One advantage that the USA has over its economic and geopolitical rivals is its projected relative demographic strength over the next few decades. Unlike Japan, China, Russia and most European nations, the USA has a fairly strong fertility rate and has a long history of attracting and assimilating large numbers of immigrants. This means that the population of the USA is predicted to continue to grow in the years ahead and that the country will not have to deal with the problems that a shrinking, ageing population and shrinking labour force will bring. (Not all things demographic are rosy for the USA however: the sustained decline in the life expectancy in the USA is concerning and something that we have discussed a few times on this blog over the last couple of years.)
Having said all that, this countrywide growth is not just business as usual: slower growth in America’s working aged population means that GDP growth of 2 per cent is probably going to be the norm in the years ahead, rather than the 3 per cent that was usual in the last 50 years or so. Nationwide growth also masks some fairly substantial regional demographic differences within the US. A Washington thinktank, the Economic Innovation Group, has released a new report on demographic decline in many parts of the country. Many American regions are facing a future that resembles that facing other nations around the world. Indeed, 41 per cent of American counties, with a combined population of 38 million people, is facing Japanese level demographic decline.
Furthermore, 80 per cent of counties, with a population of 149 million people, saw a decline in their prime working aged cohort (people between 25-54 years of age) between 2007 and 2017. Urban centres on the coasts continue to attract younger workers from smaller cities and rural areas. At the same time, the majority of new immigrants to the USA are also drawn to the same coastal cities. Many parts of the flyover states are becoming less populated. This decline is expected to continue: by 2037 about two-thirds of American counties will have fewer prime working aged people than they did in 1997.
The concern is that certain cities get into a vicious cycle: fewer working aged people mean that employers look elsewhere to expand, while local governments find it harder to raise enough taxes to pay for infrastructure and education, meaning that more people look elsewhere for better places to live. There is a danger that certain cities hit a point of no return that is nearly impossible to reverse (perhaps Detroit is an example of this process.) One counter to this cycle is that the expense of big coastal cities is a deterrent and there are signs that millennials are increasingly leaving the larger US cities for cheaper alternatives.
One potential solution might be to bond immigrants to certain areas: making visas conditional on living somewhere for a certain time. This might work, but there needs first to be the jobs in those areas to make such a scheme successful. Otherwise the USA might start to emulate countries like Japan: growing megacities dotted between depopulating rural and regional areas.