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US Competitive Advantage in the Era of the Demographic Time Bomb: Immigration

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In developed economies around the world, the population is graying. Given that population growth and economic growth are positively correlated, declining populations and a generational reduction in workers will lead to lower prosperity and shrinking economies. What may lead us out of the demographic time bomb? Immigration. Developed economies will need to facilitate immigration at a massive scale to avoid a decline in economic activity. Perhaps no country has a better history of successfully assimilating immigrants than the US. If you look at the list above, and while xenophobia challenges all countries, which country is most likely to successfully attract and assimilate immigrants. Japan? Korea? Russia? China? The United States? I wager the US is by far the most likely to successfully meet its immigration needs.

As the graphic from the WSJ above highlights, “Though the U.S. is aging — the population over age 60 is expected to increase to 26.4% of the total by 2050, from 16.7% now — it still is likely to remain one of the world’s youngest countries. Japan’s over-60 crowd would reach a budget-busting 41.7%, from 26.3% currently, and Germany’s 35%, from 25.1% during the same span. The greatest threat to China’s ballyhooed success could be a potential failure to deal with the desserts of its one-child policy — which will leave 31% of its population over 60 by midcentury, three times the current number.”

More people in a country can lead to a larger workforce and easier access to labor. More labor will lead to more products being produced which will then cause economic growth. Population growth allows for the expansion of labor and products which then grows the economy.

Today’s politicians seem to think immigration is a zero-sum game that costs Americans jobs and needs to be throttled and stifled. The tech industry is famously built by and run by first-generation immigrants, and the US has a long and successful history of providing a place of opportunity, refuge, and we are better for the millions of talented, driven people who have risked life and limb to make a new life here.

If we close our borders, rely on the natural rate of conception, the math above suggests our population will shrink, as will our economy, with increased burdens on successively smaller populations paying for the larger, graying population ahead of them.

I take heart in knowing that we are competitively advantaged with respect to immigration, that we are the country that, despite cyclical xenophobia, is, on a relative basis to our economic competitors, far and away the most friendly nation to prospective migrants. Can we do better, absolutely. Must we do better, definitely. But as the world ages, I think America’s competitive economic weapon will be our history of successful immigration.

 

Will Price

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