The Wrongologist

According
to preliminary data from the National Center for Health Statistics, the overall birth rate in 2011 was the lowest since 1920, the earliest
year for which there are reliable numbers. Births fell 4% from
2007 to 2009 (the largest drop in the US for any two-year period since the
1970s). Births have declined for three consecutive years, and are now 8% below
the peak in 2007.

The US birth
rate in 2011 was 63.2 per 1,000 women of childbearing age, according to
preliminary numbers. That’s down by almost half from a peak of 122.7 in 1957
during the postwar baby boom. The rate steadily fell before stabilizing at
65-70 births per 1,000 since the 1970s.

Wikipedia reports that researchers
attribute much of the drop in the US birth rate to the recession in 2007-2009. A
state-level look by the Pew Research Center in October 2011, showed a strong
correlation between lower birth rates and economic distress: In 2008, North
Dakota had the nation’s lowest unemployment rate (3.1%) and was the only state
to show an increase (0.7%) in its birth rate.

All other
states either remained the same or declined.

Gretchen Livingston, author of a November
2012 Pew Study about birth rates,
told
NPR:

The Pew
Study showed a correlation between economic difficulties and birth rate declines
by race and ethnicity. Hispanics (particularly affected by the recession) have
experienced the largest decline: In 2008–2009 the birth rate declined 5.9% for
Hispanic women, 2.4% for African American women and 1.6%for white women.

People
confuse the birth rate (number of births per 1,000 women) with the fertility
rate. The fertility rate is the
average number of children born to a woman during her lifetime. 
The fertility rate needed to maintain the current US population is 2.1 children
born to women of child-bearing age.

According
to multiple studies, the US fertility
rate among women is now only 1.9 children
and falling.

So, is
this a blip or an ominous trend?

Nobody
knows. The falling birthrate mirrors what has happened during other American recessions.
 

Charles
Blahous, one of two public trustees for Social Security and Medicare, told Business
Week that birth rates affect both Social Security and Medicare funding, though
he added: “it is fairly typical for birth rates to drop during a recession.” Blahous
said:

A
prolonged decline, particularly in Hispanic births could have far-reaching
implications for US economic and social policy. It would challenge long-held
assumptions that births to immigrants will help maintain the US population
and create the taxpaying workforce
needed to support the aging baby-boom generation.

Still,
foreign-born women continue to contribute a disproportionately high percentage
of American births, birthing 23% of the nation’s babies even though they make
up only about 17% of the country’s female population.

So,
is this a good or a bad thing?

Yesterday,
we discussed the increasing numbers of Singles in America. Today, we are
talking about the falling birth rate. These may be separate developments, but
they are part of the same story: As our largest generation moves toward full-on
retirement we are minting what looks to be our
smallest generation.

The
concern about population decline is dominated by politicians and pundits who
are always on the lookout for a good doom story. They say:

• How
  will we have economic growth without a growing population?
• How
  will we solve our debt crisis?
• How
  will we pay for all of those boomers to have knee replacements?  

How
will our smallest generation, from the start of its working years, face the task
of supporting millions of entitled old fogeys? Something may have to give!

They
are afraid that slower birth rates will cause future economic problems. They see
higher taxes, fewer public amenities, and lower economic growth.

Sorry,
but the first impact of a decline in the birthrate will be positive for the
economy. Society has fewer children to raise and educate. That frees up female
labor to join the economy.

A
declining population also creates a
labor shortage which can have positive as well as negative effects. Initially,
labor participation rates, which are poor today compared to 10 years ago, will increase
to reduce or delay the labor shortage.

Another positive,
a labor shortage increases demand for labor, which can potentially result in higher wages along with a reduced
unemployment rate. While some labor-intensive sectors of the economy
may be hurt if the shortage is severe enough, others may compensate by
increased automation.

We
need to see the bigger picture:

The
Baby Boom generation was not our past and is not our future. We are seeking a new demographic equilibrium,
one in which our society and culture finds a balance that is relevant to the next
100 years, one in which “American Exceptionalism” doesn’t require us to be the
world’s largest economy, but the world’s best society.

Today’s demographic
trends aren’t promising: In 1965, 81 million workers paid for benefits to 20
million people, a 4-1 ratio. The ratio has fallen to 2.8 workers per retiree
and is expected to drop to two workers for every beneficiary by 2035, with 186
million workers paying for 91 million retirees. Additional rationing of health
care will be a common reality.

But,
with declining birth rates and more Singles, this may start to reverse course
after 2035.

Oh,
and slower growth in energy needs, a better environment, more space, less
pollution, less congestion and less waste produced.

Everybody wants those gains from a decline in the global
population, we are just afraid of trying it at home.