Broker Check

Birth Rates and Immigration

February 13, 2019

Demographics have a much larger impact upon economic dynamism than the public and most politicians seem to understand. Historically, as nations become more developed the birth rate declines. This seems to be immutable as it crosses different centuries and different cultures. Large families used to provide the needed labor for agricultural sustainability. But as job opportunities expand along with a developing economy, the younger generation find employment that is more urban and skill based.

Once a population becomes urbanized and employment opportunities remain plentiful, the optimal family size shrinks dramatically. In fact, a large family within an urban setting is detrimental to economic advancement. Hence, a declining birth rate.

The problem is when birth rates drop below the population “replacement rate”. Speaking plainly, this is when more people die than are born within a culture. In practice, this means the population begins to age and many pass on with fewer young people to take their place. The result is labor markets contract, employment opportunities go unfilled, and economies are threatened with stagnation.

On February 11, 2019, the Wall Street Journal had an article entitled, China’s Birth Rate Threatens Growth. “The demographic outlook is fueling fears China could grow old before it gets rich, leaving it with too few workers to cover the cost of its aging population. That could stoke economic troubles that far outlast turbulence from trade battles this year.”

China’s aging population and shrinking manpower pool “can only make for serious economic headwinds presaging the end of China’s era of heroic economic growth,” according to Nicholas Eberstadt in a report from the American Enterprise Institute in January.

China’s overall population is expected to start declining in 2030, after peaking at 1.44 billion, according to the Chinese Academy of Social Sciences. “President Xi Jinping recently cited rising pension and social welfare costs as risks to China’s outlook. Many private economists say more aggressive measures—including raising the retirement age—are needed to prevent demographics from becoming a bigger drag.”

The one mitigating factor that helps overcome shrinking birth rates is… immigration. If birth rates within a country are insufficient to provide a growing labor force, immigration can prove critical to its future economic growth. Japan is struggling with this issue as their population gets older and the nation’s culture has been resistant to immigration. Now China is facing this dilemma.

Since its founding the United States has benefited from immigration. People around the world have always seen our country as a destination worth the risk of leaving their homes, extended families, and former occupations to pursue opportunity.

It’s easy to see the value of highly educated and entrepreneurial types crossing our border. But with U.S. birth rates declining, our nation benefits in the long run when even the unskilled join our melting pot because they often work jobs few native-born citizens are willing to take. And their children are inspired by hard working parents who risked everything to give the family opportunity in our great country.

Hopefully, our political rhetoric will be more enlightened and remember the enormous benefit immigration still provides to our nation. As a nation of immigrants, the United States is blessed to be the haven for “huddled masses yearning to breathe free”!