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Friday
May182018

Synchronicity or a Perfect Storm?

A recent report from the Centers for Disease Control, shared across various media indicates that the birthrate in the United States has continued to fall, reaching a 30 year low last year. Although many critics are surprised that a trend they attributed to the recession has continued during full employment, they perhaps should not be, as the U.S. was somewhat of an outlier among developed countries when its birthrate was not dropping precipitously. In fact, the birthrate has, for several years, been below the replacement fertility rate (the number of children per woman needed to maintain the present population) of 2.1 children per woman. The fertility rate now resides at 1.8 children per woman, with only women over 40 showing an increase over previous years. This brings the U.S. in alignment with the nearly 100 countries (out of slightly more than 200) with below replacement rate fertility listed by the World Bank, led by Korea, Portugal, Hong Kong, Macau, Singapore and including virtually all of the EU countries and Eastern Europe plus China, Japan and Russia. There is almost a linear inverse relationship between a country’s economic well-being and its fertility rate. Worldwide, fertility rates have been falling since when, in 1950, the worldwide rate was 5 children per woman to the present level of 2.5. 

Remembering doomsday predictions from forty years ago about overpopulation’s threat to the world, I find it amazing to see how rapidly birth rates have declined. The world is still vastly overpopulated for its resources, and there are still large pockets of high birth rates, but none that are not coming down. Now the discussion in developed countries is how to maintain a workforce that can pay enough taxes to sustain the retirement of older people, as people live longer and require not just more food and shelter, but more medical and nursing care. The answer for most countries had been immigration – often from less developed countries (with higher birthrates) to more highly developed countries —increasing the workforce from the bottom up as well as bringing in more educated and technically trained immigrants at the higher levels of employment from some countries with very high populations and less economic promise, such as India and Pakistan.

Within the United States we are not just at a 30 year low for our birthrate, we appear to be heading toward a similar low for immigration. Although data are only available for refugee admissions, at this time, which have been reduced by over 80% in the current year, other Trump administration programs have ended Temporary Protected Status for 300,000 legal refugees from six countries, including Haiti, Nepal, Sudan, Honduras, El Salvador, Nicaragua and Syria, this last country from which new refugees have been virtually shut off in 2018. The president’s stated aim is to reduce immigration in general, although a comprehensive immigration bill is nowhere near being agreed upon by congress. 

Falling birthrates provide an economic and social crisis for many countries, because older citizens who leave the workforce must be supported by the taxes from the work of younger members of the workforce and these older workers cannot be replaced if the population shrinks. Most countries with falling birthrates have tried to solve this problem through immigration. Indeed, the continued growth of the U.S. population has been via immigration for several years. There are exceptions, such as Japan, which maintains strict limits on immigration but has a shrinking population. Japan’s answer has been twofold: people now work longer into old age than they used to in Japan and the country employs automation on a widespread scale, so that greater numbers of workers are not needed. The statistics regarding Japan’s aging “problem” are staggering. 30% of the population is over age 65 and this number is rising. Japan has the longest lifespan in the world, of over 83 years, and its fertility rate is a mere 1.4 children per woman and has been low for decades. In the past, the retirement age was 55, but over the last several years that has risen, first to 60, then 62 and by 2025 will be 65. In addition, although mandatory retirement applies to most industrial and business jobs with large companies, it does not apply to self-employment and does not prohibit reentry into the workforce, which is a common practice among retirees. In fact more people over age 65 work in Japan than in most Western countries, including the U.S.

On a recent trip to Japan, my wife and I noticed how much of their daily business encounters were automated—from buying tickets on the trains and metro to ordering food in a restaurant—requiring fewer live people to do the tasks. Behind the scenes this practice is even more pronounced in manufacturing and even in healthcare, where robots do work from assembling cars to providing companionship to elderly nursing home residents. Japan may signal the wave of the future as other countries more slowly arrive at similar situations of a mostly older population.

