Dependency ratios rule everything around me

Pronatalist and pro-immigration politics go hand in hand

I’ve been detecting a vibe-shift in the UK right. A handful of things have happened (Muslims at the Ballot Box, immigration-motivated riots, new stats on immigration) that have made it more palatable for people to be anti-immigrant. Meanwhile, pronatalism has risen as an area that people care about. This isn’t between warring factions but instead these ideas are popular in the same pool.

We are so fucked

The British state is basically a Ponzi scheme. The theory goes something like this – it’s okay for the Baby Boomers to be net recipients because the economy has been growing. Therefore by allowing Baby Boomers to borrow and let Gen X pick up the tab, we’re effectively redistributing money from a richer group (people born in the 70s) to a poorer group (people born in the 50s).

If we think redistribution is good, why not send money back in time to our ancestors?¹

But British productivity growth has been stagnant and birth rates have dropped so now that it’s time for our generation to pick up Gen X’s tab  it’s not looking so great.

Birth rates have been below replacement since the 70s

Productivity growth has been slow since the financial crisis

The state pension has been growing as a proportion of GDP (slowly but steadily)

If we crudely say that the size of the economy is [Number of workers  *  Productivity],² if productivity is stagnant and the number of pensioners to support increases, we need lots of new workers to keep standards of living constant.

What I’ve articulated here is probably not novel to any of my readers, but I think it’s good to set the scene.

You thought it was bad? What if it’s even worse?

There’s a new OBR report that’s been making waves.

Based on current policy, this is what the OBR projects is our future.

As John Green would say “I’m on a roller coaster that only goes up”

If nothing changes the OBR says that government spending is going to balloon and government revenues are going to fall slowly from current levels. Basically, if nothing changes, we’re bankrupt.

There are lots of graphs that break down the different elements that have gone into making this prediction. But this one has made the biggest waves.

Anger at immigration has been growing. For several elections the British people have clearly voted for less immigration and politicians have listened, acknowledged their frustration, and delivered yet more immigration.

What people say is that politicians want to cut immigration but unfortunately they also want to keep taxes low and maintain our public services, so they keep them afloat with “cheap labour from abroad.”

I’m sure this is part of the reason immigration levels have stayed high, but there are other shocks as well – for example, we accepted a lot of refugees from Hong Kong and Ukraine. I think there are deeper structural issues too; people from abroad have innovated ways of exploiting loopholes in our system, inflation has increased wages meaning that more people make it over the threshold for different kinds of visas, and our politicians are so incompetent that it’s not clear that even if they really wanted to they could pass the policies needed to cut immigration.

I think the reason this OBR report  has been so exciting is because people from the anti-immigration camp have been told that  immigrants are net contributors so if you want to reduce immigration you’re probably racist and your values aren’t worth making the rest of us poorer for. But meanwhile, it is obvious that post-Brexit the groups of people immigrating here has changed and therefore it would be a mistake to rely on old data for our current conclusions.³

Britain is not alone here. It seems that lots of European countries are experiencing the same economic problems and therefore are experiencing a lot more migration.

The politics of this is great.

I don’t think we should accept immigrants who are going to decrease the quality of life for British citizens. This means I think we should be stricter about accepting dependents.  And for a combination of cultural and economic reasons, I think we should be very strict about the quality of immigrants’ English language  skills. My ideal immigration system would also privilege under 25s.⁴

I’m desperately worried about our dependency ratio and while I have altruistic values that extend to all of God’s people, I think the British government’s duty is to our citizens.

But I don’t think this is an argument against low-wage immigrants. We need people on low wages. Low wage workers are disproportionately working for the NHS, doing care, childcare, working in restaurants and warehouses, doing admin. 

1. By just driving down costs for the NHS and care they’re making the cost of providing British public services cheaper. Without these people we would need to spend more on the NHS and social care which means higher taxes – we may be counterfactually poorer without these people.

2. By doing low-paid work in other sectors they are probably making higher-skilled workers more productive. And remember, we have a progressive tax system, so boosting the productivity of high-earners benefits the public purse more than increasing the wages of average and below average workers.

3. Without immigration, British people who are doing more productive work now, would sort into the jobs that immigrants are doing. Thereby becoming less productive themselves.

Remember, from the way we crunch the numbers, the average baby boomer is a net drain on the public purse. If we could choose to delete the 80%-or-so of Boomers who are net recipients from history, would we be better off? Of course not! It is so intuitively obvious that the rich boomers would have been much less productive without their housewives, supermarket clerks, teachers, nurses, care workers, builders and waitresses. They wouldn’t have been able to create the economic growth they did if we had somehow deleted them from existence.⁵

The same is also true for our time. More workers make us richer and we often choose to use that extra wealth to boost the welfare of our poorer workers but that doesn’t mean that we’re better off without them. We don’t just distribute wealth, we also make it.

