TLDR: Yes. A growing population is a strain on the economy, only when the population drains a country’s resources, instead of adding to it. Contrary to popular belief, immigrants can actually be good for a country’s economy- which is essentially what the development of the United States is based on.
Economic growth can be seen as the sum of population growth and productivity growth. Population has accounted for half of GDP growth, as measured throughout recorded economic history.
How have countries tried to boost their working population?
1. Babies
70% of developed nations have implemented policies to boost fertility rates, through incentives such as:
Subsidized hospital stays
Direct cash incentives (which failed, because only very poor women responded to it, which added to welfare expenses)
Tax cuts
Home-help subsidies
Pension increase
Such measures, however, often lead to unpredictable distortions in the demographics (just like China’s one-child policy did), and is thus not as good a measure as opening doors to immigrants.
2. Immigrants
When productivity growth is similar for countries, it is seen that immigrants make up the difference in economic growth rates. This was seen in the 2010s, where the growth of the United States versus that of Japan or Europe was attributed to the population boost through immigration.
However, the immigrant impact on the economy is also usually accompanied by political backlash.
3. Retired workforce
Decreasing the dependency ratio, by simply increasing the retirement age seems like an easy way out, but is also necessary considering the increase in average lifespan of humans over the past decade.
This measure not only increases the population growth, but also indirectly increases the productivity growth, as investment by the earning population increases.
4. Women
Globally, less than half of women (47%) participated in the labor force in 2019. Decreasing the gender gap of women in the workforce can be done under two major buckets- removing outdated laws (women not being allowed to own property etc.), and implementing new measures to increase women participation in the workforce (such as policies of ‘womenonomics’ in Japan such as tax rebates for second earners).
It is also important to note that laws meant to boost fertility rates might end up decreasing the involvement of women in the workforce.
5. Robots
Imbibing technology for basic tasks would again have a dual impact- provision of low-end services at lower costs, as well as freeing up the working population to focus on high-return jobs, thus adding more to economic growth.
“To assess whether population trends are pushing a nation to rise or fall, look first at the growth in the working age population, then track what countries are doing to bring more workers into the talent pool quickly- women, elderly, foreigners or robots”- Ruchir Sharma
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