our source of population growth. We're risking so much.

• 32:51Robin Rauzi?

  Yeah.

• 32:51Speaker 01

  The economy being smaller hurts you. Jobs going unfilled hurts you. The economy's strength moving into obscurity on some level, that also hurts you. It should be obvious, but it's actually really hard to systematically attack a part of our economy and end up better off.

• 33:13Robin Rauzi?

  Yeah.

• 33:14Speaker 01

  The last one I'll add about what's at risk here is social security needs workers.

• 33:19Robin Rauzi?

  Yeah.

• 33:20Speaker 01

  Too. The current depletion date is the fall of 2032, but that depletion date is an estimate that has to take into account things like birth and death and wages and so on. And their population estimates, they basically account for the fact that we've lost people in 2025.

• 33:39Robin Rauzi?

  But didn't project it into the future.

• 33:40Speaker 01

  Yeah, no, they go right back to we get a million more people a year. And that's, that's not going to accelerate it by like two years, but I mean, that that will keep pushing up the depletion dates because social security needs workers and we're, we're dealing with a smaller economy and smaller labor market when you don't let certain people in. And a smaller economy hurts social security. I don't want this to sound like because I love social security so much. I'm like, get me like gourmet people. I need bodies. Like social security needs bodies, but I think social security is a really easy way to see how like the harm of having fewer people here and making our economy smaller, like social security for almost everything is just a mirror. It's just

• 34:24Speaker 01

  reflecting our overall economy back to us.

• 34:27Robin Rauzi?

  Is there anything you're optimistic about here?

• 34:30Speaker 01

  I realize that this might be an ephemeral victory and maybe one that doesn't last, but one theme of this administration is that they really take the boogeyman of rhetoric and put it into practice and we we are left to collect the data, you know, I I think there's something to be said for, you know, the next time this rhetoric comes up of like, hey, you know, this is better for Americans if we attack immigrants or if we, you know, don't have as many immigrants, you can say like, no, it is not. Like you saw what happened in 25 and 26. Like, it's not like there was some miracle cure from having fewer immigrants. Like, it was a terrible economic time.

• 35:11Speaker 01

  In part because you were getting rid of immigrants and they were the ones that benefited. Like, I think being able, this was such a clear economic case to me, but sometimes experiencing this bad economic case is helpful for talking about in the future. Like, you know, what are you going to get? A different outcome? The same, you're going to do the same thing. Like, this hurts the economy. We told you it hurts the economy and now we have proof it hurts the economy. I mean, same thing with, you know, kind of similar vein with something like tariffs.

• 35:37Robin Rauzi?

  Yeah, yeah.

• 35:38Speaker 01

  Like, we told you it would hurt the economy and increase prices. And like, what do you [BLEEP] know? It hurt the economy and increased prices.

• 35:45Robin Rauzi?

  I know. And we're spent, I mean, the amount of money we're spending on this enforcement is also just staggering. I mean, they're going to hire another 5,000 ICE agents or employees, I guess.

• 35:56Speaker 01

  Yeah, I wrote a newsletter about this where I compare the amount of spending that goes to immigration enforcement from the one big beautiful bill act versus social welfare spending. I mean, I think that one I pisses me off to such an incredible degree, but I can't, I can't actually fault, you know, immigration enforcement for that because Congress makes terrible [BLEEP] choices. It's like, this is not the economics of immigration type of argument. This is just like, yeah, we have a terrible Congress and they make terrible choices all the time. And it's not as if we were suddenly no longer nativist and convinced that immigrants are what's holding us back economically, that we would suddenly spend more on children like, like, it's not like the, that money was going to go somewhere good in the one big beautiful bill act. So

• 36:41Speaker 01

  that I think that part I

• 36:43Robin Rauzi?

  Fair enough.

• 36:44Speaker 01

  Yeah, that one's not like a direct trade off. Like, it's a whole other problem that Congress is bad at its job. And this is just the latest manifestation of it, whereas like the separate case of the economics of immigration is kind of wound up.

• 36:55Robin Rauzi?

  All right. Are we ready to take a break?

• 36:58Speaker 01

  Uh, are we ready to take a dramatic pause?

