Oxford Economics has previously tracked the impact of immigration and demographic changes on U.S. labor supply, with its model long considering the influx of foreign-born labor as a core variable; the Dallas Fed's related research has continued to quantify the labor force participation rate and retirement wave post-pandemic, noting that similar supply shocks historically pushed up the breakeven rate when baby boomers entered the labor market in the 1980s.

On the capital front, restrictive immigration policies directly reduce the supply of low-skill and some middle-skill workers, while aging accelerates labor exit, forcing companies to shift resources from headcount expansion to automation and efficiency investments; the motivation is to address wage and employment risks under supply rigidity, specifically manifested in essential industries like healthcare continuing to absorb workers, while other sectors prioritize technological substitution to maintain output.

Similar cases can be seen in Japan's lost three decades, where aging drove zero employment growth and reliance on productivity, or in some European countries where tightening immigration led to a decoupling of employment and unemployment; the current U.S. labor market is transitioning from a post-pandemic high-immigration expansion phase to a low-speed steady state under supply constraints.

Essentially, this reflects a contraction in labor supply within the restructuring of the industrial chain: when both population and policy squeeze supply, the market mechanism shifts from "growth must create jobs" to "jobs can be negative while output still increases," with pricing power tilting towards capital that controls automation and essential services.

ABAB News · Cognitive Law

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