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The Effects of a Declining Birth Rate on the Labor Force

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The Effects of a Declining Birth Rate on the Labor Force

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The Effects of a Declining Birth Rate on the Labor Force – Center for Business And Economic Research | The University of Alabama

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In 1975 Alabama’s total live birth rate was at its lowest. That year there were 57,922 births, compared to 70,589 births in 1965. Children born in 1975 became 16 years old in 1991-eligible for the labor force-and since 1991 Alabama employers have been feeling the effects almost annually of declining birth rates. So what has caused the decline in birth rates and how does that affect the labor force? Reasons for declining birth rates include 1) the effects of higher education, 2) increased access to abortion, 3) more women entering the labor force, and 4) the aging of the population.

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World fertility rates in ‘unprecedented decline’ - UN

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Hundreds of millions of people are not able to have the number of children they want, the UN warns.

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Texas birth-rate decline complicates economic growth prospects

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Texas birth-rate decline complicates economic growth prospects

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Texas birth-rate decline complicates economic growth prospects

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Lower birth rates are associated with less growth and a more rapidly aging population and, hence, slower economic expansion.

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Econofact | Key facts and incisive analysis to the national debate on economic and social policies.

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By Melissa Kearney, Phillip Levine and Luke Pardue ·
University of Maryland and Wellesley College

The Issue:

Up until the Great Recession, the number of babies born per woman in the United States had been quite stable for the previous three decades. The birth rate fluctuated within a relatively narrow range, often along with economic conditions, with fewer babies born during lean times and with births recovering when economic growth was stronger. However, the U.S. birth rate has fallen precipitously since the 2007 Great Recession, with no signs of reversing. This decline cannot be explained by demographic, economic, or policy changes. It is reflective of lower childbearing rates across successive cohorts.

The U.S. birth rate has fallen by 20% since 2007. This decline cannot be explained by demographic, economic, or policy changes.

The Facts:

The Great Recession disrupted a stable period in birth rates. For the almost three decades between 1980 and 2007, the U.S. birth rate hovered between 65 and 70 births per 1,000 women between the ages of 15 and 44. The birth rate followed a predictable pro-cyclical pattern, falling during economic downturns and recovering when the economy improves. But something changed around the time of the Great Recession; the birth rate fell precipitously, and it did not recover when the economy improved. Rather, the U.S. birth rate has continued a steady descent. As of 2020, the U.S. birth rate was 55.8 births per 1,000 women between the ages of 15 and 44, a decline of almost 20 percent from the rate of 69.3 in 2007.

The decline in births cannot readily be explained by changing population composition. The sustained decline in U.S. births since 2007 has been driven by declining births among many demographic groups, rather than by changes in population composition. Births have fallen among women in their early 20s, late 20s, and teens (in fact, the teen birth rate in the U.S. has been falling steadily since the mid-1990s). Births have fallen among white women, Black women, and Hispanic women, with the largest declines among Hispanic women. Births have also fallen among women with and without college degrees and among both married and unmarried women. The population of U.S. women of childbearing age has actually shifted toward groups that tend to have higher birth rates, not lower birth rates, with the exception of a rising share of women of childbearing age being unmarried.

No obvious policy or economic factor can explain much of the decline. The onset of the Great Recession clearly played a role in the early stages of the decline. Beyond that, it is difficult to identify any policy or economic factor that can statistically account for the continued decline. Casual observers have suggested that a variety of potential factors are responsible for the decline, including greater take-up of highly effective contraception, the high cost of raising children, improved occupational opportunities for women, and the high level of student debt carried by young adults. Our research finds little empirical support for these possible explanations. Moreover, none of the measures that have been shown in previous research to have a causal effect on annual birth rates - such as labor market conditions (beyond the Great Recession), certain social policy indicators (such as child support enforcement) or reproductive health policy measures (such as abortion clinic closures) - have changed in ways that can account for the drop in the national birth rate since 2007.

