Falling birth rate is not a problem if we embrace immigration and income redistribution

The recent study by the Pew Research Center that found the U.S. birthrate is falling has transformed a lot of economists and economic writers into Chicken Littles, running around the barnyard waving their wings furiously and shouting that “the sky is falling.” Most of the news coverage, e.g., in U.S. News and World Report and Bloomberg Business Week concluded that a falling birth rate is a negative, or made unstated and unsubstantiated assumptions that it is negative.

Having fewer people in the world will mean we use fewer resources and push less CO2 into the environment.  What could be bad about that?

What the economists and pundits fear is that the economy will shrink with fewer people to feed, educate, keep well, herd from place to place and entertain. Fewer children mean a need for fewer pediatricians and toy makers and elementary school teachers. The children become teens and there is suddenly less demand for cars, video games, cosmetics and fashion clothes. And as the new generation ages, more and eventually all industries contract.

Continual increases in productivity and energy efficiency make the problem worse, because when productivity and energy efficiency improve, fewer jobs are required to produce the same amount of products and services.  More people don’t have jobs, which leads to an even smaller economy and enormous social problems.

In other words, the common view is that without population growth the economy and society will decline.

This old time thinking may have worked before we realized we were both polluting the Earth and depleting its resources.  But no more.

To address global warming, we have to reduce our output. Fewer people is a far better way to do it than famine, war or pestilence. True enough, we must slowly move to renewable sources of energy and materials, but even as we do, reducing our population remains one of the best ways to address global warming.

But what to do about the economy that will shrink if the population decreases?

The answer is two-fold: immigration from poorer, less developed nations and income redistribution. If we accept immigrants from poorer, less developed countries they will fill the gap between our current population and the smaller population that would result from no immigration. The population of the world will get smaller, even as ours will stabilize. And while the immigrants will use more energy and resources in the United States than they would have back home, there will still be a net decrease in energy/resource use in the world.

Income redistribution comes into play as we address the growing number of unemployed that results when productivity increases but the population doesn’t. There are several ways to address the social problems inherent in fewer hours of work needed to produce the same amount of goods and services:  working fewer hours to afford the same or a slightly lower standard of living; raising the education level needed for jobs (extending adolescence); reducing the retirement age; free services and goods to the unemployed. All of these actions take money from those who own the means of production in the form of higher wages and benefits or more use of tax policy to distribute income down the ladder. The only way for a humane and decent society to address a falling population is to distribute wealth in a more equitable fashion.

Two of the most fundamental principles of the study of economics are 1) that an economy must always be growing to be healthy and 2) a greater population is the most effective way to achieve that growth.  Economists accept these principles as absolute truth, but they are only starting premises—foundation stones upon which the whole of economic theory is currently constructed.

But just as Einsteinian physics replaced the Newtonian version, so must an economic theory that does not depend upon growth develop.  As long as economists and mass media journalists continue to believe and promulgate that growth is always good we will not come close to learning how to create a world in which our energy and materials footprint is small enough to sustain the human race.




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