Birth Rates and the American Economy

I have mentioned on several occasions (click here for the most recent comment) that Americans (especially white males) seem overly concerned about the birth rate in the United States. It is low by historical standards, but scarcely below replacement level and, given the number of women of reproductive age, we continue to have many more babies born each year than there are people dying. In today's New York Times, Derek Hoff of Kansas State University offers the more reasoned view that the birth rate is not really the big problem in the United States. His Op-Ed is largely in response to the claims by many people, including conservatives, that supporting immigration reform is a good idea because we need more immigrants and their children to help keep the American economy going.

Unlike many wealthy nations that will see their populations stabilize or decrease in coming decades, the United States, the world’s third most populous country, is expected to grow — to to 420.3 million by 2060 from 315.7 million people today. Our fertility rate (1.9 births per woman, slightly below the “replacement rate” of 2.1) has dipped since the Great Recession but is still among the highest of rich countries’ and ties or exceeds fertility rates in middle-income countries like Brazil, Iran, Thailand and Vietnam.

If you follow the link to the Census Bureau website in the above quote (where it says "expected to grow") you realize, of course, that the Bureau's population projections already account for expected immigration. Furthermore, it is not clear to me that the immigration legislation currently being discussed in Congress is likely to increase the overall level of immigration. It will eventually make legal migrants out of currently undocumented ones, but it probably will not have a huge impact beyond that. Indeed, if the idea of stricter border enforcement (assuming that were possible) were put into effect, the current legislation would slow down immigration, not increase it.

But another of Hoff's points is a particularly important one: Economic growth is not driven by population growth. Rather, it is driven more by increases in human capital (especially investments in education) of the existing population.

Conservatives and liberals alike generally assume that population growth drives economic growth. But until the triumph of the new laissez-faire economics in the 1970s and 1980s, most economists agreed that what mattered was not the size of a population but its human capital and its savings, investment and consumption practices. Indeed, many mainstream economists argued that a smaller but more productive population would enhance growth and lead to a more just society. It is strange that we talk on one hand about an innovation- and knowledge-based economy while still thinking about economic growth in terms of sheer body count. Moderate levels of immigration can help us maintain a highly skilled work force, but so, too, can investing more in educating our young.

Actually, I could write a whole book about what is correct and incorrect about that paragraph. Oh, that's right! I already did!