To Secure The Border—Provide a Wide Gate for Guest Workers

Which part of the graph below do the GOP border warriors not understand? To wit, after growing by 1.9% per annum between 1972 and 2008, the growth rate of the prime-age US labor force (age 25-54) has decelerated to, well, 0.03% during the last 14 years.

At the same time, you do not need to be an economic historian to recognize that fully half of the GDP growth during modern times has been due to more workers and more labor hours supplied to the economy. So if labor supply growth has gone to zero on a long-term trend basis—and is actually shrinking as per below—where in the world is 4%, 3% or even 2% annual real GDP growth to come from?

Obviously, the only other source of economic growth in the great scheme of things is productivity gains. But during the 12-years since 2010 the productivity growth rate clocked in at just 1.13% per annum. So if that’s all there is and there ain’t no more when it comes to the core, two-part economic growth equation, what lies ahead is pretty miniscule gains in real GDP.

In turn, that begs the obvious big time societal question. There will be 100 million US retirees within a few decades, as the Baby Boom gets fully put out to pasture. So how in the world are they to be supported at anything near existing pay-as-you-go based Social Security, Medicare and other transfer benefit levels by an anemic GDP growth rate—one squeezed by a shrinking labor force on one side and the current, tepid levels of productivity growth, on the other?

Prime Age Civilian Labor Force, 1972 to 2022

The answer, of course, is no can do. But for avoidance of doubt, here is the growth of hours worked in the nonfarm economy versus real GDP for the period 1964 through 2007. Total hours worked grew from 112.6 billion to 236.0 billion during that 43-year period or by 1.74% per annum.

As it happened, real GDP rose by 3.27% annum during the same period. Accordingly, the input of labor hours accounted for 53% of total real GDP growth during the better part of America’s post-war prosperity.

Owing to the demographics already baked-into-the-cake, however, the black area of the chart below is slated to shrink progressively for several decades to come. Well, unless Washington finally wakes up to the demographic facts of life and the law of supply-and-demand, and follows a scheme that Robert Kennedy Jr. aptly describes as a “secure border with a wide gate”.