Immigration: The Next Issue to Rethink

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Nov 24, 2015 3:21:20 PM

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immigrationThe other day, I wrote that, as the cycle turns, we need to examine things that we assume to be true and make sure they still are. I used China’s quest to make the yuan a reserve currency as an example of just that type of decision. It’s a decision you might make based on what you know to be so but end up regretting once it turns out you were wrong in the first place.

Long-term cycles

I can think of several more areas where this could apply—interest rates, for example, as we exit a 30-year period in which they have declined consistently. But when you look at long-term cycles in which assumptions have become ingrained as solid truths but then turn out not to be (usually at the worst possible times), demographics is probably the poster child for exactly this type of problem.

Overpopulation has been the worry for much of the past century. In the west, Paul Ehrlich’s 1995 best seller, The Population Bomb, laid out very clearly the approaching crisis: mass starvation as human populations exceeded food production capability. In China, the government took more practical steps with the one-child policy. Everyone knew that overpopulation was a crisis-level problem and one that demanded immediate strong action. Of course, it hasn’t worked out like that.

The seeds of the solution were already in place at the time books like this were being written and policies formulated. Of course, you can argue about why the trends turned. But, decades later, we no longer expect unlimited population growth, and China has just reversed the one-child policy for fear of a population shortage.

Not on the public radar

Here in the U.S., and certainly in Europe, the worry is about too many people coming in from other countries. This is the modern version of the population bomb: not internal population growth, but being flooded by people from other countries. In Europe, given the relative numbers, there is certainly a case to be worried. As we are seeing, there are millions of people not very far away who are desperate to escape to a place where they can live safely—like Europe.

Here in the U.S., however, we have only two major borders, of which only one—Mexico—is seen as a problem. The rhetoric focuses on the risks from Mexican immigration, primarily on job losses for native-born Americans. At one point in time, certainly, there were real concerns. Now? Not so much.

More Mexicans are now leaving the U.S. than are coming. Although there have been recent headlines on this, it has in fact been the case since the mid-2000s. Moreover, it’s creating problems. Farm labor shortages are common, to the point where the agricultural industry has actually called for immigration reform to attract more laborers—not to send them home.

Global labor shortage

This is the thin end of the wedge. As Americans get older (and other countries have the same problems we do, except worse), there will be a global labor shortage. Expect to see countries competing to attract migrants in the next 20 years, rather than trying to scare them away.

The long view

This was probably a big part of the reasoning behind Germany’s original decision to welcome Syrian refugees. People are increasingly becoming a scarce resource, and policies that make a country less welcoming may, in 20 or 30 years, look like China with regard to its one-child policy. It seemed to make sense at the time but, in the long run, was self-defeating.

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