Why population?

The three frequent readers of my blog over the last several months probably noticed a repeating theme to my posts: population. A logical question to ask would be, why this focus? Quite frankly, and this is my opinion, population is the root of economic activity and the very economic actors we attempt to model.

There is another perspective as well and that is policy. From a policy perspective, and I am thinking quite specifically about North Dakota right now, population is an important, almost binding constraint. When you look to the potential growth of a state, any state but, again, thinking about North Dakota, you look at increase in productive resources and you look at innovation. Population would appear to be the binding constraint for North Dakota.

How many times have I heard the low unemployment rate celebrated? How many times are there comments about more job openings than unemployed available to fill the the jobs? Do not get me wrong. We should celebrate low unemployment, but we also need to recognize a second side to this. As a state, we do not have a significant pool of available workers waiting around to work in new jobs or new industries.

An economic problem of this sort, lack of population, is not so easy to solve. The three fundamental demographic forces are fertility, mortality, and migration. We could try to encourage births to solve a labor supply problem, I suppose, but that is a solution for fifteen years into the future. If we could reduce mortality, and assume that it also included a longer working life, we have a moral obligation to do that anyway, regardless of economic policy needs. This leaves us with migration.

Migration is the quickest fix, if it is actually the case that you can attract people. The anecdotal information given to me over the years is varied on this front. We all know the oil patch generated significant jobs and attracted workers in, but never enough. This led to internal labor reallocations in the state and created shortages in various industries and various geographies.

The fact is, even with high paying jobs in a booming industry, North Dakota never generated the population necessary to satisfy the labor demand. Early evidence also points to many of these workers leaving once the peak oil activity fell off. Other stories I have heard speak to a difficulty with attracting workers in for jobs on a longer term basis. There are various excuses, which also have demographic analytic components such as age, such as weather or distance from home and so on.

From a policy perspective the state does not have the resources to “buy” workers into the state. Economic development policy and regulatory policy consistent with a strong economy with attractive labor market opportunities is the best approach to take. This does not change the fact that demographics are still working against the state in terms of economic goals and performance.

That is why I love teaching demographic methods. It is incredibly relevant to the policy discussions going on in the state right now.



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