In the U.S., like much of the developed world, the birth rate is falling. But that doesn’t mean the sky is falling too.
The Centers for Disease Control and Prevention reported that around 3.86 million babies were born in the U.S. in 2017 (the most recent year with available data), the fewest annual births since 1987. In 2017 the total fertility rate, which is an estimate of the total number of children a woman will have over the course of her life, was 1,765 births per 1,000 women. That is well below what is known as the “replacement level” – the rate necessary to keep population more or less stable.
America is far from the only nation facing a baby bust. Fertility rates and birth rates have fallen in many places in recent decades, and a study published in The Lancet last year put the global average fertility rate at 2.4, down from 4.7 in 1950. Not all nations are following this trend, and even those that are have seen fertility fall at varying rates. (Rates vary between U.S. states, too.) But overall, fewer babies are being born in enough places to make those prone to worry start issuing dire warnings as to the potential consequences.
Fewer babies each year will have real consequences over time. But I don’t think the news is cause for doomsday predictions.
First, it is important to ask why births are declining. An individual’s decision to have children – assuming the person is physically capable of doing so – may rest on a variety of factors, including personal priorities, religious beliefs, access to contraception and outlook on the world in which a potential child will grow up. But when we talk about broad societal trends, I think one key factor worth highlighting is the economics of having and raising children.
Kids are expensive. Depending on where you live, these costs can vary, which is why a lot of online calculators that attempt to estimate the cost ask you to input your state or region. But regardless of your location, having a child is not cheap. The costs of pregnancy and delivery alone can range widely; for instance, researchers at the University of California, San Francisco found that costs in California in 2014 ranged from as low as $3,330 for an uncomplicated vaginal delivery to as high as $71,000 for a C-section. How much of that cost comes out of the parents’ pockets also depends on their health insurance coverage, meaning determining delivery costs ahead of time is often complicated at best.
Once your child is born, the expenses continue. The Department of Agriculture estimated in 2018 that it costs around $13,290 annually to raise a child, or $233,610 from birth until they leave home (assumed to be around age 17 in this model). That is about $31,000 more, adjusted for inflation, than it cost when the USDA started tracking costs in 1960. Two factors, in particular, have become markedly more expensive: education and child care.
The USDA’s figures don’t include college tuition, but prospective parents are likely eyeing those costs with alarm, especially parents who may not have paid off their own educational debt. U.S. News and World Report’s annual survey found that the advertised rate for tuition and fees – the so-called “sticker price” – for the 2018-19 school year averaged $9,716 for an in-state public school, $21,629 for an out-of-state public school and $35,676 for a private school. Those costs don’t include housing, food, books or other non-fee expenses. The USDA estimate of overall child-rearing costs does include primary and secondary educational expenses, including private school tuition, books and school supplies; these have also generally risen in recent decades relative to other child-rearing costs.
Child care, too, is a major financial strain for many parents. In 1960, it was typical for one parent – usually the mother – to stay home with young children. Today, two-income families are much more common, which means paying for day care and babysitting. In especially expensive parts of the country, the monthly cost of full-time child care can rival a family’s rent. The USDA notes that child care and education together account for 16 percent of the overall cost of child-rearing, or around $38,000 on average over the course of childhood, though that figure varies significantly depending on factors such as the availability of extended family in the area who can take on some care responsibilities.
Under these circumstances, the choice to have many children can be viewed as a luxury. Couples who might otherwise opt for a big family may decide they can’t realistically support more than one or two children. In the United States, for instance, the Pew Research Center found that 41 percent of adults think that families with three or more children are ideal, even though families with one or two children are much more common. The number of American mothers with four children or more has decreased sharply since the mid-1970s, the Census Bureau reports, but Gallup polling found in 2018 that the number of Americans who want four or more children has been growing since the Great Recession.
If the economic factor is a serious driving force behind falling birth rates, this trend may well reverse itself with time. Some researchers have already theorized that what seems like a drop may actually be a delay, as many women now wait longer before having their first child. To the extent people really are having fewer children overall, the law of supply and demand should come into play. If people continue to have fewer kids, eventually day cares and colleges that today have more applicants than they can serve will no longer be so full. Market forces will pull prices back down. If that happens in a significant way, we may see births tick back up as child care and education become more affordable.
Yet even if the birth rate does not bounce back soon, or at all, we should evaluate the real consequences without unnecessarily raising the specter of catastrophe.
