Friday, May 2, 2008

Demographics and Future Economics

The WSJ published one of the most comprehensive articles I've ever seen on modern U.S. demographics on May 1, 2008 (page A3: "Surge in U.S. Hispanic Population Driven by Births, Not Immigration"). Here is one section from the article:

According to the Pew Research Center, whites are projected to make up only 45% of the working-age population in 2050, down from 68% in 2005. The center projects that the share of Hispanics in the working-age population will rise to 31% from 14%. The ratio of senior citizens to working-age people age 25 to 64 will grow to 411 seniors per 1,000 working-age people in 2030 from 250 per 1,000 in 2010, according to Dowell Myers, a demographer at the University of Southern California.

"If you are pro-economic growth, you must be pro-immigration and pro-Hispanic, because we don't have the workers," says Donald Terry, a senior official at the Inter-American Development Bank in Washington.

I won't pass up this opportunity to paraphrase Julian Bond, the most inspiring civil rights leader living today. He has said that integration and more cross-cultural understanding are essential, because today, benefits like Social Security are paid by people with names like Smith, Blake, and McAllister. In the future, however, they will be covered by people with names like Sanchez, Akeem, and Priya. Therefore, the children of the Smiths, Blakes, and McAllisters have a direct stake in seeing that the Sanchez families do well so everyone can continue having a cohesive financial net.

One issue not discussed is that many immigrants do not learn English, which limits their earning and career potential. In some neighborhoods in San Jose, I have knocked on a client's door, and will see about five people watching Telemundo in a small apartment. It is the six year old daughter, not the parent, that comes to me asking whom I want to see in English. Our ability to integrate that six year old girl is crucial to California's success, because she will have a difficult choice when she is older. Will she move away from her family into a more affluent neighborhood as her earning capacity increases, or will she stay in a poorer, less integrated neighborhood so she can assist her family? The decision to seek economic opportunities in society sometimes entails leaving the neighborhood in which you grew up. That's an easy choice if you know your parents can take care of themselves. But what if they don't speak English?

There is another, more troubling issue--any country that guarantees gun rights must ensure that its entire population is sufficiently optimistic about the future. Intuitively, people who have access to guns but no belief in a better future will pose problems.

At the end of the day, most governments "bribe" their citizens to avoid being overthrown--the question is whether such bribery takes place in the form of a promise of an unbridled, open future that leads to innovation, or in the form of enforcing a re-distributive income policy that provides expensive benefits like subsidized housing, free health care, and even free food (some governments pay for bread lines for the poor). In a capitalist system with a Second Amendment, this policy preference is no small question. If there continues to be widespread income inequality, the winds will inevitably shift to benefits and bigger government rather than less government and more freedom. And if that's the case, why not just accelerate the process and adopt European-style governance, which has more experience with administering this kind of large government? (The EU, of course, is imitating the U.S., indicating that it doesn't believe its system is working perfectly, either.)

U.S. Population Map:

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