The Euro crisis and the world-wide recession have dominated headlines and underlined much of the discussion regarding the problems facing Western economies since the economic downturn in 2008. Even so, one of the most pressing issues facing developed countries is something else entirely – shrinking populations.
While much of the political rhetoric in the U.S. with regards to Europe’s problems seems to center on socialist policies and welfare states, the fact of the matter is that many European countries no longer have enough tax payers to support the growing number of those dependent on government services such as retirees.
The populations of Italy, Monaco, Germany, Greece and Japan are all getting smaller, and older. The trend is one that countries troughout Europe, North American and Asia are grappling with. According to the U.S. Census Bureau, the European Union will see a 14% decrease in its workforce by 2030.
These number are far more than interesting demographic statistics. Aging populations result in a decrease in the labor force. Decreases in the labor force result in a decrease in economic growth. Such changes also result in a loss of tax revenues. As the percentage of the taxable population shrinks, one of two things happens: tax revenues fall off or the portion of the population able to pay taxes becomes overburdened, or in a worst case scenario, both.
This is a very real problem throughout Europe, resulting in changes to retirement laws and labor markets. A recent European Commission study indicates that many countries are both raising the retirement age and changing the size of pension benefits based on expected demographic changes.
Some countries have begun to look to immigrants as a potential solution to their shrinking populations. Italy and Germany have both begun to adopt more open immigration policies. Canada began to liberalize its immigration policy in the 1970s.
Why immigration? People tend to immigrate in the prime of their lives.
They have their entire careers ahead of them. They earn money and pay taxes, two things that help alleviate the pressure brought on by aging or shrinking populations. Simply put, immigration changes the ratio between workers and retirees.
Bringing things home, the U.S. is one of the few developed countries that is not dealing with a shrinking population. In fact, the U.S. population has increased by almost 60% since 1965. More than half of that increase is the direct result of immigration. Looking across the pond, is that really something we want to change right now?
By restricting immigration now, the U.S. runs the risk of seeing its population follow the same demographic path seen in Europe today. That path is not sustainable.
While many are resistant to change, particularly the changes in culture influenced by large waves of immigration, the fact of the matter is that immigration continues to make our economy viable and competitive in the
world market. Immigration allows us to keep our government services running and makes our country great.
Rather than focus the debate solely on how to secure our borders, perhaps politicians should begin discussing how to encourage the immigration our economy needs and how to secure the rights of those who have already taken the risk to come here. Rather than bemoan the manner in which many of our immigrants arrived, perhaps we should wake up and recognize that one of the biggest differences between us and the European economies we fear becoming is our vibrant, growing population. For that we have immigrants to thank.
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