Immigration…Can it and should it last?

Many people may take the position that no matter where they look, it seems there are more and more people. Schools are overcrowded, traffic is backed up in our cities and on our highways, every flight is packed to the gills, and the line to get a simple cup of coffee is practically out the door. And it seems to be getting worse. However, the harsh reality of our economic future is the fact that we as a country really don’t have enough people. To prove this point, all we have to do look is at the demographics of the United States.

According to Social Security, there are roughly 43 million people receiving Social Security benefits as well as being enrolled in Medicare. This demographic is currently being used to project what will happen in the future for those nearing retirement.

The problem when looking at demographics is that the next generation that is supporting these 42 million “retirees,” the Baby Boomers, numbers about 76 million people according to the US Census.  From what we are being told, both the entitlements of Medicare and Social Security are expected to go broke in the very near future.

As reported by the Associated Press, the trust fund that Medicare uses to fund hospital expenses is expected to be empty by 2026, and Social Security’s coffers are expected to be exhausted by 2036.

Unfortunately, this time frame just happens to sit smack dab in the middle of Baby Boomers’ window for retirement, and these very same Boomers may expedite the ‘demise’ of Medicare and Social Security funds by retiring even earlier.

Here is the major issue, especially when we look at demographics: today’s retirees have the luxury of having an almost 2 to 1 ratio of workers to retirees. When we consider that in the context of who is helping to fund these entitlements, it’s not a robust scenario, but it’s also not a horror show… yet.  However, this cushion, tenuous as it is, will not be the same for the Boomers.

US fertility rates have been on the decline. There are various reasons for that, which is a separate discussion. What we do know is the smallest generation in the United States just happens to be the one following the Boomers, Generation X. This generation will be responsible for the Baby Boomers, and those who are still alive (and retired) from the silent generation.

Generation X, according to the US Census, comprised roughly 62 million births. That is simply not going to be enough to help maintain or sustain these two entitlements.  Instead of the Boomers having a 2 to 1 ratio of people funding their Social Security benefits and Medicare costs, they will actually be in the red.

Luckily there has been immigration over the last few decades, and even luckier, the majority of these immigrants (according to government analysis) have fallen into the same age brackets as Generation X.  However, this is not enough.

As reported by migrationpolicy.org in February 2015, “overall, the immigrant population in 2013 was older than the U.S.-born population: The median age of immigrants was 43.1 years, compared to 35.9 years for the native born.”

Even with this influx of new taxpayers into the country, the numbers still do not add up to  that 2 to 1 ratio. The latest US Census pegs Generation X to only contain about 90 million people.

The other issue that few want to discuss is that wages are stagnant, especially among the unskilled and undereducated. The number of people in Generation X who are earning at least the same amount in wages and income as compared to the Boomers is considerably less.

The United States, due to this upcoming demographic shift, is staring at a problem much larger than anyone has predicted. How is the government going to support the entitlements of both Social Security and Medicare for the much larger population of Baby Boomers and the remaining older retirees, while also continuing to pay for everything else it supports such as salaries for employees, military conflicts, welfare, pensions, etc.?

On the surface, an easy solution would be to allow as many people into the country as possible to help pay for this impending doom. But even with this band-aid approach, the problem wouldn’t be solved due to the fact that this idea is simply running out of steam.

Just by looking at the Latin American countries that have been supplying these immigrants into the United States, we can see that the clock is running out. Once again it is due to demographics, as the fertility rates in many of those countries have fallen off the table as well.

Back in the 1970’s, the average fertility rate among these countries was roughly in the mid 6% range. Mexico, which accounts for 28% of all immigrants into the US, had a birth rate of roughly 6.77% through the 1960’s. The bulk of immigrants that are here today were born in the 1970’s, and that is when the birth rate started to drop.

In 1970, Mexico’s birth rate fell 2 percentage points to 4.76%. By 1990 it was only 3.32%. Today, Mexico’s birth rate is only at 2.22%, which is at the point of where a society can maintain itself.

And the numbers are pretty much the same for almost every other Latin American country that exports people into the United States, both legally and illegally.

The next largest importer of people into the US from a Latin American country, according to migrationpolicy.org, is El Salvador. El Salvador is also facing the same demographic shift as Mexico. Throughout the 1960’s and the 1970’s, the birth rate was as high a 6.77%, but that too fell off the table over the last four decades. El Salvador’s birth rate is only at 2.21% and is getting smaller.

The Latin American countries with the highest birth rates in the 1960’s through the 1970’s, Honduras and Nicaragua, are now seeing birth rates at 3% and lower.

If the United States does not take in enough people today from these countries, this natural resource of human beings will dry up over the next 2 decades. There simply won’t be enough people to maintain the inflows and keep up with the bills that the government is racking up.

Again, the United States is facing a problem of incredible proportions and the current solution will only lead to even more disastrous problems within the country. Both of the two major political parties seem to be talking about allowing as any immigrants in as possible. But even this cannot sustain itself if you look at the demographics.

It is time that the United States government faces the harsh reality. After years of spending like drunken sailors (although that is not a fair comparison, as sailors spend their own money), a reevaluation of the economic structure needs to be discussed by the adults in the room. Maintaining an economic structure that rewards corporations for keeping wages down by importing cheaper labor while also shipping jobs overseas,  is not a long term solution. Maintaining what appears to be a constant marketing plan to decrease the size of families, which is done covertly via economic policies that make it hard for those to want larger families to afford it, is yet another band-aid solution. These policies will not offset catastrophic events that are staring us in the face.

At the end of the day, we still do not have enough people who are going be in the workforce supporting those who are retired. We need to improve the fertility rates in America as well as plan for the inevitable costs that come with an older generation…health costs.

This means that we will need economic programs to promote growth, which will help with wage growth and wealth generation as well as restructing how the financial industry helps people plan for retirement in order to avoid this impending problem.

By the way, the hits don’t just stop with the Baby Boomer generation as the generation aptly known as the Millennials will face the exact same problems as they are much larger than the generation that is following them.

The cherry on top for them though: the countries with the highest fertility rates in the world, currently, just happen to be ones with a population that is dominated by those who happen to be of Islamic faith.

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