Impact of the Economy on Demography

Demographic trends fluctuate in response to the economy.  The most obvious effect is a reduced birth rate during bad times, which can produce serious and expensive distortions in the nation’s demographic profile.  The baby boom of the Roaring Twenties was followed by the severe baby bust of the great depression.  Then the boom babies from the Twenties came of age during good times in the late forties and fifties and had large families, creating the enormous post-war baby boom that has stressed our social systems and distorted politics for decades and now threatens to bankrupt us as the Boomers retire.

To make matters worse, the smaller generation of children from the Depression and WWII years had smaller families in the 60s and 70s, leading to a second baby bust.  This whipsawed school systems, local governments, and businesses that had been frantically expanding services for the Boomer families and now had to retrench.  It also means that the generation after the Boomers is unusually small, and that they will have to bear a disproportionately high per capita burden to pay for the Boomers’ pensions and health care costs.

Not all of those fluctuations are necessarily bad – the drop in illegal immigrants from Mexico that we experienced during the 2008 recession was arguably a positive effect of the economic downturn.  Still, if our economic growth were to settle at a lower “normal” level, there would very likely be a downturn in the number of immigrants whom we want to come to the US, which would definitely be a bad thing; similarly, the lower birth rates amongst non-poor citizens which tends to accompany economic slowdowns would not be good for our long-term outlook.

These impacts suggest the importance of using immigration policy to balance out the vagaries in births from year to year.  The US would be a much more stable and predictable place if the number of residents born in any given year were nearly the same.  Since we can’t legislate or manipulate that directly, the next best thing is to specifically give priority in immigration to individuals born during “birth dearth” years, and/or families with children born during those years.

Looking back, if we had welcomed substantially more educated immigrants who had been born during the great Depression or WWII and who had young children born after 1964, the US economy would now be much stronger and we would not be facing such an unmanageable debt crisis as the Boomers retire.  Looking forward, we would be much better able to handle the Boomer retirement crisis if we gave a higher priority to  educated immigrants who were born during the 70s and early 80s.

Aggressive use of cohort (birth year) leveling would eliminate the perpetual cycle of boom and bust generations, which fuels the long-term economic boom/bust cycle, which in turn amplifies and sustains the demographic booms and busts.  This would reduce  economic and political instability and the drag on economic growth from generational oscillations, and eliminate the destructive generational whipsaw effect on local governments and school systems.

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