Successive generations of women are having fewer children at every age. While the largest decreases in birth rates have occurred amongst women under 30, it is possible that this reflects more than a general tendency among women to delay childbirth and that there are generational changes taking place. Cohorts of U.S. women born after the mid-1980s are having fewer births at all ages. The above figure shows that subsequent cohorts of women who were born in the windows 1968 to 1972, 1973 to 1977, and 1978 to1982 all had similar childbearing age profiles throughout their lives. Then, the cohort of women born between 1983 and 1987 had fewer children throughout their 20s and their 30s. The next two five-year birth cohorts of women (born between 1988 and 1997) have fewer children than earlier cohorts. In other words, later cohorts of mothers have fewer children at every age than women in earlier cohorts. The likelihood of births "catching up" at older ages across these cohorts seems limited.

Shifting priorities could be the primary driver for the decline in the birth rate since 2007. There is survey and anecdotal data suggesting that perhaps more recent cohorts of young adults have different preferences for having children, aspirations for life, and views about parenting norms that are driving the decline in the U.S. birth rates. These shifts could reflect preferences and norms that changed primarily in earlier decades, long before 2007 - such as more intensive parenting practices and expanded economic opportunities for women - in ways that profoundly shaped the world views of today's younger adults.

A sustained decline in the birth rate would have important social and economic consequences. A temporary decline in annual birth rates does not necessarily portend social and economic challenges. However, the decline in annual birth rates in the U.S. has been ongoing for many years and as shown above, corresponds to a decline in the number of children a woman has over her lifetime, on average. This trend predicts a persistently lower fertility rate in the U.S., which, absent increased immigration, would lead to a smaller workforce and an older population. In general, a smaller workforce and an aging population would have negative implications for economic productivity and per capita income growth. In addition, the combination of a smaller workforce and an aging population puts fiscal pressure on social insurance programs, like Social Security, that rely on tax payments from current workers to pay the benefits of current retirees. Some observers point to the idea that, all else equal, a shrinking population will reduce humans' carbon footprint, and hence have positive environmental effects. We are not aware of any evidence, though, that population declines corresponding to the size of the drop in U.S. fertility would have a meaningful effect on climate outcomes.

The onset of the COVID pandemic added another layer of uncertainty to childbearing trends in the United States. Births conceived between the onset of the pandemic in March 2020 and the end of that year fell by around 60,000. This is a smaller drop than many had expected, given the dramatic rise in unemployment and in economic and public health uncertainty at the outset of the pandemic. It is possible that government assistance blunted the economic impact of the pandemic on many families.

Although the 2007 recession seems to have played a role in decreasing the number of children born per woman in the United States, the lack of any rebound in births and, in fact, their continued decline following the end of the recession suggests a role for factors beyond the Great Recession. A decline in annual birth rates does not necessarily imply a long-term reduction in childbearing. If the recent decline in annual birth rates simply reflects women pushing off having children from their 20s to their 30s, then annual birth rates will eventually rebound and the total number of children the average U.S. woman has over her lifetime will not change. But the decline in annual birth rates since 2007 is consistent with more recent cohorts of women having fewer births. Those cohorts have not completed their childbearing years yet, but the number of births they would have to have at older ages to catch up to the lifetime childbearing rates of earlier cohorts is so large that it seems unlikely they will do so. If the decline in births reflects a (semi)permanent shift in priorities, as opposed to transitory economic or policy factors, the U.S. is likely to see a sustained decline in birth rates and a general decline in fertility for the foreseeable future. This has consequences for projected U.S. economic growth and productivity, as well as the fiscal sustainability of current social insurance programs.

Editor's Note: The analysis in this memo is based on Kearney, Melissa S., Phillip B. Levine, and Luke Pardue. 2022. "The Puzzle of Falling US Birth Rates since the Great Recession." Journal of Economic Perspectives, 36 (1): 151-76.

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The Mystery of the Declining U.S. Birth Rate | Econofact

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The U.S. birth rate has fallen by 20% since 2007. If sustained, this could impact economic growth, productivity, and social insurance programs down the line.

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This week, research fellow Rachel Greszler explains how the declining birthrate affects the U.S. economy.

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World fertility rates in ‘unprecedented decline’ - UN

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Hundreds of millions of people are not able to have the number of children they want, the UN warns.

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America’s people shortage is about to get real. Colleges, companies, and cities are unprepared.

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As the US birth rate continues to decline, employers, universities, and the entire economy is already scrambling to bridge the gap.

