Curbing the influx of migrants into the country may have an unintended negative consequence, Black Swan author Nassim Taleb said on Saturday.
What Happened: The U.S. is “so structurally dependent on cheap labor from ‘illegal’ immigration that any sudden restriction would, in a nonlinear way, lead to explosive inflation,” Taleb said in a post on X, formerly Twitter.
The former trader and risk analyst’s view aligns with that of Nobel laureate Paul Krugman, who, in a post in February, said that immigrants were the reason behind bringing down inflation. “Inflation has come down so easily in part because of strong labor force growth," the economist said, adding that all of that growth is attributable to foreign-born workers.
Krugman also asserted that immigrants do not supplant the domestic labor force but are “complementary.” “Foreign-born workers expand the supply. And lots of evidence that they are complementary to native-born workers, so that they let us run the economy hotter without inflation and hence *raise* native-born employment,” he said.
See Also: Best Inflation Stocks
Why It’s Important: Undocumented immigration has become a key election issue, weighing down on President Joe Biden’s re-election bid, according to a slew of nationwide opinion polls. Several well-known figures, including Tesla CEO Elon Musk, have decried the fiscal strain the influx of migrants has placed on states.
But the economy become a bigger issue than immigration, with Americans visibly unhappy over their personal finances being dented by rising price levels.
Inflation surged to over 9% in June 2022 following extensive stimulatory measures enacted after the COVID-19 pandemic. With the Fed acting aggressively with a string of rate hikes, inflationary pressure has cooled off but not to the extent that has pleased the central bank.
As Taleb pointed out, higher labor costs can result in cost-pull inflation. Undocumented immigration, therefore, remains a double-edged sword.
The iShares TIPS Bond ETF TIP, an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Friday’s session up 0.12% at $106.44, according to Benzinga Pro data.
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