The steady decline of birth rates in the U.S. creates considerable concerns for the future of the American economy, which relies on a robust working-age population, according to experts who spoke to the Daily Caller News Foundation.
Birth rates have steadily declined for a number of years in the U.S. and currently total around 12 births per 1,000 people, which is lower than the 14.2 birth average seen in 2000 and far lower than 24.3 in 1950, according to Macrotrends. The decline in birth rates poses major issues for long-standing economic and government institutions that depend on larger labor forces, but the worst of the effects could be avoided if proper policy actions, like addressing runaway government spending and entitlement programs and investing in measures that improve productivity, are taken, experts told the DCNF. (RELATED: High Rent Prices Are Crushing Americans — And They Could Be Here To Stay, Experts Say)
“Declining birth rates are a major problem for America. Our greatest economic resource is not land, or water, or energy, but people,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “Fewer births mean less economic growth, all else being equal. Additionally, we face another problem in many of our entitlement programs, which have been set up like Ponzi schemes, such as Social Security. These programs require a much higher birth rate than we currently have in order to prolong their solvency. We are already seeing this effect, with major entitlements moving toward insolvency faster than previously anticipated because the birth rate has been so low.”
Both the federal and state governments are facing huge debts and unfunded liabilities in terms of entitlement spending like Medicaid, Medicare, Social Security and pensions. Working-age populations have increasingly been unable to provide the necessary funding for these programs as the number of older Americans grows, resulting in more than $90 trillion in unfunded liabilities.
There is a strong correlation between higher incomes and lower birth rates, with countries where gross domestic product per capita is below $1,000 per year usually seeing women give birth to more than three children, while women in countries with $10,000 per year tend to have no more than two children, according to the Federal Reserve Bank of St. Louis (FRED). Economists speculate about a number of different reasons why this relationship exists, such as the cost of educating children in richer countries, higher infant mortality and people in poorer countries more commonly having to take care of their parents as they age.
“It is possible for a shrinking, aging society to maintain and increase prosperity, but that isn’t going to happen automatically,” Nicholas Eberstadt, Henry Wendt chair in political economy at the American Enterprise Institute, told the DCNF. “We’ve got reasons to be cautiously confident, since there are constantly improving technological possibilities, since in general, we kind of hope that health is going to be improving. And since, in general, we think that education is going to be improving. All of those things can lay the foundation for more productive, wealthier Americans, even if the headcount is shrinking.”
Demographically, Japan is done pic.twitter.com/HN70JndcKn
— zerohedge (@zerohedge) February 28, 2024
Investors have been increasingly optimistic that technology related to artificial intelligence (AI) will be able to generate huge increases in productivity, with semiconductor companies leading the charge on AI, like Nvidia, seeing massive gains in stock prices in the last few years.
“What does not work so well is when you have some of the things we see today, with health stagnation, with troubles in education, with a completely feckless inattention to budget discipline in our public finances,” Eberstadt told the DCNF. “Those are not the sorts of things that are going to help lay the foundations for an increasingly prosperous country.”
Government debt has continued to grow at a fast pace under the past few administrations, currently totaling nearly $34.4 trillion, according to the Treasury Department. The U.S. added over $800 billion to the national debt in just the fourth quarter of 2023 and spent $659 billion on debt payments in the fiscal year.
“If this continues, the symptoms here in America will grow to the same magnitude as in Japan, China, Korea, and others,” Antoni told the DCNF. “Legal immigration has helped alleviate the problems of America’s low birth rate, but illegal aliens are actually exacerbating the problem. Not only are the latter less likely to pay taxes than legal immigrants, but they’re also eligible for government handouts in several more liberal states. Thus, they simultaneously generate less revenue while adding to outlays.”
The employment level of foreign-born workers in the U.S. has climbed from 27,697,000 in February 2020 to 29,842,000 in 2024, while the level of native-born workers has declined from 130,320,000 to 129,807,000 in that same time frame, according to FRED. In the 2023 fiscal year, Customs and Border Protection saw more than two million encounters at the southern border.
Japan has long experienced issues of an aging population and declining birth rates, with the number of births reaching an all-time low in 2023 and current trends indicating that the country’s population could shrink 30% by 2070, according to Independent. The country has experienced widespread economic trouble since the 1990’s, with some referring to 1991–2011 as the Lost Decades, according to Investopedia.
“Over the long term, a shrinking labor force is going to put a constraint on US economic performance,” Eberstadt told the DCNF. “How much of a constraint it puts on US economic performance is going to depend upon a lot of other things we do politically, like how we schedule and structure our entitlements, the sorts of incentives and the sorts of arrangements we make for our national health care incentives.”
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