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The Birth-Rate Crisis Isn’t as Bad as You’ve Heard—It’s Worse

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The Birth-Rate Crisis Isn’t as Bad as You’ve Heard—It’s Worse

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The Birth-Rate Crisis Isn’t as Bad as You’ve Heard—It’s Worse

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Humanity is set to start shrinking several decades ahead of schedule.

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The Fertility Crisis is here and it will permanently alter the economy

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The Fertility Crisis is here and it will permanently alter the economy

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Analysis: The fertility crisis is here and it will permanently alter the economy | CNN Business

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The world isn’t having enough babies and that demographic shock will reshape the largest economies in the next decade.

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The Impact of Low Fertility Rates on Labor Demand and Socioeconomic Development in China

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The Impact of Low Fertility Rates on Labor Demand and Socioeconomic Development in China

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The Impact of Low Fertility Rates on Labor Demand and Socioeconomic Development in China

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The World Population Prospects report, published by the United Nations in 2022, revealed a decline in the global population growth rate (PGR) to less than 1% — the lowest recorded rate since 1950. Predictions suggest a further decrease to 0.5% by 2050, culminating in negative growth in more than 60 countries and intensifying the issue of population aging (1). China, a highly populous nation, is encountering even more acute challenges. By the conclusion of 2022, China’s population totaled approximately 1.412 billion, reflecting a decline of 850,000 from the prior year and a natural PGR of −0.06% (2). This negative growth, China’s first since the 1960s, indicates that the peak of China’s population was reached in 2021, with a slide into negative growth from 2022 onward. Examining the population structure between 2010 and 2022, there was a decrease in China’s working-age population (ages 15–64) from 74.5% to 68.2% and an increase in the over-65 demographic from 8.87% to 14.9%, whereas the under-15 age group experienced only negligible change. This scenario underscores the escalating trend of aging in China, propelled by persistently low fertility rates.

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DAVID E. BLOOM is a professor of economics and demography at Harvard University’s T.H.
Chan School of Public Health.

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A decline in global population later this century may threaten human progress, or it may lead to better lives

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Download PDF

A decline in global population later this century may threaten human progress, or it may lead to better lives

Global fertility rates have been falling for decades and are reaching historically low levels. While the human population now exceeds 8 billion and may top 10 billion by 2050, the momentum of growth is dissipating because of declines in its most powerful driver-fertility. Over the next 25 years, East Asia, Europe, and Russia will experience significant population declines.

What this will mean for the future of humanity is rather ambiguous. On one hand, some fear that it could hinder economic progress as there will be fewer workers, scientists, and innovators. This could lead to a paucity of new ideas and long-term economic stagnation. Moreover, as populations shrink, the proportion of older people tends to expand, weighing on economies and challenging the sustainability of social safety nets and pensions.

On the other hand, fewer children and smaller populations will mean less need for spending on housing and childcare, freeing resources for other uses such as research and development and adoption of advanced technologies. Declines in fertility rates can stimulate economic growth by spurring expanded labor force participation, increased savings, and more accumulation of physical and human capital. Population decline may also reduce pressures on the environment associated with climate change, depletion of natural resources, and environmental degradation.

Clearly, policymakers face crucial choices in managing the unfolding demographic trends. Responses may include measures to encourage fertility, adjustments to migration policies, expansion of education, and efforts to encourage innovation. Together with advances in digitalization, automation, and artificial intelligence, the coming declines in population pose a significant challenge but also a potential opportunity for the world ' s economies.

Fertility rates

In 1950, the global total fertility rate was 5, meaning that the average woman in the world would have five children during her childbearing years, according to the United Nations Population Division . That was well above the 2.1 benchmark for long-term global population stability. Together with low and falling mortality, this drove global population to more than double over a half century, from 2.5 billion people in 1950 to 6.2 billion in 2000.

A quarter of a century later, the world ' s fertility rate stands at 2.24 and is projected to drop below 2.1 around 2050 (see Chart 1). This signals an eventual contraction of the world ' s population, which the UN agency expects to top out at 10.3 billion in 2084. Projections of global population in 2050 range from 8.9 billion to more than 10 billion, with fertility rates between 1.61 and 2.59.

