February 16, 2008


The Population Gap (James C. Capretta, February 14, 2008, Washington Times)

Over the medium and long term, the United States retains an important economic advantage over much of the rest of the world. That advantage is a growing population of younger workers. In contrast, Europe and Japan are on the verge of an unprecedented labor-force contraction, which will slow their economies markedly in the years ahead.

The size of a country's economy depends fundamentally on two factors: how much each worker, on average, can produce and the absolute size of the active workforce. Business investment in new technology, modern production plants and better equipment are crucial, as these investments increase worker productivity, which in turn boosts total output, as measured by gross domestic product (GDP).

But a vibrant economy is just as dependent on a ready supply of skilled workers as it is on continuous capital investment. The National Center for Health Statistics reported in January that there were 4.3 million births in the United States in 2006, the most since 1961. We are now experiencing something of a baby boomlet in this country, with the fertility rate inching up to 2.1 children per woman -- the magic level needed to sustain a population across generations.

Some time around 2030, those babies born in recent years will become indispensable participants in our economy, earning a living, producing goods and services and paying taxes. And we will need every bit of their output to meet the consumption needs of an aging population. Projections for Social Security show the number of Americans age 65 and older will nearly double in the next two decades, rising from 38 million in 2006 to 70 million in 2030. Thanks to our relatively high fertility rates, these same projections show the number of Americans aged 20 to 64 will increase from 183 million in 2006 to 201 million in 2030.

Even with a growing workforce, these projections point to an increase in financial stress. The ratio of the elderly population to the working-age population in the United States will rise from .21 in 2006 to .35 in 2030; and it will get worse from there.

But the situation is far worse in Europe and Japan. According to the European Commission, in 2004 the countries of the European Union (EU) had, in total, a fertility rate of around 1.5 children per woman, with some countries as high as 1.8 and others as low as 1.2. Japan's birth rate stands at about 1.3 children per woman, according to U.N. estimates.

Thus the global dependence on American debt and the danger of reducing same.

Posted by Orrin Judd at February 16, 2008 9:50 AM

Can't say it too often, our treasure is our people.

Posted by: erp at February 16, 2008 12:59 PM

Agreed, erp. Which is why Mexico is so screwed - they export their greatest resource.

Europe, however, will deal with that ratio of elderly to young through their national health systems. [Crosses arms] - "No more health care for you, grandma!"

Posted by: Mikey at February 16, 2008 3:33 PM

They're catching on. From the Dallas Morning News In Cambridge, Mass., Mr. Calderón stressed the importance of transforming "Mexico from a nation that loses its best people to migration into a nation capable of generating opportunity for Mexicans on their own soil."

Posted by: erp at February 16, 2008 6:15 PM