Ideas to Action:

Independent research for global prosperity

X

Views from the Center

Feed

This is the third in a series of blogs looking at regional aspects of future global demographic and migration patterns discussed in my paper Global Mobility: Confronting A World Workforce Imbalance. The first two blogs in the series focused on East Asia and Northern Europe.

US migration policy bears the scars of a four-year attempt to wrench the country toward nativism. Not least, the Biden administration initially refused to raise the 2021 refugee cap from its historically pitiful level of 15,000 people on the grounds that it would not be able to process more than that number. Under pressure, it then raised the cap to 65,000 for 2021 and 125,000 for 2022 while reiterating it would never meet such targets. And even as it has terminated travel bans and narrowed immigration enforcement, the administration has been consumed by the rise in unaccompanied children at the Mexican border alongside rising border arrests. But that focus on the supposed crisis at the border hides an underlying reality: the real crisis is one of too few migrants (temporary and permanent both) arriving to keep the US economy growing in the face of its aging population. To think about a policy response, the US should look north to Canada, a country facing an even more severe problem of aging, but one that appears to be doing considerably better in mounting a response.

America has long relied on its migrant population to provide vital services, spur innovation, and create jobs. Migrants make up 38 percent of home health aides and 28 percent of physicians. Between 1976 and 2012, immigrant inventors produced roughly 23 percent of all US patents. And immigrants started more than half of US billion-dollar startup companies in 2018. At the same time, exacerbated by pandemic border closures, the US is facing shortages of truckers, hospitality workers, construction staff, farm labor, and as many as one million technology professionals. Job openings in the US reached a record high in June 2021: above 10 million strong.

The slowing of the pandemic (hopefully alongside higher pay) will help mitigate the challenge of finding employees for the jobs that need doing, but this is a problem that is set to get worse rather than better. In common with high- and upper-middle-income economies worldwide, the US is seeing fertility rates fall and old-age populations rise, squeezing the number of working age people in between. Automation of some jobs, higher women’s labor force participation, and raising the retirement rate can all play some part in ameliorating the challenge, but, collectively, they are an inadequate response to the scale of the coming worker gap. More worker mobility will have to be part of the mix.

Thanks in considerable part to the number of migrants already living in the US, the problem is less severe there than in Europe and parts of East Asia . Unlike in many of those countries, the UN predicts the working age population will at least continue to expand in the US, by about 8 percent between 2020 and 2050 (in Figure 1, the gray bars depict the percentage change forecast for the working age population between 2020 and 2050). But the retirement-age population will expand faster, so that the ratio of those over 64 to people aged 20-64 in the US will climb from 28 percent to 40 percent between now and 2050 (the teal bars in Figure 2 show the change in predicted old-age dependency ratios 2020-2050). In order to keep the 2020 ratio between the number of dependents (those under 20 and above 65) and those 20-64 in 2050, the US would need to find additional workers equal to 14 percent of the predicted working age population in 2050.

Figure 1. 2020-2050 working age population decline and 2050 worker gap

Figure 1. 2020-2050 working age population decline and 2050 worker gap

Figure 2. 2050 old-age dependency ratios with and without migration

Figure 2. 2050 old-age dependency ratios with and without migration

Again, the level of migration that the UN predicts for the US under business as usual between 2020 and 2050 will play some role in mitigating the problem. The gray bars in the second figure depict how much larger the 2050 dependency ratio is under the UN zero migration forecast. Without any migration the US old-age dependency ratio would be 45 percent rather than 40 percent in 2050. That compares to predicted ratio of 80 percent in Japan and 58 percent in Germany. But because of the US’ larger population, the absolute number of additional workers the US needs is greater than in those two countries: 29 million for the US compared to 19 million in Japan and 15 million in Germany. (The good news for the US is that this pales in comparison to China’s 2050 worker gap of 384 million people.)

Canada has faced its own struggles to find workers both before and during the pandemic and also faces a retirement boom. In fact, it is predicted to see a higher old-age dependency ratio than the US in 2050, as well as a worker gap that is a larger percentage of its working age population. That said, business-as-usual migration is also predicted to have bigger impact on reducing the dependency ratio: by 13 percentage points to a 5-percentage-point reduction for the United States. And that reflects the increasing seriousness with which Ottawa is taking the need to attract more people to come to live and work in the country.

Canada already houses a larger migrant share of the population than the US and has been adding to the number of immigrants it admits each year. The plan (sure to be derailed by COVID-19) was to admit about 0.9 percent of its population as new permanent migrants in 2021. That compares to the US average of closer to 0.3 percent in 2017 when the Canadian plan was put in place, but is the kind of scale that might help close the US worker gap if (as in Canada) inflows were focused on attracting economic migrants. The US could learn from, and Canada expand on and improve, temporary migration paths as well, including the Temporary Foreign Worker Program, which allows Canadian employers to hire foreign nationals for up to one year for a variety of jobs to fill gaps in their workforces.

And especially for temporary migrants, the US has an advantage over Canada with regard to proximity to a growing source of workers. Mexico’s working age population will climb by 17 million between 2020 and 2050, and its dependency ratio will fall over that time (although as the country becomes wealthier it is likely the pool of potential emigrants will shrink). Taking the Central America region as a whole, the working age population will climb by 29 percent while the old-age dependency ratio remains low and total dependency ratios fall (although, again, even in many Central American countries, peak demand for emigration may be in the past). It is time US policymakers woke up to the fact that migrants wanting to cross the Rio Grande are not an external problem, but a considerable opportunity to deal with a homegrown crisis.

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.