The annual report by the Council of Economic Advisers (CEA) said the aging U.S. workforce, slowing population growth and declining labor force participation by both women and men have created "significant headwinds" for U.S. labor supply, which could depress economic growth and living standards for years.

“Necessity is the mother of invention," CEA Chair Cecilia Rouse told Reuters, warning that failure to enact comprehensive immigration reform and steps that allowed workers to balance home and work responsibilities would harm the U.S. economy.

The report comes amid strong resistance in Congress to Biden's efforts to enact immigration reform, guarantee paid leave for all workers, and boost childcare options, with Republican control of the House of Representatives further narrowing the odds for action.

Rouse said changes were imperative to ensure U.S. growth: “These are not political issues; these are economic issues. If we want to continue the kinds of economic prosperity that we count on ... we have to have all hands on deck."

Labor force participation has begun to recover after an abrupt shock caused by the COVID-19 pandemic, but remains lower than it was in the 2000s, the report noted. COVID accelerated the trend, with more older workers retiring, while declining U.S. life expectancy was removing other workers.

That means the "vast majority" of the growth in working age people will come from immigrants and their descendants, it said.

Allowing more immigrants to enter the United States, and legalizing the status of 11 million people already in the country without authorization to work, would offset the aging demographics and boost innovation, without a big impact on the wages and employment of the existing population, it said.

Funding childcare, removing barriers to employment for previously incarcerated people, and expanding the Earned Income Tax Credit, while supporting regional development and encouraging higher rates of unionization would also draw more adults in the workforce and boost labor supply, the report said.