These fertility and total population trends hold for much of the world. During 2000-25, fertility rates declined in every UN region of the world and in every World Bank country income group. This will most likely continue over the next 25 years, signaling future global depopulation.

The exceptions to this trend are Africa and a number of low-income countries on other continents where fertility rates are still 4 or higher. As head counts elsewhere dwindle, Africa ' s share of global population is likely to increase from 19 percent in 2025 to 26 percent in 2050.

Amid the transition from high to low rates of fertility and mortality, population declines are accelerating. Over the coming quarter century, 38 nations of more than 1 million people each will probably experience population declines, up from 21 in the past 25 years. Population loss in the coming quarter century will be largest in China with a drop of 155.8 million, Japan with 18 million, Russia with 7.9 million, Italy with 7.3 million, Ukraine with 7 million, and South Korea with 6.5 million (Chart 2). In relative terms, average annual rates of population decline will be highest at 0.9 percent in Moldova and in Bosnia and Herzegovina; 0.8 percent in Albania, Bulgaria, and Lithuania; and 0.7 percent in Latvia and Ukraine.

The link between fertility rates of less than 2.1 and depopulation is not ironclad. For example, in 6 of the 21 countries with average fertility rates of less than 2.1 and fewer births than deaths during 2000-25, immigration prevented depopulation.

Recent and projected patterns of population decline generally differ in nature and intensity from those of prominent historical episodes. Those cases of depopulation did not reflect mainly fertility choices but rather mass migrations and Malthusian mortality shocks such as famine, genocide, war, and epidemics. Certainly, the outlook for the populations of Russia and Ukraine would reflect the ongoing three years of warfare after Moscow ' s invasion in February 2022.

Previous situations also differed in duration and intensity. During the Black Death of 1346-53, Western Europe lost upward of a quarter of its population to the bubonic plague, corresponding to an average annual rate of population decline of 4 percent or more. By comparison, the population of Moldova-the fastest-depopulating country this century-has fallen by roughly 1 percent annually since 2000.

Low fertility also feeds a related phenomenon: population aging. This amplifies the economic, social, and political challenges facing countries with shrinking populations. Between 2025 and 2050, the share of population ages 65 and older in countries experiencing population declines will almost double from 17.3 percent to 30.9 percent. In countries whose populations are not shrinking, that age group will expand from 3.2 percent to 5.5 percent.

Challenges of low fertility

Low fertility and depopulation can impede economic and social progress. Fewer births and smaller populations naturally mean fewer workers, savers, and spenders, potentially sending an economy into contraction.

A shortage of researchers, inventors, scientists, and other people-based sources of innovative ideas could also hurt economic progress. In a , Stanford economist Charles Jones argues that the implications of low fertility include a drop in the number of new ideas, which could strangle innovation and result in economic stagnation.

Meanwhile, the burgeoning shares of older people that often accompany low fertility and depopulation may also weigh on growth. Younger people tend to drive innovation. Older people work and save less than the young and create significant burdens for prime-age workers through long-term care needs and spending on health and economic security.

A nation's slow or negative population growth relative to other countries may translate into less military might and political clout on the world stage. For example, some historians attribute France's 1871 defeat in the Franco-Prussian War to the low fertility and slow rate of population growth that stemmed from early and widespread use of contraception among married couples in France.

Economic opportunities

But there are countervailing forces. Fewer children and smaller populations mean less need for spending on housing and childcare. These resources could be reallocated to research and development, adoption of advanced technologies, and elevation of education quality. Declines in fertility can also stimulate economic growth by driving up rates of labor force participation, especially among women, as well as savings and capital accumulation. This phenomenon followed the end of the post-World War II baby boom and fueled a demographic dividend in many countries, contributing as much as 2-3 percentage points to per capita income growth.

A population's productive characteristics figure more prominently than its size in defining its capacity for knowledge creation and innovation. The number of healthy and well-educated people represents the human capital that contributes to advances in knowledge and determines technological progress and economic growth. In his book The Journey of Humanity: The Origins of Wealth and InequalityBrown University economist Oded Galor argues that falling fertility and rising education will lead to human capital formation and long-term increases in prosperity.

Population decline may also enhance social welfare if it reduces environmental pressures such as land, air, and water pollution; climate change; deforestation; and the loss of biodiversity.