• 37:02Robin Rauzi?

  All right, we'll be back in a second.

• 37:08Robin Rauzi?

  All right, we're back. My executive order is that if you read a news story, you are not allowed to then go in the comments and say, why hasn't the media been covering this issue? I read so many stories about immigration where that's exactly what people responded to, and including stories that were specifically pointing out how Mark Wain Mullins had changed the strategy around enforcement, and therefore, they weren't doing big raids in cities, and they were instead, you know, sort of fanning out across the country and just operating on slightly smaller scales, but everywhere all at once. And The New York Times has done some great coverage on this.

• 37:48Robin Rauzi?

  And then people would read the story and say, why isn't the news media covering this?

• 37:54Speaker 01

  I've definitely been guilty of that before, though, on one of my social channels, especially it was about immigration. I was like, no one's talking about this, because I was just like mad. And I made a video. And then afterwards, I was like, heard, people were talking about this, and I was being an ass. So I've done this. Your EO is me.

• 38:14Robin Rauzi?

  Okay. All right.

• 38:16Speaker 01

  So, okay, my executive order, this one is like much more whimsical, but we have talked before about my love of independent bookstores.

• 38:23Robin Rauzi?

  Yes.

• 38:24Speaker 01

  I'm here in Tulsa right now, recording, and they have a delightful independent bookstore just around the corner called Magic City Books. And it is one of the best arrays of bookstore tote bags I have ever seen.

• 38:37Robin Rauzi?

  Great.

• 38:38Speaker 01

  Part of me was like, you know what would be really fun? If we did a best of award, but just for like bookstore tote bags. Like, this is the punniest, this is the one that speaks to readers' soul. I would love to have more celebration of readers, like for every fifth story about how no one reads anymore, like, let's lift up some bookstores. I would like to do something like that.

• 39:00Robin Rauzi?

  Great, great. Spiritual sponsors. These are the things that are kind of keeping us going through, you know, weeks, months, administrations. My spiritual sponsor, I was away from Los Angeles for four weeks, and when you come back, you really realize the things that you missed. And I'm going to say Sonora Town, which is one of the greatest Mexican restaurants in Los Angeles, and if you're from here, you know it, that they have the best flour tortillas anywhere in the city. So yeah, Sonora Town kept me going this week.

• 39:36Speaker 01

  My spiritual sponsor is a beer on tap, because when you really need one, and then you get one, it's awesome.

• 39:44Robin Rauzi?

  It's the best.

• 39:45Speaker 01

  It's absolutely the best. I was at a restaurant last night. I'm at a conference, and even I get tired of talking and interfacing. I know. I still have to take some little like introvert healing time. And so at the end of this conference, a very long day of talking and interfacing and being charming, I went to a restaurant, and I told the guy, I was like, I would like a beer on tap. And he's like, sure. I was like, the bitterest one you have. Like, just give me a real nasty IPA. And he was like, oh, my God, hold on, wait one second. And then he left, and he came back with like, what looked like a tray of shot glasses, but was actually like-

• 40:21Robin Rauzi?

  Like a flight?

• 40:22Speaker 01

  Yes, it was like four of the beers that they had on tap. And he was like, I don't drink beer, and I didn't want to mess this up. And so then he gave me like each of the four and had me try it. And he was like, great. And I was like, this is amazing. And then I sat in silence and read a book while sipping a very good beer. So that is my spiritual sponsor, is that great beer on tap when you need it.

• 40:50Robin Rauzi?

  The Optimist Economy podcast is edited by Sophie Laland, and our video production for social media is by Andy Robinson. We're going to snap them out. Video clips from the show, which you can share, are available on TikTok, Instagram, Facebook, and YouTube, and occasionally LinkedIn. We have our hats, our popular Optimist Economy caps, back in stock. There are still t-shirts and tote bags. I think we're down to the last three tote bags. Those are all available, again, on our website, optimist economy dot com.

• 41:21Speaker 01

  If you are on Substack, free or paid subscribers to Optimist Economy can join our chat. And if you have the means to contribute, at whatever level you feel comfortable, we'll take your gift at optimist economy dot com. The show is run entirely by your contributions, and we are extremely grateful for them.