Why the US Needs a ‘Secure Border With a Wide Gate’

Which part of the graph below do the GOP border warriors not understand? To wit, after growing by 1.9% per annum between 1972 and 2008, the growth rate of the prime-age US labor force (age 25-54) has decelerated to, well, 0.03% during the last 14 years.

At the same time, you do not need to be an economic historian to recognize that fully half of the GDP growth during modern times has been due to more workers and more labor hours supplied to the economy. So if labor supply growth has gone to zero on a long-term trend basis—and is actually shrinking as per below—where in the world is 4%, 3% or even 2% annual real GDP growth to come from?

Obviously, the only other source of economic growth in the great scheme of things is productivity gains. But during the 12-years since 2010 the productivity growth rate clocked in at just 1.13% per annum. So if that’s all there is and there ain’t no more when it comes to the core, two-part economic growth equation, what lies ahead is pretty miniscule gains in real GDP.

In turn, that begs the obvious big time societal question. There will be 100 million US retirees within a few decades, as the Baby Boom gets fully put out to pasture. So how in the world are they to be supported at anything near existing pay-as-you-go based Social Security, Medicare and other transfer benefit levels by an anemic GDP growth rate—one squeezed by a shrinking labor force on one side and the current, tepid levels of productivity growth, on the other?

The answer, of course, is no can do. But for avoidance of doubt, here is the growth of hours worked in the nonfarm economy versus real GDP for the period 1964 through 2007. Total hours worked grew from 112.6 billion to 236.0 billion during that 43-year period or by 1.74% per annum.

As it happened, real GDP rose by 3.27% annum during the same period. Accordingly, the input of labor hours accounted for 53% of total real GDP growth during the better part of America’s post-war prosperity.

Owing to the demographics already baked-into-the-cake, however, the black area of the chart below is slated to shrink progressively for several decades to come. Well, unless Washington finally wakes up to the demographic facts of life and the law of supply-and-demand, and follows a scheme that Robert Kennedy Jr. aptly describes as a “secure border with a wide gate”.

That is, a safe and orderly entry portal for willing workers wishing to participate in a large-scale Guest Worker program. And one that would allow them to eventually earn their citizenship by consistent contribution to the American economy over 5-10 years and faithful observance of US law in the interim.

Then again, perhaps the busy statesmen of Capitol Hill have lost track of where babies come from and how long it takes to make a prime age worker from the point of conception.  The well-known fact, of course, is that lifetime fertility rates of native-born women have been falling for decades, but since 2008 alone the rate has dropped from 2.07 to only 1.69 in 2019. That’s far, far below the 2.1% replacement rate.

Even when you add-in the current 2.02 fertility rate for immigrant women the total US rate in 2019 was just 1.76.

So the math is unequivocal: Without new, substantial immigration, the US working age population will be shrinking as far as the eye can see.

For instance, the birth rate of the entire US population–native born and immigrant alike—has fallen by 17% just since 2007. So what would have been 4.6 million new births (black line) at the 2007 birth rate had plunged to just 3.8 million (red line) actual births by 2018. Thirty-years hence, therefore, the prime age workers cohort aged 30-41 years will be 5.7 million smaller than would have been the case at the 2007 birth rates. And self-evidently, the gap will continue to widen ever more rapidly with the passage of time.

Accordingly, the GOP’s border closure policies are dead wrong. What America actually needs during the years ahead is a dramatic step-up in the level of working-age immigrants, not their arrest and deportation.

Moreover, the falling dotted line after 2015 in the above chart would have been even worse absent prior decades of immigration. Accordingly, just 128 million (74%) of the 173 million prime-age worker cohort shown above for 2015 were born here since 1965 to American-born parents. And that figure would drop to just 120 million or to 66% of the 183 million persons projected for this cohort by 2035.

That is to say, based on the non-immigrant population as of 1965 the prime age US workforce would shrink by 6.5% through the middle of the next decade alone.

In short, two generations of immigrants, past and projected, account for the difference between a 2035 US workforce of 183 million per the graph above versus the 120 million that would have resulted from just American-born workers born to American-born parents. That 63 million difference accounted for by recent past and projected immigrants amounts to fully one-third of the estimated 2035 labor force.

Reprinted with permission from David Stockman’s Contra Corner.

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