This blog,It Does Not Add Up, addresses important fiscal and economic issues in the U.S. It is remarkable that our unemployment rate, currently 3.5%, has been under 4% for going on two years. This is the equivalent of a huge labor shortage which is very good news for our lowest-income workers who now have lots of new employment opportunities as well as big wage increases.
But here is another very interesting fact. A new book, Fully Grown, by Dietrich Vollrath, makes a convincing argument that U.S. per capita GDP growth has actually slowed dramatically in the 21st century and for very positive reasons:
- Per capita GDP growth averaged 2.25% annually from 1950 – 2000 and only 1% annually from 2000 – 2016. Most of the slowdown comes from the effects of smaller family sizes and aging as well as the shift from goods to services.
- This slowdown represents success since child-rearing has become a smaller burden on families, we are living longer and we are able to spend more on enhancing the quality of life rather than just physical necessities.
But this raises the obvious question: how can we have both slower GDP growth and a labor shortage at the same time? Here is at least a partial answer to this question:
- The U.S. unauthorized immigrant total has fallen from a high of 12.2 million in 2008 to 10.5 million in 2017 (see chart) and is probably still continuing to fall further. This means that unauthorized immigrants have declined as a share of the U.S. labor force (see second chart).
- Concurrently with our overall labor shortage, the number of H-2A (agriculture) and H-2B (non-agriculture) guest worker visas has increased from 103,000 in 2010 to 408,000 in 2019 (see chart).
- This means that there are now more legal immigrants to fill the physically demanding jobs which Americans don’t want. It also means more jobs, and higher wages, overall for low-income Americans!
Conclusion. Overall, we have an amazingly strong economy even though annual per-capita growth has slowed in the 21st century. The U.S. is doing something amazingly right!