What a weird question! As is well known, most European countries (with the exception of UK and France) suffer from shrinking populations. A shortfall of young contributors threatens public pension schemes burdened with ageing baby boomers. A new kind of old age poverty is looming; young people are being told that they will never achieve their parents' standard of living.

   Germany has launched an immigration campaign comparable to Israel's and attracted 1.1 million migrants in 2015 alone. “Slaves for Germany's industry” called them France's Marine Le Pen. Economists see them as future taxpayers expected to fill gaping holes among the German work force.

   In this context, immigration is interpreted as beneficial as mother's milk, not only in Europe.

   Time magazine said: “... the vast majority of the economic literature argues that a more liberal immigration policy would be good for the U.S. economy as a whole.” Ronald Reagan told the Republicans: “Whatever happens, don't stop immigration!”


The Cleveland mystery

   Cleveland OH is at the bottom of the ranking for job growth potential among 66 large American cities, only four steps above Camden NJ, the monument of de-industrialization and crime.

"Cleveland is dying," says Jim Russell. "Not only has the per-capita income gone up in Cleveland as the population has declined, it is growing at a faster rate than in Columbus where the population is on the upswing."  


    Although Columbus OH enjoys a middle-level ranking for job growth, it has been overtaken by Cleveland in per capita income.   From 2003-12, the Cleveland metro's total personal income increased by about $20 million. 

"Another example of how population growth is outdated as an important economic metric," says Jim Russell. "Population a good number for 1950s economies, a fine measure of manufacturing's dominance. Manufacturing isn't dominant anymore. Neither is population growth. Today, fewer people are needed to produce more goods. The old numbers are out of touch with the economic transformation."

  "For example, the region's rate of educational attainment appears less-than-competitive in a knowledge economy. About 28 percent of adults in the Cleveland metropolitan area hold a college degree, compared to 35 percent in metro Columbus... Younger newcomers are fueling the brain gain. The number of college-educated 25 to 34 year olds in Greater Cleveland grew by 23 percent from 2006 to 2012.

   The skill level of Cleveland's young adult workforce is world class. It ranks 7th nationally, ahead of San Francisco, Chicago, Seattle and Austin, for professional and graduate degrees."


The Japan mystery

   Japan's population is ageing and shrinking. Yet, the country stubbornly refuses to accept more than a tiny trickle of immigrants.

"Opinion polls show the Japanese public to be increasingly worried about the effects of the declining population. However, when asked what should be done to secure the labor supply, the top two answers in an April Yomiuri poll were to increase the rate of working women and encourage more elderly to work. Only 37 percent said more foreign workers should be accepted, and only 10 percent of those said manual workers should be brought in."

   International media, especially American ones, have for years described Japan as a depressed economy suffering from two decades of stagnation. Yet, the opposite holds true. 



    Production of goods and services is based on three inputs: labor force, capital and total factor productivity (TFP). A declining labor force will raise the capital stock per caput and increase productivity (unless the investment has become obsolete, e.g. a wastewater plant in an abandoned village). Reduced fertility permits more investment in fewer children, resulting in a better educated generation, Better education leads to more R&D investment, hence higher TFP.  In this way, GDP of a shrinking population will rise*), at least per capita, as shown by Japan. 

 Tim Worstall says: When we look at ...things from the point of view of the life experienced by people ...Japan is the third best performing country of those measured.   Even after two “lost decades” life in Japan... is still getting better. Rather better than it has in either the US or UK over the past decade too.



   Actually, if we look at the decade from 2005 to 2014 and compare the long term top performer Australia with Japan, we get a different picture. Measured in purchasing power parity (PPP) US dollars, Australia's per capita GDP increased from 38.900 to 43.200, i.e. by 11.3 percent. Japan's per capita GDP rose from 30.200 to 37.400, or by 23.8 percent. 




   No doubt, Japan continues to be a star performer -- without immigration. How did the Japanese achieve this surprising performance?

    There are several possible explanations. Often mentioned is Japan's world leading role in robotization not only at the factory level. Outsourcing of menial tasks to other Asian countries. 'Brain gain' by improving human capital**). Longer working years, later retirement age. Clever use of investments financed by the public sovereign debt which is at the world's highest level. 

   Nothing miraculous, however. Nothing which demographically shrinking European countries could not emulate, if they wished. In fact, an increasing number of countries have opted for no or only limited immigration: Denmark and Hungary, Slovakia, Poland and the Czech Republic, as well as Italy, Spain, Portugal and France. 

   There is no economic reason***) to criticize them for this policy. At the human level, that is of course a different story. 

Heinrich von Loesch


*)The second and most devastating bubonic plague in Europe which started in 1347 and killed off one third of the population is thought by historians to have reduced the level of malnutrition of the remaining population and permitted a more affluent lifestyle which ushered in the Renaissance period of modernization. 

**) Countries characterized by stagnant or shrinking populations appear more creative than those with growing populations. Japan and Europe are granted more patents and gain more science and economy relevantNobel prizes than India, China, the Moslem countries and Sub-Saharan Africa. The population of the United States, another creative country, continues rising mainly because of legal and illegal immigration.


Source: European Patent Office

***)    Jean-Laurent Cassely of  Le Monde says in Slate: Let's stop justifying immigration with economic and demographic arguments. He explains that migrants entering France don't care for the country's requirements. The migrants do not arrive to repair gaps in the age pyramid. He quotes the demographer François Héran who says that in any case the French population will see its share of old-age people double by 2060 because of the growth of life expectancy. "The contribution of migrants to repairing the pension systems is necessarily limited because ageing is first of all resulting from increased longevity."

"Ninety percent of the migration streams do not respond to our needs but to the rights of the migrants. The social scientists's job is neither to assuage nor to alarm the public about the effects of immigration but to provide a more objective view on the phenomenon."

Also of interest:


Jan van Ours 

Age, wage, and productivity

"Ageing populations are a concern for many developed countries, with increasing dependence on the working population expected. Despite this, there is relatively little research on how productivity changes with age. This column argues that while older people do not run as fast, there is no evidence of a mental productivity decline and little evidence of an increasing pay-productivity gap. The negative effects of ageing on productivity should not be exaggerated.."