Americans are getting older and family size is shrinking, which means the nation will have fewer working-age adults going forward.

“I think it is a cause for concern if we are calibrating our expectations of having a strongly growing population,” says David Kelly, chief global strategist for JP Morgan Asset Management. “If you’re investing in things like the housing industry or the auto industry and you need an ever-growing population, then you have to adjust to a world in which the U.S. population is growing more slowly.”

By 2030, one in five U.S. residents — 20%— will be older than 65, compared with 13% in 2010 and just under 10% in 1970.

Various studies show that not only does an aging population cut into economic growth, but older workers who stay in the workforce tend to be less productive.

Meanwhile, as Americans age, the U.S. birth rate dropped to a 32-year low last year. Fewer than 3.8 million babies were born in 2018, down 2% from the previous year. Overall, the population grew 0.6% in 2018 compared to 1.2% growth in the mid-1990s.

That’s not necessarily a negative in the long run, says Kelly, adding that if you look beyond economics, a growing world population will potentially do more damage to the planet. Instead, he says, policy makers should plan for the expectation of a reduced workforce.

”There’s so many things in this world you can’t see coming. Demographics you see coming from a mile off,” he says. “It should be something that we try to adapt policy to as opposed to a lot of the things that we’re very unsure about, which we can more reasonably hesitate to act on. We really should adapt to a world of slow population growth because it’s clearly happening to us.”

He expects the lack of workers to spur the growth of robotics and artificial intelligence to replace the missing human labor. And he says Americans need to “get over our delusions” and prepare for U.S. economic growth to slow a bit.

Another fix for a diminishing workforce is to add more legal immigrants rather than restrict them. Immigrants tend to arrive in the United States during their working years.

“I think what you need to do is, first of all, change immigration policy so you can do something about the lack of immigration growth or lack of population growth,” Kelly says. “But also you need a more open trade policy. If we don’t have big growth in our population, we won’t have big growth in our domestic markets. If we want to attract fast growing companies they’ll have to see the world as their market and not just the United States.”

Kelly believes the U.S. economy can easily adjust to the challenges of slow population growth, but he worries politics could get in the way.

”Of course we can adapt to this stuff,” he says. “The real question is a political question because it seems even as our population matures in years, it seems that our political system gets less mature in terms of thought process.”
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