Monday, April 03, 2006

If you are going stop immigration then you better start having babies:

Currently, the political topic of the day is how we’re going to stop the flow of illegal immigrants into the country. As a staunch capitalist who believes in Adam Smith’s “invisible hand”, I disagree tremendously with the attempts by certain people in this country to stop our flow of labor and wreck the economy.

First immigration, illegal or legal is not a problem. Unemployment in this country is currently under 5% the amount considered to be full employment in a country, which means these immigrants are not hurting or taking away jobs. Secondly the jobs these immigrants do are typically unskilled or jobs Americans don’t want to do, like pick grapes in California vineyards.

These immigrants have nothing but positive effects on our economy. They for one keep the price of goods and services low for all Americans leading to higher consumption and more jobs. Without many of these immigrants more companies would offshore. Besides remittance to their home country billions of dollars stays in the U.S. every year thanks to these immigrants whose employers would most likely setup shop elsewhere if this portion of our labor force were not available. The millions of goods these immigrants purchase every year in this country helps fuel our economic growth and leads to many other higher paying jobs in the service industry.

Above all the most important reason why we need immigration is because sustainable population growth is the key to growing and maintaining a successful economy. Currently the biggest risk to Europe in the coming years is that their fertility rates are below 2.1 the number needed to maintain the population of a country. Across Europe the fertility rates are in the low 1’s with countries like Estonia and Italy projected to have less then half their population left by the year 2050.

The reason why shrinking populations are a concern is because fewer young people means less consumption and lower consumption means a shrinking economy. It also raises dramatic concerns for the housing market as when the backend of the population scale dies off there will be a glut of housing leading to a potential devaluation in the market, as there are more homes then people. The biggest concern though is that before that backend of the population dies it will far out weigh the younger front-end and when you throw in all our social programs like Social Security and Medicare that is a pay as you go system there will be not enough people paying in to sustain those collecting. One only needs to look to Japan at the negative effects on an economy with no population growth. Last year Japan started the first of many years to come of population decline. Looking at the years leading up to this decline, we saw Japan struggle economically for decades as consumption came to a grinding halt as the number of new people in society purchasing goods was dramatically lower than the decades before. Without a young population to buy homes, clothes and other items economic activity declined.

Currently the United States is fairing much better then the rest of the developed world when it comes to sustaining our population but we’re also at risk. Our fertility rate sits just at the 2.1 needed for sustainability and it is only because of our large immigrant population that generally have more children then the level needed, plus the immigrants themselves keep things level. Most people reading this blog only need to stare in the mirror and ask themselves how many children do they and their friends have. I would bet the number ranges from 0-1 making the chances of sustaining our population going forward impossible without immigration. These days many people are attacking immigrants I’m thanking them.

For further reading on the risks population decline has on an economy I would recommend checking out “The Empty Cradle” by Philip Longman.

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