US Federal Reserve chairman Alan Greenspan believes that America should allow the creation and adoption of labour-saving technologies (outsourcing?) and easier immigration to offset a presaged decline in the growth rate of US working-age population over the next two decades.
In his opening remarks made in a recent symposium at the Federal Reserve Bank of Kansas city, Wyoming, Greenspan also said that the US capital markets should be more receptive towards immigrants.
The Fed chairman added that that outsourcing will help offset the rising pressure of retirement incomes and growing scarcity of experienced labour, while higher immigration would offset the decline in fertility seen in the country.
Statements like these will be more than welcome for the Indian information technology industry that's facing outsourcing heat in the run-up to the Us presidential election.
The growth rate of the working population in the US is expected to decline substantially over the next two decades and is expected to remain low thereafter, Greenspan said in his speech.
He pointed out that despite improving the feasibility of work at older ages, Americans have been retiring at younger ages.
However, he cautioned that rising pressures on retirement incomes and a growing scarcity of experienced labour could eventually reverse the trend. Greenspan added that the productivity gains in the US have been exceptional in recent years.
But for a country already on the cutting edge of technology, to maintain the pace will not be easy unless it engages in the long overdue upgrading of primary and secondary school education system.
Maintaining even a lower rate of capital investment growth will require an increased rate of domestic saving. This, he said, is because it is difficult to imagine borrowing savings from abroad indefinitely at a rate equivalent to 5 per cent of the US GDP.
A key component of domestic savings in the US in future decades will be path of the personal saving rate, which in turn, will depend especially on the behaviour of the members of the baby boom cohort during their retirement years.