Broker Check
Do We Want Growing Pains or Labor Pains?

Do We Want Growing Pains or Labor Pains?

March 11, 2024


Today, we are going to talk about a topic I have avoided for the last couple of years due to its politically charged nature: immigration and the labor market. I am going to do my best to keep this discussion at an economic and mathematic level and not get into the public policy side of things.

Growing Pains was an ABC sitcom that aired from 1985 to 1992. The show ran for seven seasons, consisting of 166 episodes. The series centered on the Seaver family who lived on Long Island in New York. 

The show ended up focusing much of its time and attention on their ornery son, Mike, played by Kirk Cameron. Mike was a lovable goofball who did not take life or school too seriously. While Alex P Keaton was worried about the stock market and what was going on with politics over on the NBC show “Family Ties”, Mike and his friends, Eddie and Boner, showed a much simpler and goofier side of teenage life. Personally, I identified much more closely with APK, but Mike seemed to have a lot more fun.

In the United States, we are living with a different type of “growing pains”. One that comes from demographics and is not easily fixed by any political policy. As you can see in our first chart below, it seems that the birth rate in the United States has dropped to all-time lows. This creates a problem in that we are not producing enough children to replace the workers who are retiring.

There is an old adage that says, “demographics are destiny”. This is due to the fact that you must have population growth to have GDP or economic growth. As a matter of fact, the formula for GDP growth is as follows: Workforce growth (which is driven by population growth) X productivity growth = economic growth.

In short, if you don’t have enough babies being born to keep your workforce growing, it is hard to have enough productivity growth, in and of itself, to keep an economy moving forward. This is one of the reasons the AI revolution is potentially so important; it could increase our productivity dramatically while our population or workforce is growing much more slowly.

As you can see in our second chart below, we need to find some way to address the issue of a rapidly growing elderly population, driven by baby boomers, who are moving into retirement at a rate of roughly 10,000 people per day. At the same time, the percentage of our US population that is now working age is dropping quickly.

We know that this is a major issue in other economies with aging demographics. These would include much of Europe, Japan, and especially China, where the population is expected to drop by more than 500 million people over the next 75 years due to their one-child policy.

Artificial intelligence productivity gains may help this situation. However, if our birth rate does not pick up, one logical solution to this situation is to have more people who are working age come into the country. The United States is a country that has historically been built on (legal) immigration.

One of the great concerns that US citizens have is that lower-paid migrant workers could take the jobs of people born in the United States. We can see this validated in our final chart today, which shows that since 2019, foreign-born workers have gained approximately 2.5 million jobs, while people born in the United States have cumulatively lost 1.3 million jobs over the same period.

There are massive issues around border protection, as well as legal versus illegal immigration. We will leave these to the politicians to solve for now. However, in this election year, we wanted to frame the mathematical and economic numbers so that you had a better understanding of the overall issue. 

Source: Wiki Fandom

Until we adequately address the worker shortfall through either higher birth rates or immigration policies, we will continue to face the struggle between “labor pains or growing pains.”  Unfortunately, watching politicians grapple with this will not be nearly as fun as watching Mike and his friends on an episode of Growing Pains.

The CFPs of Impel Wealth Management will continue to try to keep you informed on these important topics. Please let us know if you would like us to address any questions or issues in these blogs. Education and communication are part of our mission as we continue “Moving Life Forward.” 

© 2024 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot directly invest in indices.

Featured blog image source: