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Datawatch

Lack of immigrants risks population decline in rich countries

Labor shortages already threaten economic growth as COVID-19 limits worker mobility

A wall is under construction along the border between the U.S. and Mexico.

TOKYO/NEW YORK -- The COVID-19 pandemic and anti-immigration sentiments in advanced economies have dealt a double blow to the global trend of migration this year. This will increase the risk of a population decrease in these countries, with some observers predicting negative impacts on economies.

On Sept. 27, a Swiss referendum rejected a proposal to end the freedom of movement with the European Union. The right-wing Swiss People's Party had proposed the idea, but many rejected it because they thought it would damage an economy already battered by the pandemic. The party wants to bring back the sovereign right to control immigration, as did Brexit advocates in Britain's 2016 referendum.

Whether to welcome or prevent immigration has been a classic topic in history. The U.S. implemented the Chinese Exclusion Act in 1882 as a result of voters feeling their jobs were being taken by newcomers. In 1965, the Immigration Act abolished quotas and opened the door for immigrants. Under President Donald Trump, the country is again tightening immigration.

A comparison of 53 high-income economies' share of immigrants and gross domestic product per capita shows a trend in which GDP per capita is higher where there is a higher proportion of immigrants.

Critics point out that immigrants compete for jobs with the host country's low-income workers. But according to a study by Giovanni Peri, professor at the University of California, Davis, the influence of immigrants on short-term wages is "close to zero." The study said: "Native workers also respond to immigration by specializing in more communication and cognitive-intensive production tasks, which complement the tasks performed by immigrants."

The International Monetary Fund in April published a study that said "a one percentage point increase in the inflow of immigrants relative to total employment increases [economic] output by almost one percent by the fifth year." Having a more diverse workforce makes an economy more robust, according to the IMF.

With the pandemic making many countries close their borders, many are now short on labor.

In the U.S., farmers in Texas and Oklahoma face a challenge in harvesting their crops this year due to the virus. As the borders have been tightened, the seasonal labor force has shrunk dramatically.

Since Trump became president, family farm bankruptcies have increased. In the crop year from July 2019, the sector saw 580 filings, an 8% increase from the previous year.

According to the American Farm Bureau Federation, labor accounts for 35-48% of the production cost of crops, dealing a blow to the sector when immigrants are scarce. The federation says the current visa rules allow less than 4% of the labor necessary in the sector.

The population of high-income countries had been increasing thanks to immigration. United Nations statistics show that as of 2019, the population of the advanced economies had increased 7%, or 82 million, since 2000 and that 35 million of them were immigrants from emerging economies. As of 2019, the total number of immigrants from emerging economies to advanced economies was 91.7 million.

The U.N. estimates that if there were no immigration, the population of the advanced economies would start declining from next year. The population in 2030 would be 24 million fewer than in a business-as-usual scenario, and their current population of 1.3 billion would fall to 1.2 billion by 2050. Under a business-as-usual scenario, the peak population would occur in 2036 rather than 2020.

According to a study led by University of Washington professor Stein Vollset, by 2100 the fertility rate in most of the countries will be less than 2.1 -- meaning populations will decline. The group wrote in the study, "Liberal immigration [policies] could help sustain population size and economic growth."

Japan, where the population is only 2% immigrants and the fertility rate is low, is therefore experiencing a shortage of labor. In Germany, Chancellor Angela Merkel has said, "Without sufficient skilled workers, a business location cannot be successful," adding, "otherwise, companies will have to migrate."

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