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Labor Pains

If immigration laws tighten, all entrepreneurs could feel the squeeze.

Just what will happen to the economy if tighter immigration policies reduce the flow of immigrants? That's a serious question many entrepreneurs are mulling over in the wake of newly formed attitudes toward immigrants, post 9/11.

The U.S. economic boom of the 1990s was fueled by labor arriving from other countries, according to an analysis of Census data done by the Center for Labor Market Studies at Northeastern University in Boston. Immigration hit record levels last decade, as more than 13 million new immigrants entered the country. Because those immigrants tended to be relatively young men who were hungry for work, they had an outsized impact on the U.S. supply of labor, making up nearly half of labor supply growth from 1990 to 2001.

Looking forward, the primary concern is what effect 9/11 will have on the labor pool. "When the recovery occurs, the overall labor market will tighten up very quickly," says Paul Harrington, associate director of the labor center. You're going to be pretty dependent on foreign labor." As many of the 1990s immigrants are believed to have been illegal, sharply curtailing illegal immigration might hurt the overall labor supply, affecting even businesses that don't employ illegal immigrants.

No dropoff in immigration has materialized yet, says Harrington. But unlike countries such as Canada and Australia that tie immigration policy to economic policy, U.S. policy focuses on accommodating political refugees and reuniting families.

While national security is an important part of the immigration policy issue, another major question is how labor supply should be factored into the decision. "We've let the flow of immigrants answer that for us," says Harrington. "We need to start answering it for ourselves."

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This article was originally published in the May 2003 print edition of Entrepreneur with the headline: Labor Pains.

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