The U.S. economy continued to gain steam last year, increasing at a 2.5% inflation-adjusted rate. Exports grew nicely thanks to the dollar’s 7% decline, and on the consumer front, low unemployment and a buoyant stock market helped boost spending levels. Keeping our economic engine humming at this rate, however, will not be easy. In order to get back to our historic 3%+ annual growth rate, we will need to address, among other things, the weak outlook for work force growth. While policies aimed at enticing more people into the job market may help at the margin, solving the core underlying problem of low birth rates and unfavorable demographics (i.e. aging Baby Boomers) will not be easy.
A more effective approach to growing the labor pool, however, may lie in policies aimed at facilitating immigration. Consider the case of Japan. Historically, Japan has been one of the least ethnically diverse countries on the planet. But restrictive immigration policies and low birth rates have caused a severe shortage of workers in the world’s second largest economy. In response, the Japanese government has enacted a range of policies to promote immigration and help foreigners, once in country, find work. These efforts include lengthening training programs, easing the path to residency, and introducing a point-based scoring system for highly skilled workers. As the chart above shows, these efforts are paying off. As of last October, there were 1.3 million foreign employees in Japan – an 87% increase since 2012. Consultancy Capital Economics estimates that the influx of foreign workers boosted Japan’s work force and GDP growth by 0.3% last year – a significant gain considering that the economy has only grown, on average, 0.5% per year over the last decade.
The good news is that the U.S. is one of the most desired destinations for potential migrants (see chart below). According to polling firm Gallup, in 2016 one in five potential migrants or about 147 million adults, named the U.S. as their desired destination. But our appeal should not be taken for granted. The number of potential migrants that named the U.K. their desired destination dropped almost 20% over the approximate four year period bracketing the 2016 Brexit vote.
The recent Olympics provides another example of the benefits of a more open immigration policy. Olympic host South Korea rules in speed skating. Of the 53 winter Olympic medals it has earned, all but two have been awarded for different versions of the sport. To expand their bench, the country recently granted citizenship to no fewer than 19 athletes. The majority of them ended up on the men and women’s ice hockey team – a sport only in its infancy in the country. South Korea is hardly alone in its global approach to Olympic recruiting. A total of 47 of those competing for the U.S. in Rio de Janeiro back in 2016 were foreign born.
Not everyone will agree with this open borders approach to sourcing Olympic talent. But the Olympics has always been as much about promoting international understanding and cooperation as competition. Playing against and alongside players (and workers) from other nations may be the best way to achieve this.
