Category: The Economy

“In short, the standard innovation theory of American exceptionalism is all about qualities that make each worker more productive. Today, nearly all the economic discussion about how to make America great again focuses on ways — like cutting red tape and taxes — to revive flagging productivity growth.

Though this discussion remains critically important, it plays down a big shift in the story. The underlying growth potential of any economy is shaped not only by productivity, or output per worker, but also by the number of workers entering the labor force. The growth of the labor force is in turn determined mainly by the number of native-born and immigrant working-age people. Over the last two decades, the United States’ advantage in productivity growth has narrowed sharply, while its population advantages, compared with both Europe and Japan, have essentially held steady.

What makes America great is, therefore, less about productivity than about population, less about Google and Stanford than about babies and immigrants.

The growing importance of the population race will be very hard for any political leader to fully digest. Every nation prefers to think of itself as productive in the sense of hard-working and smart, not just fertile. But population is where the real action is.

Comparing six of the leading developed countries — the United States, Germany, Japan, Canada, Australia and Britain — I found that not only has productivity growth been slowing across the board in recent decades, but also that the gaps in productivity growth among these rich nations are narrowing sharply. For example, in the 1990s and 2000s, productivity was growing much faster in the United States than in Germany or Japan, but that advantage has largely disappeared in this decade.

The reasons for this convergence are complex, possibly having to do with the way production technology now spreads quickly across borders. But this trend spans the developed world, and it basically holds regardless of which two countries you compare, which should raise doubts about how any one country, including the United States, can regain a distinct economic advantage by focusing only on reviving productivity.

Which brings us back to babies and immigrants. Like productivity, population growth has been slowing worldwide in recent decades, the big difference being that the gaps among the rich nations are increasingly significant. In the 1960s the United States population growth rate averaged 1.2 percent, or 50 percent higher than Europe’s and about the same as Japan’s. By the late 1960s, population growth peaked worldwide because of the spread of birth control and other cultural shifts, but it has slowed much more gradually in the United States than in its rivals.

Since 2005, per capita gross domestic product has grown on average by 0.6 percent a year in the United States, exactly the same rate as in Japan and virtually the same rate as in the 19 nations of the eurozone. In other words, if it weren’t for the boost from babies and immigrants, the United States economy would look much like those supposed laggards, Europe and Japan.

Indeed, if the United States population had been growing as slowly as Japan’s over the last two decades, its share of the global economy would be just 15 percent, not the 25 percent it holds today.

Moreover, immigrants make a surprisingly big contribution to population growth. In the United States, immigrants have accounted for a third to nearly a half of population growth for decades. In other countries with Anglo-Saxon roots — Canada, Australia and Britain — immigrants have accounted for more than half of population growth over the past decade. Those economies have also been growing faster than their counterparts in the rest of Europe or Japan. But much of that advantage would have disappeared without their population advantage.

Politically, the irony of this moment is stark. Population growth is increasingly important as an economic force and is increasingly driven by immigration. Yet now along comes a new breed of nationalists, rising on the strength of their promises to limit immigration. And they have been especially successful in countries where anti-immigrant sentiment has run strong, including the United States and Britain.

. . . .

It would be unrealistic to imagine that hard economic logic will turn the anti-global, anti-foreign tide any time soon. So the likely result is that the United States and Britain will go ahead and limit immigration. To the extent they do — and their rivals do not — they will undermine their key economic edge, and cede much of the growth advantage they have enjoyed over Europe and Japan.”

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The “other people’s babies” crowd is driven by xenophobia and racism, not by any real desire for a great future for all Americans.

Meanwhile, tone-deaf Republicans, including Jeff Sessions, are calling for limits on legal immigration, without any credible factual or statistical basis to support their restrictionist agenda. Same goes for those who would limit family-based immigration in favor of some type of “point system” favoring highly skilled migrants.

The U.S. needs (and uses) migrant labor in all parts of the economy. If anything, migration, both legal and undocumented, at the “worker bee level” — farmworkers, construction  workers, food processors, child care workers, hospitality industry workers, janitors, and other service occupations — has been just as important to our growth and prosperity as a nation as have been scientists, researchers, professors, executives, star athletes, entertainers, and capitalists.

We need a comprehensive immigration reform package that not only legalizes those law-abiding immigrants already in  the workforce, but provides opportunities for significantly expanded legal immigration. Not only would this more realistic approach address our economic needs, but it also would be a better way to solve immigration enforcement issues than money spent on walls, detention, and more enforcement bureaucracy.

As the system more reasonably matches supply and demand, the pressure for migration outside the system decreases and the incentive for “getting in line” increases. Just good old capitalist theory applied to the oldest human phenomenon: migration.

PWS

05-07-17