Several decades ago, fear spread that overpopulation would lead to a dystopia in which widespread starvation was inevitable. Paul Ehrlich, a Stanford University biologist, wrote “The Population Bomb” in 1968, and the book sold millions of copies. But subsequent advances in agriculture and technology meant these predictions turned out to be overblown. In the same way, predictions that a shrinking population will necessarily create the worst of all possible worlds fail to take into account human ingenuity.
If our global population falls, naturally, from more than 7 billion to 6 billion, or even 5 billion, significant turmoil would certainly result. Aspects of our culture and infrastructure would have to change, and that change would not necessarily come without growing pains. But that does not mean such adjustments would not eventually succeed.
Consider Japan. For many years, the country served as a cautionary tale about the consequences of demographics, as its population aged and its birth rate plummeted. But since 2012, the country has actually expanded its labor force by increasingly enlisting older adults, women and immigrants, three populations it had historically ignored. Prime Minister Shinzo Abe took active steps to make it easier for foreign workers to become permanent residents, and government policies have encouraged Japanese workers to delay retirement and young mothers to return to the workforce sooner. While Japan’s fertility rate is still far below the replacement threshold, evidence suggests that the country is well on its way to a new economic equilibrium.
If the world population fell significantly, there are a few major areas where we would have to work on creative solutions. In the U.S., Europe and many developed nations, retired adults are supported by the current crop of younger workers. We are already seeing a strain on Social Security today as the effects of lopsided demographics on this system become increasingly clear. We should seriously think about how we will meet the needs of a top-heavy population that will require medical care as well as means of support as it ages.
As in Japan, one of the keys may be encouraging migration. While the U.S. fertility rate has fallen below replacement level, in recent years our population has still grown, in part due to immigration. But given the current political gridlock surrounding this issue, we will need to get serious about compromise and reform in order to keep our economy strong as our birth rate drops.
A shrinking workforce can certainly cause problems beyond supporting older generations, but it may not necessarily mean a huge loss in productivity given the increasing reach of automation. Given how many existing jobs are vulnerable to automation, it is not unreasonable to imagine that we may be able to get as much or more done with fewer workers in the future. It may simply require creative approaches to compensation, retirement and other norms.
The birth rate may or may not bounce back, regardless of changes in the cost of raising a child. Either way, as long as we face the potential challenges of a shrinking population proactively, the rest of us will manage just fine.
Posted by Paul Jacobs, CFP®, EA
In the U.S., like much of the developed world, the birth rate is falling. But that doesn’t mean the sky is falling too.
The Centers for Disease Control and Prevention reported that around 3.86 million babies were born in the U.S. in 2017 (the most recent year with available data), the fewest annual births since 1987. In 2017 the total fertility rate, which is an estimate of the total number of children a woman will have over the course of her life, was 1,765 births per 1,000 women. That is well below what is known as the “replacement level” – the rate necessary to keep population more or less stable.
America is far from the only nation facing a baby bust. Fertility rates and birth rates have fallen in many places in recent decades, and a study published in The Lancet last year put the global average fertility rate at 2.4, down from 4.7 in 1950. Not all nations are following this trend, and even those that are have seen fertility fall at varying rates. (Rates vary between U.S. states, too.) But overall, fewer babies are being born in enough places to make those prone to worry start issuing dire warnings as to the potential consequences.
Fewer babies each year will have real consequences over time. But I don’t think the news is cause for doomsday predictions.
First, it is important to ask why births are declining. An individual’s decision to have children – assuming the person is physically capable of doing so – may rest on a variety of factors, including personal priorities, religious beliefs, access to contraception and outlook on the world in which a potential child will grow up. But when we talk about broad societal trends, I think one key factor worth highlighting is the economics of having and raising children.
Kids are expensive. Depending on where you live, these costs can vary, which is why a lot of online calculators that attempt to estimate the cost ask you to input your state or region. But regardless of your location, having a child is not cheap. The costs of pregnancy and delivery alone can range widely; for instance, researchers at the University of California, San Francisco found that costs in California in 2014 ranged from as low as $3,330 for an uncomplicated vaginal delivery to as high as $71,000 for a C-section. How much of that cost comes out of the parents’ pockets also depends on their health insurance coverage, meaning determining delivery costs ahead of time is often complicated at best.
Once your child is born, the expenses continue. The Department of Agriculture estimated in 2018 that it costs around $13,290 annually to raise a child, or $233,610 from birth until they leave home (assumed to be around age 17 in this model). That is about $31,000 more, adjusted for inflation, than it cost when the USDA started tracking costs in 1960. Two factors, in particular, have become markedly more expensive: education and child care.
