Birth Rates And Immigration Key To Economic Growth

A key factor in the slow economic growth since the Great Recession has been low demand failing to keep up with supply. The cause of the problem may be lack of young people.

Foreign Affairs magazine takes a look at the problem in “Why Demography Matters.” Ruchir Sharma says today’s slow economic growth is caused by slow growth in the global workforce as birth rates drop around the world.

“One way to calculate the world’s potential growth rate is to add the rate at which the labor force is expanding to the rate at which productivity is rising,” Sharma writes. “Since 1960, gains in both factors have contributed equally to potential economic growth. And in the last decade, the gains in both appear to have leveled off.”

Japan offers a case study. The nation’s birth rate has dropped to below the replacement rate, leading to a shrinking population with more older people and fewer young people. That helps explain why Japan’s economy has performed badly over the last 25 years, and why no amount of economic engineering appears to make a difference.

One reason why Japan makes such a great example is the culture’s resistance to immigration. Conservatives argue for Japanese exceptionalism in the same vein as some Americans, only the Japanese have succeeded in shutting down any attempts to allow more foreigners to immigrate.

One reason why the U.S. economy is doing so well, despite a lower birth rate, is the immigration of young workers looking to start a family. Both legally and illegally. That’s what makes the talk about deporting 11 million undocumented workers and tightening immigration laws so frightening. America’s economy could end up like Japan’s.

By Chris Tomlinson of Houston Chronicle
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