Many people cite immigration as the cause of the historically low American growth, but let’s consider the dependency ratio.
Dependency ratio is the percent population between 16 and 65, the people that mostly don’t contribute to our labor force. Our dependency ratio has been increasing since the 1960s when it was at its highest at 39 percent. It hit its lowest in the early 1980s (33 percent) and early 2000s (32 percent) where it stayed until the financial crisis. Since the great recession, birthrates have dropped to historic lows, hitting the sixth consecutive year of declining birthrate in 2014.The 2015 data doesn’t look much better. Some speculate there may be a similar effect to the great depression, when one-fifth of women did not have children.
China Working Age Population
In 1977 China began a one child policy, which resulted in sharp shifts in their dependency ratio. Since then, China experienced unprecedented growth and economic prosperity. The dependency ratio didn’t change until 2010 when a large segment of their workforce reached retirement age. Since then, its growth has begun to slow.
The U.S. would likely not tolerate a policy limiting birth rate, but this is not the only policy option to adjust a dependency ratio. The U.S. could also bring in economic migrants who could decrease the dependency ratio and promote future growth. Immigrants actually have a twofold effect on dependence ratios – they give to the workforce without having a 16 year wait where they are adding to it as natural born citizens do.
United States Working Age Population
One of the arguments for the dependency ratios effect is the period from the 1970s to early 80s and 90s, all the way to the early 2000s. During this time, the dependency ratio shifted rapidly. During this time, there was strong economic growth. 1992-2000 had, year over year, growth of over 4 percent GDP, and only one recession during the entire period. This sounds negative, as nobody wants a recession, but it’s still above the average. We’ve had one every 7.7 years since 1960. The 90s recession was also one of the least severe during recent memory. To get from current dependency ratios to the 1994 peak we would need to increase our working age population by 32 million people, and immigrants are great candidates.
While we could increase the population in house, this would require an additional 32 million children born, which would actually increase the dependency ratio until these children reach the age of 16. The Congressional Budget Office projected the population of US citizens over 65 will increase by one-third, that’s 11 million people, over the next ten years as the baby boomers reach retirement and life expectancy rises. To offset this increase, we would need an additional 16 million immigrants. This increase, totaling 48 million people, would increase the workforce, grow the tax base, and promote economic growth.
The economy is a complex entity with a multitude of factors influencing it constantly in difficult to measure ways, but the U.S. should always promote policies that will improve the lives of its citizens. If immigration policies were loosened and we don’t experience decent job creation, these policies will heavily burden people without a college degree or technical certification due to the growth of labor supply.
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