So the question is whether population growth is helping or hurting the economy. Now even I wouldn’t suggest to you that GDP would have been the same without these additional people. Take away those 850,000 people and the GDP would clearly decline too. Every person contributes something to the overall economic activity. Even if all they buy is food, clothing and housing, no matter how rudimentary (even if they rent instead of buy), they are boosting the GDP by that amount. But if they are boosting it by an amount that’s below average, then they are a net drag on the economy, contributing just as much to the labor pool but consuming below the level needed to gainfully employ them. Well, the fact that the percentage of people falling below the poverty line is increasing is clear evidence that population growth is occurring primarily in the bottom half of wage earners, actually hurting the economy in per capita terms.
It all makes sense if you think about it. As we cram more people into the same amount of space, per capita consumption declines while the per capita contribution to the labor pool remains the same or may even grow. (As the over-supply of labor grows, putting downward pressure on wages, a higher percentage of the population will enter the work force in a bid to keep up the family’s income.) If you don’t understand the relationship between population density and per capita consumption, then you need to read Five Short Blasts.
It’s time for economists to abandon GDP in favor of a more meaningful economic indicator, one that takes the size of the population into account. Even a child can understand that a bag of jelly beans shared with three kids instead of two means fewer jelly beans for himself. Economists need to look not just at the growth in the supply of jelly beans, but also at how many kids are showing up to share them.