These three factors: low birthrates, reduced immigration and increased automation are all either happening or are on the near-horizon for the United States. They each have their own independent causes, but they will all converge to impact our country (and eventually other countries) at the same time. Some speculations seem warranted:

In order to compete in the world’s economy, the workforce needs to be of sufficient numbers and skills to maintain and grow our gross domestic product. With a shrinking birthrate, the workforce needs can either be met by immigration or by automation. If immigration is also shrinking, then automation will supplant human workers (the solution seen in Japan, in which older persons rejoin the workforce is less feasible in the U.S., where lifespan is lessening, not increasing, and most people only work past retirement age—which is already higher than Japan’s— if they are forced to). Certainly automation in the form of robots or autonomous construction and farming machines can be used to replace manual labor, much of which is now done by immigrants. At the same time, however, automation is also rapidly taking over clerical tasks, even much of the work of educated and skilled workers, such as lab techs, medical techs and even that of lawyers and doctors in some situations. We are already seeing much of engineering done by computer. Computing technology and artificial intelligence are improving at explosive rates and replacement of humans in the workforce seems to be an inevitable consequence of this. So we will not only have fewer workers contributing to the taxes that support an aging population, we will have less work for those who are working age.

With a combination of a smaller workforce due to fewer people and fewer workers due to automation, payroll taxes will lose their significance as a major way to raise money to pay for the country’s infrastructure, defense, and social programs. On the other hand, the economy will very conceivably be doing very well, as automation increases productivity. Tax revenues will need to be based on wealth, rather than income, particularly if, as is being experimented with now, basic income is provided to everyone via tax revenues.

In addition to raising taxes, there is the problem of how unemployed or partially employed people of working age spend their time so they feel productive and satisfied. Right now, all sorts of unhealthy behaviors accompany unemployment, particularly chronic or widespread unemployment, e.g. drug use, alcoholism, suicide, and obesity. Our national consciousness will have to a lot of readjusting to do to make life without full employment fulfilling. There may be a number of types of employment, that, if they weren’t currently associated with low wages and if wages weren’t necessary for meeting daily needs, might be better done by automation, but enjoyably done by humans. For instance, all the human interface jobs of waiter, receptionist, caregiver, even cook, gardener, carpenter, etc., if wages were not the main source of income, might be enjoyed by many people and doing them well could be a source of pride and fulfillment. Eventually, wages would need to be divorced from one’s sense of worth and self-esteem.

The new age is sneaking up on us and our conversations, except at the edges of our society, are mostly stuck in the same mode as they were decades ago in terms of wages and employment, work and taxes. To insure that these converging factors of changes in birthrate, immigration, and automation don’t blow us over, but offer instead, new opportunities, we need to start making plans for how to include them in our models of the near future.

 

Reader Comments (4)

There is a rather high birth rate in the Islamic countries and PEW predicts that in a few years Islam will replace Christianity. Just curious about this statistics, what is your take?

May 18, 2018 | Unregistered CommenterIlana

In all regions of the world, Muslim fertility is higher than that of Christians, which in turn is higher than that of those not affiliated with any religion. I can speculate that the differences are due to education and empowerment of women, which appears to be the main driver of Lower birth rates, but that’s just a guess.

May 18, 2018 | Unregistered CommenterCasey Dorman

Basing taxes on wealth is an abandonment of basic property rights. This is a communistic concept whereby the collective maintains ownership of a product through perpetual taxing on a supposedly “owned” item. I don’t want to pay taxes on my car, tv, books, furniture, etc. for the rest of my life or for the life of my property. I don’t think anybody wants a tax assessor coming to their home every year to determine their collective wealth and apply an appropriate tax. The real answer is that as culture and behaviors change, some people will go underserved and we need to leave enough liberty available for people to effectively confront these issues for themselves and their fellow citizens.

May 18, 2018 | Unregistered CommenterMark Wheeler

A primary reason the Muslim birth rate is so high is that it is a fundamental tenant of an Islamist agenda desired by hundreds of millions of Muslims to create a global totalitarian theocracy based on the tenets of Sharia. The Pew data is there for anybody to review on this subject.

May 18, 2018 | Unregistered CommenterMark Wheeler

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