How Immigration and Migration Affect the Consumer Price Index
I have not yet mentioned the effects of immigration and migration (I-M) on the Consumer Price Index (CPI). I have explained that the United States federal government agencies, such as the Environmental Protection Agency (EPA), the Occupation Safety and Hazard Administration (OSHA), the Department of Agriculture (USDA), the Department of the Interior, the Department of Energy, the Internal Revenue Service (IRS), and others, can enact statutes that create scarcities and/or impose taxes and fines, etc. to affect the CPI. “And others” includes the Department of Homeland Security (DHS). The DHS plays a central role in the administration of matters concerning I-M.
I-M does not affect inflation as it does not directly cause an expansion of the money supply; however, it can be a major economic force on the CPI. And its effect can be a regional or a state phenomenon, as well as a national one. [Bear in mind that the individual states can possess differing CPIs while inflation affects them equally because the creation of money is not a state prerogative.]
And whether a person immigrates (changing his permanent country of domicile) or internationally migrates (temporarily moving in and out of the country to perform seasonal work) or merely visits the United States for the Christmas holidays, he will worsen certain shortages and affect the Consumer Price Index (CPI) via scarcity, however insignificantly for just one person (who may be merely offsetting another person who has left the United States).
You might argue that this depends on whether the visitor is a contributor or a freeloader. Actually, this is irrelevant. To explore this, let’s examine some possibilities, some of which are theoretical and some, are presently occurring realities.
[I use contributor as a general category to denote the opposite of a freeloader. But a contributor may or may not be a producer. A producer is one who actually effects some material good. A house builder is a producer. A tradesman (electrician, carpenter, welder, machinist, mason) is a producer. A farmer, rancher, roughneck, or miner is a producer.
Pointing to one of his security guards to make a point about the welfare state, Nautilus inventor, Arthur Jones lectured:
“You are essential to my business. I require you to stand guard with your proverbial spear at the gates of my proverbial fort to protect me from evildoers. However, you are not a producer. Society now requires doctors and lawyers and accountants and clergy and police and teachers and politicians and salesmen, but none of these people produce a damn thing.”]
Case #1: Theoretical 1 If 1,000 foreign doctors immigrate to Arizona, a place currently beset with a severe drought, and begin to actively administer to the local indigents, these doctors will consume water and electricity, resources that the state may soon be forced to ration. Probably, the prices for these and related commodities will rise locally.
Case #2: Theoretical 2 Imagine that you host a Thanksgiving dinner for 20 people and 20 more crash the event. The 20 extras promise to serve food and wash the dishes, but do not bring additional food. They thus create a scarcity on this small scale although they contribute to the group.
Case #3: Theoretical 3 Imagine that 10 adults are adrift in a lifeboat that holds only 10 adults and 10 more are in the water about the lifeboat begging to board. Those remaining in the water promise to contribute to the group by rowing and bailing water, but the boat will swamp regardless of their contributions. Before the mother ship sank, the lifeboat had relatively little value.
Case #4: Present Reality 1 Europe is descending into a permanent dystopia. It has collectively and effectively committed mass suicide with its sanctions against Russia and the related strangulation of its energy sources.
BASF, the largest chemical company in the world with over 60,000 products, has permanently closed large portions of its productions in Germany and moved those portions to China where it can obtain cheap and plentiful gas.
All zinc smelters have curbed production, and some have shut down and half of the primary aluminum production has shuttered for lack of energy to operate.
Much of the German and Polish virgin forests are being chopped down for fuel. Residents are chopping up furniture to burn for warmth. Trash pickup volume is reduced because residents are saving appropriate parts of it to burn. One Polish coal mine is selling coal directly to consumers who line up to load it into their private vehicles.
Some governments are providing large shelters for people to gather in for warmth, This gathering may cause a deeper scarcity of water due to burst water pipes in the unoccupied homes of those gathered.
There is a severe shortage of fertilizer and grain from the east. Drought has severely hampered barge traffic along the major rivers.
The immediate future of Europe is starvation, freezing, darkness, de-industrialization, massive unemployment, etc. This winter will be barely survivable, but 2023 is expected to be far worse. Some officials are predicting extremely bad economic conditions for 5-10 years.
And to top this off, there is the strong prospect that 6-8 million Ukrainian refugees will soon pour into the European Union (EU) as the war is causing an economic wasteland in Ukraine. [Note that the 2015 immigration crisis (from Syria through Turkey) was a major stimulus of Brexit.]
The CPIs of the European nation states will greatly and quickly increase due to scarcities and inflation and taxes, and the influx of more immigrants amidst worsening critical shortages of all commodities will upend the supply-demand balance. These supply-demand imbalances alone will skyrocket the CPIs, but then the governments will deficit spend relief money, thus creating more inflation and currency devaluation that will show up on the CPI months or years later, perhaps just when the supply-demand issues might otherwise be finding a balance.
Case #5: Present Reality 2 Since the beginning of 2020, approximately 5.5 million illegal immigrants have crossed its southern border and into the United States. This number roughly equals the population of a city the size of Houston, Texas. Houston is the largest city in Texas and the fourth largest city in the United States.
If all of these new arrivals were confined to Texas, one might argue that “Texas has plenty of empty space. So what’s the big deal?”
People who make such an argument are focused on space alone. Additionally, they often fail to appreciate that much of Texas is a vast wasteland of desert, sage brush, and marginally arable acreage.
To survive, people need more than space. They need water, and water is limited. [At some point, everything has a limited supply.] During the Texas drought last summer, ranchers’ trucks were lined up for miles to bring their cattle to the slaughterhouses prematurely because of the lack of grass for the cattle to graze.
The new arrivals place a monumental demand—regardless of their possible contributions to their new homeland—on housing, sewage systems, toilet tissue, the electric grid, the food supply, and innumerable other commodities, thus driving up the CPI locally if not nationally and internationally*.
Summary
Therefore, immigration and migration (whether legal or illegal) directly affect the CPI, but of course, do not affect or effect inflation.
*Note that a CPI can reflect the economic activity of a particular county, state, region, country, continent, or the entire world. But inflation can only be linked to a particular currency.
[I’ve heard some experts say that our inflation is exported to other countries. This can only be true if the foreign entities use our currency.]