Do you want more people or not?

All these arguments for why we might want to severely restrict immigration are also arguments for reducing the birth rate. New babies will increase the strain on public services, housing, and you will eventually have to pay these people’s pensions as well.

Actually, it’s even worse, because for new babies you have to pay for education, child benefits, and you may lose a productive worker to caring for them.

I basically think most of the arguments against low-wage migrants are the same as arguments against pronatalism. This same, very exciting OBR report also shows that the average British person is a net drain.

If you’re worried about having to pay for migrant’s public services you should be worried about the sinister people who want to boost birth rates. You should be especially worried about the sinister people who want to boost birth rates by giving people money, which will disproportionately boost the birth rates of poorer people.⁶

We have a lot of work to do

This does reveal a core terrifying truth. If the average British person is a net drain and the average immigrant is a net drain, and if rich people are leaving, then we’re living on borrowed time. At some point something has to change or the British state is bankrupt.

It’s not the OBR’s job to predict the future. It’s their job to model the consequences of current policy. Obviously if current productivity trends persist and we don’t have a once-in-a-generation plague that targets old people, then we’re not going to keep up current levels of welfare spending. We should expect severe cuts to all aspects of the welfare state – for the young and old alike.⁷ And we should expect taxes to go up.

Because we expect these benefits to be reduced, immigrants look like a much more appealing option. 

If you’re under 40, the spending we’ve done on your education has already happened. But with new immigrants we haven’t paid for their education, we’re going to tax them more, and we probably won’t even give them a pension at the end.

Assuming the birth rate doesn’t increase and we want to keep current dependency ratios, by 2050 we’re going to need 38% of the working population to be immigrants.⁸

Like most developed nations, we’re faced with a choice

1. Boost productivity

2. Boost immigration

3. Boost birth rates

4. Get poor

The Tories chose 2 and 4. Labour are trying to choose 1. In an ideal world we would have boosted productivity to the point where all our choices about birth rates and immigration are about culture and achieving eudaimonia but that’s a luxury we don’t have. Instead we need to be thinking about how to find more human chattel to sacrifice down the NHS mines.

Many of my team would like to boost productivity and birth rates. But those are the hardest choices. I think there’s some low hanging fruit for productivity but I definitely don’t think there’s much low-hanging fruit for boosting birth rates. 

I think there is a valuable conversation here about culture. We currently aren’t choosing immigrants to maximise economic output, nor are we choosing immigrants with the best cultures that can blend harmoniously with British culture. But we’re lucky – Britain is actually really good at integrating migrants. Italy, Japan and France are going to have a much worse time.⁹

Good institutions and good culture are precious and rare and I fear that Britain will lose these if we become poor (too poor to take care of the old and sick) or if a significant chunk of the population are unintegrated immigrants. But I think most people who are concerned about immigration are too timid to have the conversation that they really want to have about culture so they’re hiding behind economics or “respecting the electorate”.

Personally, I have some cultural concerns but they’re minor when I think about our tax burden and our crumbling public services.

1. Of course, this seems less noble when you remember that the older generation makes this decision before younger generations could magnanimously agree.

2. The economy also contains capital so you could also say the economy is [capital stock] * [return on capital] but for the purposes of this post I am going to abstract away from how capital will evolve over different population scenarios or the extra investment needed under new population flows.

3. For an example of how good Britain has historically been at selecting and integrating migrants, here’s a Twitter thread that talks about how the UK is the only European country where second generation immigrant children outperform the native population. But as we bring in more and more care workers and asylum seekers, we are probably choosing people who are very different from our pre-Brexit cohorts.

4. An interesting side effect of our immigration system is that, because we use income thresholds, we shift the balance away from bright young grads with little experience and towards mid-career professionals.

5. This same logic applies to cities – bigger cities are more productive per capita. More people generally means more productivity.

6. If you don’t want low-skilled migrants for economic reasons, you should also be against stay at home mothers. Personally, I think raising the next generation is noble work and I think it’s okay for us to subsidise it somewhat by giving people pensions at the end of their life regardless of their tax contributions.

7. Sadly, we should expect these cuts to disproportionately affect young people because old people are a large and growing voting block

8. Without any immigration we’re going to have 1.69 working people for every pensioner. (Currently we have 2.75)

9. Fun fact, even though France has a higher birth rate than us, their low immigration rate means their dependency ratio is worse than ours.