Economic growth is a simple equation: workforce growth plus productivity growth. There is no other formula. The economists and politicians may want to make it more complicated or obfuscate these basic elements, but at the end of the day, effective actions either grow the workforce or improve productivity. Period. Discussions about other aspects of the economy may be interesting, but they distract us from facing a clear crisis that demands immediate, practical action.
We’re running out of people! Open jobs now outnumber people seeking work. It’s a fundamental issue with a demographic cause. Our population is not expanding, and the U.S. fertility rate declined over the past five decades. In 1960, the average family had 3.7 kids. Today the number is 1.9 – a rate too low to replenish our people. As a result, all our workforce growth in the past decade has come from folks over 55 years old working later in life than ever before.
And this “Body Gap” will not go away any time soon. Manpower Group, the global employment company, projects that we will have minimal workforce growth through 2040. Over 10,000 Baby Boomers reach retirement age every day, and this aging puts ongoing stress on our workforce – both in terms of the number exiting, and the experience those people take with them. These demographics create a strong headwind against any growth in the workforce.
Still, I can hear you say, “There are plenty of people on the sideline.” Here in Wisconsin, we have a 68 percent Workforce Participation rate. That’s 1.5 million people- why not put them to work? Unfortunately, it’s not that simple.
Look beneath the surface at the details and other problems arise. Half of the 1.5 million are 65 or older – retirees. Another 17 percent are between 55 and 64 – preparing for retirement. Subtract another 14 percent for people between 16 and 24 – we expect them to be students. All of those exclusions take the 1.5 million down to 302,000 – and that includes everyone – stay-at-home parents, the physically challenged, caretakers – who are not working in that age group.
There just aren’t enough people.
An intelligent immigration policy would provide a new supply of capable workers. We need bodies to fill open positions. We have more jobs than workers. It’s time to stop pushing each other’s hot buttons and work together to make pathways for people to come here legally and work, keeping the American Dream alive for another generation.
I believe it is possible to both accept new immigrants and build strong borders. That requires us to reach practical solutions rather than ratcheting up the rhetoric. Those solutions involve compromise, sophisticated approaches, and the ability of the rest of us to accept that compromise from our leaders. If we don’t fix immigration, we slam shut a major door to sustainable economic growth.
Economic growth becomes almost impossible without more people. Even modest three percent growth requires sustainable productivity gains not seen since World War II – rates of 25-35 percent over the next two decades. Despite the ongoing talking points on tax policy and regulations to the contrary; history shows us that neither of these actions spurs the transformational productivity growth we need.
Our economy will not grow without more workers. Our domestic workforce will not expand without an immigrant influx. A sensible, practical approach to immigration could quickly fill much of the needed gap. It’s time to act!