Immigration is Necessary for Economic Growth

As I was sitting in my Richmond hotel room this morning watching New Hampshire news (ah, the wonders of modern technology), an interesting report on the working age population of New Hampshire came on (watch the whole video.  It’s only about 5 minutes).  New Hampshire, unsurprisingly, is experiencing a falling Labor Force Participation Rate due to an aging population.  One of the interviewees in the video sums up the situation aptly (beginning at the 1:20 mark):

One of the reasons [for the decline] is [New Hampshire] was an excellent place for baby boomers to live in the 60’s, 70’s, 80’s, and 90’s and now they are aging.  As they age, they naturally participate in the labor force less, so the labor force naturally declines.  The other thing…is people are not moving to New Hampshire as they did in the 70s, 80’s, and 90’s so we’re not replenishing the workforce in the way we used to so, absent changes in the way people migrate, we’re looking at reductions in the labor force.

Although this report focuses on New Hampshire, this is a trend we’re also seeing around the US (there is a graph in the above video showing the trend).  The US labor force participation rate is declining, and part of that decline is due to the Baby Boomers (a very large generation) retiring.  In other words, the pool of available workers for businesses is shrinking.  If left untouched, this could lead to 1) worker shortages (which we are already seeing that in some fields), 2) increased costs of labor, 3) increased automation.  Most likely some combination of the three.

Labor is an economic resource and, just like other resources, is necessary for economic growth.  If the domestic supply of labor is shrinking and not being replenished fast enough, then immigration (ie importing workers), becomes an economic necessary in order to maintain and expand the economic pie and grow living standards.

In a later post, I will expand more on this and flesh out my idea that immigration is necessary for an advanced economy to survive.

13 thoughts on “Immigration is Necessary for Economic Growth

  1. This post has been up for hours. Looks like it’s hard to get a comment around here.

    In my opinion, almost all schools of economics underrate demographics as a factor. If you are a businessman, it is usually a lot easier to sell into a growing market than a shrinking one.

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  2. This demographic trend is very bad news for the US Social Security program. I was reading something about that subject at a wildly popular blog recently.

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  3. Jon

    I’m not sure why a declining labor force participation rate is anything to be concerned about from the point of view of consumers. Maybe you can enlighten me.

    It seems you have identified the likely responses including higher wages, immigration, and automation. We have seen all of those occur in areas where the oil business is booming.

    While it’s true that some NH business might suffer, from a consumer standpoint it’s not very important where things are made anymore except maybe to nativists. It seems likely the market would provide exactly what’s required by those retired boomers.

    What’s this “Grow Our Own” nonsense? It sounds like collectivists have invaded the “Live Free Or Die” state.

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    • Ron,

      You are right to point out that consumers with enough money won’t have much trouble spending it and obtaining the products they want just because the population is declining and aging. And you are also right that these demographics will ultimately mean that Social Security benefits will have to be a bit less generous.

      The biggest problem will be that it will get harder for entrepreneurs to succeed. And we still all revere the entrepreneur around here, right? They will tend to find their costs for labor rising while their pool of potential customers shrinks.

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  4. Greg

    The biggest problem will be that it will get harder for entrepreneurs to succeed. And we still all revere the entrepreneur around here, right? They will tend to find their costs for labor rising while their pool of potential customers shrinks.

    Yes, yes, we love entrepreneurs! They provide us with marvelous things when they pursue their own interests. Let’s do everything we can to remove barriers in their paths created by leviathan government at the request of competition-fearing cronies and well-meaning meddlers..

    I’m not sure why you see tougher times for entrepreneurs, whose target market will simply become older and richer. I see great opportunities in high capacity adult diapers, voice controlled wheel chairs, and drool absorbent bibs.

    All seriousness aside, I would love to find a mobile device with a palsy resistant touch screen so that when I shop online and press “Add To Cart” my shaking hand doesn’t add 6 or 8 of the same item before I can yank my hand away.

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      • Greg

        I don’t think I discovered it, because retailers already offer volume discounts on items I frequently purchase, indicating to me that they are aware of the phenomenon and hope to discourage me from spending the time necessary to correct my order.

        Actually, buying 6 cases of Drooly Bibs (r) leaves me without enough money for my Depends (r), so aggregate demand isn’t really increased.

        I have only SS benefits to live on, you know, because I was assured all my working life that Big Brother was taking good care of my retirement so I didn’t have to worry about investing for the future. Only when it was too late did I realize I had been lied to.

        My Grandpa used to caution me that I should be saving for retirement as he had done, but I didn’t listen. I called him an old fashioned fuddy-duddy, and explained that in this modern age people no longer need to take responsibility for themselves, as strangers will be forced to support us in our old age.

        Now that I’ve bought a 2.37 year supply of Drooly Bibs (r) I’ll have to forgo my weekly Senior Special dinner at Denny’s with my fellow geezers if I am to also have enough money to buy diapers for the rest of the month.

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  5. Immigration as a concept is neither good nor bad, it depends on the type of immigrant. Do they assimilate in society and are they educated and or have the needed job skills? Sweden and Denmark have large immigrant populations with very high unemployment rates and consequently high welfare cost. Immigration of skilled workers who undergo a reasonable level of assimilation are good, a large population of unskilled immigrants who assimilate poorly pose a significant burden.

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    • Although Jon didn’t indicate, I’m sure New Hampshire officials are carefully screening out those low skilled, poorly assimilating, layabout immigrants from Massachusetts.

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