The USDA’s figures don’t include college tuition, but prospective parents are likely eyeing those costs with alarm, especially parents who may not have paid off their own educational debt. U.S. News and World Report’s annual survey found that the advertised rate for tuition and fees – the so-called “sticker price” – for the 2018-19 school year averaged $9,716 for an in-state public school, $21,629 for an out-of-state public school and $35,676 for a private school. Those costs don’t include housing, food, books or other non-fee expenses. The USDA estimate of overall child-rearing costs does include primary and secondary educational expenses, including private school tuition, books and school supplies; these have also generally risen in recent decades relative to other child-rearing costs.
Child care, too, is a major financial strain for many parents. In 1960, it was typical for one parent – usually the mother – to stay home with young children. Today, two-income families are much more common, which means paying for day care and babysitting. In especially expensive parts of the country, the monthly cost of full-time child care can rival a family’s rent. The USDA notes that child care and education together account for 16 percent of the overall cost of child-rearing, or around $38,000 on average over the course of childhood, though that figure varies significantly depending on factors such as the availability of extended family in the area who can take on some care responsibilities.
Under these circumstances, the choice to have many children can be viewed as a luxury. Couples who might otherwise opt for a big family may decide they can’t realistically support more than one or two children. In the United States, for instance, the Pew Research Center found that 41 percent of adults think that families with three or more children are ideal, even though families with one or two children are much more common. The number of American mothers with four children or more has decreased sharply since the mid-1970s, the Census Bureau reports, but Gallup polling found in 2018 that the number of Americans who want four or more children has been growing since the Great Recession.
If the economic factor is a serious driving force behind falling birth rates, this trend may well reverse itself with time. Some researchers have already theorized that what seems like a drop may actually be a delay, as many women now wait longer before having their first child. To the extent people really are having fewer children overall, the law of supply and demand should come into play. If people continue to have fewer kids, eventually day cares and colleges that today have more applicants than they can serve will no longer be so full. Market forces will pull prices back down. If that happens in a significant way, we may see births tick back up as child care and education become more affordable.
Yet even if the birth rate does not bounce back soon, or at all, we should evaluate the real consequences without unnecessarily raising the specter of catastrophe.
Several decades ago, fear spread that overpopulation would lead to a dystopia in which widespread starvation was inevitable. Paul Ehrlich, a Stanford University biologist, wrote “The Population Bomb” in 1968, and the book sold millions of copies. But subsequent advances in agriculture and technology meant these predictions turned out to be overblown. In the same way, predictions that a shrinking population will necessarily create the worst of all possible worlds fail to take into account human ingenuity.
If our global population falls, naturally, from more than 7 billion to 6 billion, or even 5 billion, significant turmoil would certainly result. Aspects of our culture and infrastructure would have to change, and that change would not necessarily come without growing pains. But that does not mean such adjustments would not eventually succeed.
Consider Japan. For many years, the country served as a cautionary tale about the consequences of demographics, as its population aged and its birth rate plummeted. But since 2012, the country has actually expanded its labor force by increasingly enlisting older adults, women and immigrants, three populations it had historically ignored. Prime Minister Shinzo Abe took active steps to make it easier for foreign workers to become permanent residents, and government policies have encouraged Japanese workers to delay retirement and young mothers to return to the workforce sooner. While Japan’s fertility rate is still far below the replacement threshold, evidence suggests that the country is well on its way to a new economic equilibrium.
If the world population fell significantly, there are a few major areas where we would have to work on creative solutions. In the U.S., Europe and many developed nations, retired adults are supported by the current crop of younger workers. We are already seeing a strain on Social Security today as the effects of lopsided demographics on this system become increasingly clear. We should seriously think about how we will meet the needs of a top-heavy population that will require medical care as well as means of support as it ages.
As in Japan, one of the keys may be encouraging migration. While the U.S. fertility rate has fallen below replacement level, in recent years our population has still grown, in part due to immigration. But given the current political gridlock surrounding this issue, we will need to get serious about compromise and reform in order to keep our economy strong as our birth rate drops.
A shrinking workforce can certainly cause problems beyond supporting older generations, but it may not necessarily mean a huge loss in productivity given the increasing reach of automation. Given how many existing jobs are vulnerable to automation, it is not unreasonable to imagine that we may be able to get as much or more done with fewer workers in the future. It may simply require creative approaches to compensation, retirement and other norms.
The birth rate may or may not bounce back, regardless of changes in the cost of raising a child. Either way, as long as we face the potential challenges of a shrinking population proactively, the rest of us will manage just fine.
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