The cost of the Federal Reserve’s ‘full employment’: Migrant child labor
Tiana Lowe
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Contrary to the narrative that snowflake millennials caused the “Great Resignation,” keeping the labor market artificially tight, a new study from financiers at the University of British Columbia determined that almost all of the drop-off from the labor force since the start of the pandemic came from boomers who cashed in on the Federal Reserve propping up the housing market.
“A 65 year old home owner’s unconditional [labor force] participation rate of 44.8% falls to 43.9% if he experienced a 10% excess house price growth,” the researchers write. “The pattern is quite different for other age groups. The labor supply of middle-aged owners is relatively unresponsive to house price growth; younger owners actually work more in response to higher house price growth, perhaps because their expected housing expenses have gone up. All renters work more in response to higher house price growth, but the effect is weakest for older renters.”
ONLY A WOMAN COULD HAVE WRITTEN HARRY POTTER
Does the housing boom and its related effect on seniors explain the majority of the labor shortage? Considering that the labor force participation rate for workers older than 55 fell by 4% — ten times higher than the drop in prime-age labor force participation rate — it probably does. The most interesting question is, at what cost?
The most obvious consequence of the Fed financing Uncle Sam’s spending glut with ZIRP and quantitative easing is the worst inflation crisis in 40 years, with prices rising by nearly 16% since 2020. In response, the Fed has had to raise interest rates to their highest point in 15 years and destroy more than 2% of the money supply.
But there has been a human cost to this, beyond the young workers who face a disproportionate burden of inflation. As employers struggle to find workers thanks to the boomers who scored retirement funds thanks to the monetary expansion that caused this inflation, employers have increasingly turned to child labor, at times in violation of the law.
While teenagers taking a summer job is a trend that we should hope returns, the child labor trend is not about older children padding their resumes or saving for college. Increasingly, it looks like exploitation.
The New York Times spoke to over 100 migrant children employed at factories to package Cheetos, stitch “Made in America” tags on J. Crew sweaters, and wash hotel laundry. Thanks to Joe Biden’s policy of catch and release, the staffers at the Department of Health and Human Services who are supposed to keep in contact with minor asylum applicants could not reach a third of the migrant children in their nominal keeping. Most of the 60 caseworkers interviewed by the Gray Lady believe that two-thirds of all unaccompanied migrant children — more than 152,000 UAC crossed the southern border last year — ended up working full-time. Child labor law and hazardous occupation order violations were four times higher last year than 2015, with the Department of Labor counting nearly 4,000 minors illegally employed.
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While conservatives will quickly and correctly point out that, especially in the case of the New York Times piece, the child labor crisis is a result of border policy, it’s as much, if not more, a consequence of Washington’s addiction to easy money and deficit spending. Without politicians doubling the national debt since the Great Recession, the Federal Reserve would have never needed to keep interest rates artificially low, and without the Fed keeping the cost of borrowing at zero, home prices would have never skyrocketed. Without those home prices skyrocketing, those boomers would have never started their retirements early, and then employers would have more labor — and cheaper labor — to choose from without exploiting minors and illegal immigrants.
The Fed spent over a decade chasing the white whale of “full employment,” enacting the experiments of ZIRP and QE at the risk of the world’s reserve currency. That experiment failed. The abuse of child laborers is just one consequence of many that the Fed cannot forget, should they ever consider forgetting their mandate is dual, with price stability their legally-mandated duty to pursue.