April 04, 2019

Declining working-age population is a major problem for the US economy, study finds

Declining working-age population is a major problem for the US economy, study finds

Slower growth in the working-age population is America’s biggest economic challenge. The Washington-based think tank Economic Innovation Group reports that US population growth has fallen to its lowest point in 80 years. Compared to the early 2000s, the US now adds approximately 900,000 fewer people each year to its population.

The researchers argue that the US is facing a demographic crisis of the same scale as Japan. Japan’s population shrank by 1% over the last decade and its economy has suffered as a result, with the country’s working-age population shrinking by 4.4% in the same period.

Between 2007 and 2017, 80% of American counties experienced a decline in the number of residents aged 25–54. The research predicts that by 2037, two-thirds of American counties will have fewer working-age adults than they did 40 years before. Population decline perpetuates economic decline with detrimental consequences for housing markets, local government finances, and productivity.

In the case of Japan, Daiji Kawaguchi and Hiroaki Mori suggest rapidly expanding healthcare services and increasing the female labor participation rate. However, the situation is made worse in the US because uneven population growth is causing some regions to fall behind others, resulting in vast regional inequalities.

In response to this, the authors of the report suggest implementing a new visa policy, which would encourage skilled immigrants to work in regions suffering from a lack of human capital. Alongside the visa system, the researchers also propose complementary initiatives to upskill and retrain existing residents.

IZA World of Labor author Abdurrahman B. Aydemir, argues that skilled immigrants boost innovation and "can raise wages for low-skilled native workers struggling with declining labor market prospects," in his article, Skill-based immigration, economic integration, and economic performance.

Read more articles about immigration and the aging workforce.