Australia will never achieve ‘full employment’ with mass immigration

Adair Turner – a senior fellow at the Institute for New Economic Thinking, the chair of the Energy Transitions Commission, and former chairman of the U.K. Financial Services Authority – has penned a ripping article explaining why a growing population no longer has any benefit and how falling fertility rates and population decline are the mark of “rich, successful human societies“. Turner also explains why economies experiencing rapid population growth will never achieve full employment:

Every two years, the United Nations issues its latest estimate of future population trends. Its 2019 projection reveals a stark divide. Across all of Asia, Europe, and the Americas, population stability has already been achieved or soon will be, with the median projection suggesting an increase from 6.4 billion today to 6.5 billion in 2100, a rise of just 2%…

In all countries that have achieved middle-income status, and where women are well educated and have reproductive freedom, fertility rates are at or below replacement levels…

Rich, successful human societies choose fertility rates that imply gradual population decline.

Much conventional commentary laments the inevitable consequence that the “working age” population, often rigidly defined as people aged 15 to 64, must decline as a ratio to those aged 65 and above. If fertility rates cannot be coaxed higher, it is often argued, immigration must be embraced as the only answer to impending labor shortages.

But in a world of rapidly expanding automation potential, demographic shrinkage is largely a boon, not a threat. Our expanding ability to automate human work across all sectors — agriculture, industry, and services — makes an ever-growing workforce increasingly irrelevant to improvements in human welfare.

Conversely, automation makes it impossible to achieve full employment in countries still facing rapid population growth… we should at least recognize that this is where the real demographic threat lies. Automation has turned conventional economic wisdom on its head: there is greater prosperity in fewer numbers.

Adair Turner’s view mirrors the arguments Dr Cameron Murray and I put forward in our research paper Three Economic Myths about Ageing: Participation, Immigration and Infrastructure, which was commissioned by Sustainable Australia and released in April.

In Australia’s case, the population is unambiguously ageing, due to Australian’s living longer (a good thing), as well as the mass immigration program ran in the post-war period (i.e. 1950s and 1960s):

These migrants (which include my parents) have now grown old, thus adding to Australia’s current ‘ageing problem’.

Therefore, the common policy response to run a strong immigration program to counter population ageing is misguided, because today’s migrants will also grow old, thus creating further ageing ‘problems’ in 40 year’s time.

Furthermore, the standard rigid definition of 15-64 years old for the working-aged population ignores the increasing labour force participation by older Australians:

Since the mid-2000s, the labour force participation rate of over-65s has more than doubled. And there is obviously further scope for increases in participation given older Australians are remaining healthier for longer, as well as the legislated lift in Australia’s pension eligibility age to 67 by 2023.

Regardless, the ABS’ own demographic projections show that immigration is next to useless in ‘younging’ Australia’s population. That is, if we apply a more realistic definition for the working aged population of 19 to 70 (given more kids are staying in school and older Australians are working longer), then running annual net overseas migration (NOM) of 200,000 to 280,000 delivers only 3% more working-aged Australians by 2101 than zero NOM:

This tiny ‘benefit’ will only be transitory and comes at the expense of adding 150% to 200% more people to Australia’s population versus zero NOM:

Such a massive increase in population will obviously take a massive toll on Australia’s natural environment and general liveability.

It also makes no sense when technology’s rapid change has given rise to worries that automation will replace predictable and routine jobs—or even put many of us out of work.

It’s time to put the ageing economic myth to bed once and for all, along with the snake oil solution of mass immigration.

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