Is this the ‘spooky chart’ of the decade?

Australians obsessively debate immigration – either how to get extra people in, or how to keep unwanted ones out.

But a graph posted up on Trinity College Adjunct Lecturer in Finance Dr Constantin Gurdgiev’s True Economics blog suggests that the debate is already on its way to a resolution and there may be nothing much Western economies can do about it, regardless of whether you think the consequences are good or bad.

Eye-catchingly titled A Spooky Chart of Decade?, the post digs out a graph from Alan M. Taylor’s The Great Leveraging to suggest that developed economies may find themselves struggling to attract cheap labour as populations in less developed economies age (ie. as the dependency ratio in these countries increases).

Source: True Economist

Writes Gurdgiev: “Yes, folks, the upward path in the red line – the dependency ratio for more developed regions – is scary enough. Fair play. Although we all knew it. The really monstrous bit is the green line rise from 2030 on and the relative flattening of its decline from 2015 onward. Why is it ’monstrous’? Because until recently, immigration into the advanced economies from developing economies was taken as a given. Now, not so much anymore.”

Business Insider points out two possible implications of this. One, is (as Gurdgiev points out) that sources of cheap labour might dry up. The other is that immigrants may send a greater proportion of the cash they earn in developed economies back to their home countries, reducing their benefit to the country in which they work.

Gurdgiev concludes: “Never say we haven’t told you (European) that abandoning family for the sake of social benefits and improved consumption of holidays is not a good idea, but it is even dafter when one thinks that the sources of cheap labour might just run out pretty soon... in and around 2010-2025”.

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