A few years ago, Joan and I had dinner with clients in Puerto Vallarta, Mexico, where they have a home. The clients were very friendly with people who owned and worked in local restaurants. On this particular night, they introduced us to a young man working in the kitchen. He had moved back to Mexico after living in L.A. for some years and had no interest in ever going back to the U.S. When we asked why, his answer was clear: he missed his family in Mexico.
That was in January 2015. Our client, a staunch Republican, pointed out that the U.S. had net emigration of Mexicans from the U.S. back to Mexico. I looked it up. Every year from 2008 to 2014, more people were moving from the U.S. to Mexico than the other way.
While we were in Mexico, my Google news feed started to send me local news in English. No, I hadn’t informed Google of my trip, but then, Google knows everything. A story caught my eye that only one of Mexico’s 32 states was experiencing net emigration to the United States—the Sinaloa province. When I asked our clients about it, they said it was because farms in Sinaloa were finally getting mechanized and thousands of farmhands were getting laid off. Many of those laid-off workers sought jobs in the United States.
Why am I discussing Mexico? Because it may be the beginning of a larger trend around the world.
Despite some tarnishing, America is still, as Ronald Reagan said, “the shining city upon a hill.” In many countries, millions of poor people dream of one day living in America. But two things are going on that is changing the dynamic.
First, in most countries, but especially in the developed world, the birth rate is in decline. Back in 1960, the birthrate in the United States was 3.65 births per woman. In 2017 that was down to 1.77 and it’s still declining. It doesn’t take a degree in mathematics to understand that 1.77 births per woman will eventually lead to a declining population, unless we increase immigration or people get serious about having more children in the U.S.
But while having more children will help, that help won’t arrive until the new generation is old enough to work. As we come out of the pandemic, we are very likely to return to full employment. Our problem for some years now has not been one of creating new jobs—but of finding workers. This is why the unemployment rate, until this year, had been falling to extremely low levels. I anticipate a return to those low levels no later than 2022, and more likely by the fall of 2021.
For the next two decades, and probably longer, the more likely solution would be immigration. But there may only be a limited window of opportunity there. The reason is that the birthrate around the world is also declining. In 1960, the birthrate in Mexico was 6.77 births per woman. In 2017 it was down to 2.16. These trends can be seen around the world.
The second thing going on is rising prosperity. As countries like Mexico have reduced population growth and increased prosperity, there is less pressure to emigrate. The number of Mexicans living illegally in the United States has been steadily declining as ex-pat Mexicans return to their home country, where opportunities are increasing.
According to the World Bank, the U.S. population grew by only 0.6 percent in 2018. Unsurprisingly, that is a new low growth rate relative to the last 50 years. The only surprising thing, given the anti-immigration policies of the Trump administration, is that we had any growth at all. And that is a real problem.
The problem is that the combination of ever-slowing population growth and increased life expectancy means that we have an increasing number of old people at a time when the working-age population is decreasing. That’s fewer people per senior citizen to produce the goods and services seniors need, and fewer people per senior to pay in to Social Security.
We still have the opportunity to reverse these trends, but the time window is slowly closing.
Who are all those people on the southern border trying to get into America any way they can? Mostly, they are from Guatemala, Honduras, and El Salvador. These are intensely poor countries, but even there, per capita incomes are rising and birthrates are falling.
During the presidential election of 2016, candidates Trump and Clinton competed to tell us who had a better jobs campaign. I screamed as loud as I could, “We don’t need jobs. We need more workers. If you stimulate more jobs, you will only be making the problem worse.” And curtailing immigration added to the problem.
But what about all those criminals that come to our country? There are criminals that come into our country—illegally, of course! And no, we don’t want criminals. But didn’t Australia start out as a prison colony? In the early days of the U.S., many convicted felons made their way here in search of a fresh start.
That said, I think open borders are foolish. We certainly do want to say who gets in and who doesn’t. But we need to quit arguing about how we do this right now, because every day we do not expand our immigration policies is another day in which we move toward closing the window on getting the workers we need.
How do we plan to grow our economy without sufficient workers? Japan hasn’t figured that out. Italy hasn’t figured that out. And more countries around the world are facing the same problems. Fewer births, fewer available workers, and an older population.
We are still that shining city on a hill. Millions of people are eager to come here. But that situation looks like it will be ending. Our image as the land of opportunity has limitations, and one of them is time. We need to act now.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, Inc is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/ Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questions can be sent to hal.masover@emailsri.com. These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results. Indices mentioned are unmanaged and cannot be invested in directly.