Adaptation and restructuring

Under what circumstances should policymakers try to address declining fertility, and what measures should they implement?

Those are difficult questions. There is nothing intrinsically wrong with an economy expanding or shrinking along with its population. Regardless, effective fertility policies are notoriously difficult to come by. It ' s possible that falling birth rates are a clear expression of societal preferences that we should simply accept. The problems have to do with the side effects, such as declining per capita GDP, stagnating innovation and growth, and the challenges of supporting an aging population.

Those threats have already driven some countries facing declining or low fertility to implement measures to stabilize or increase birth rates. South Korea recently reported a rise in fertility rates for the first time in nine years. China abolished its one-child policy. Japan introduced flexible work arrangements. And several European countries are overhauling their social security systems to ensure sustainability.

Policymakers could deploy a range of family-friendly policies to encourage increased fertility, although more children create economic strains of their own, and an expanded workforce would take two decades to materialize. Such policies could seek to enable a better balance between work and family responsibilities. They might include tax breaks for larger families, extended and more flexible parental leave policies, public or subsidized private childcare, and subsidies for infertility treatment.

Gains in education access and quality could also work to enhance a population ' s capacity for innovation. This would enable a society to create more value through work, elevating both individual and societal well-being.

Retirement policy changes-such as raising the age of retirement-have considerable potential to forestall workforce shrinkage by removing disincentives to working longer. Policies related to low fertility and depopulation may be stronger in combination than in isolation. Robust investments in the health and education of youths and prime-age adults may enable people to be sufficiently healthy and well trained to work productively well past the traditional retirement age.

Policymakers must be mindful of the evolving work landscape, particularly the rise of digitalization, robotics, automation, and artificial intelligence. While these tools offer tantalizing potential, their evolution will not only affect the types of jobs available and how they are performed but will also alter the ways that workers interact socially. This too could have significant implications for fertility levels and patterns.

The world is experiencing a dramatic demographic change, from rapid population growth during the past century to depopulation in the current century. The relentless and precipitous fall in fertility is the main driver of this transition, which also involves a historically unprecedented rise in the number of people of advanced age. Policymakers would do well to pay close heed to emerging evidence and global discourse on the economic and social consequences of these demographic shifts. They may not embrace all the consequences, but at least they will be able to point to plausible strategies for addressing them.

Ravi Sadhu, a research assistant at the Harvard T.H. Chan School of Public Health, also contributed to this article.

DAVID E. BLOOM is a professor of economics and demography at Harvard University's T.H. Chan School of Public Health.

MICHAEL KUHN is director of the Economic Frontiers Program at the International Institute for Applied Systems Analysis.

KLAUS PRETTNER is a professor at the Vienna University of Economics and Business.

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A decline in global population later this century may threaten human progress, or it may lead to better lives

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No Easy Fix for Low U.S. Birth Rate, Economics Professor Says

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No Easy Fix for Low U.S. Birth Rate, Economics Professor Says

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Why is the U.S. birth rate so low?

It's hard - if not impossible - to say conclusively why we are having so few babies in the United States.

But there are a couple of ways to look at it.

One possible contributing factor is the cost of having and raising kids in the United States.

Even birth itself isn't cheap, right? The average out-of-pocket cost of a birth for someone with insurance is approximately $3,000. When you combine that with the cost of child care and education, babies can be prohibitively expensive.

The low birth rate also is a consequence of the plummeting teen birth rate in the United States. In 1960, the teen birth rate was almost one in 100. In 1990, it was approximately 60 out of 1,000. In 2022, it was 13.5 per 1,000. That's an extraordinary drop that has definitely brought down the birth rate.

Some countries have tried providing financial incentives to families when they have children. Has that increased the birth rate?

Things like "baby bonuses" don't seem to change the number of babies. It does, however, seem to shift the timing of when people have babies.

That is, people aren't having new babies because of a payout. But they do seem to have them faster. They might have a second kid six months earlier because they don't need to save as much for the cost of the kid. But they aren't necessarily having a third.

Are there other policies that have shown promise?

The Nordic countries have been leaders in quality-of-life policies like extensive parental leave and easy access to health care. These are all good things to do but they don't necessarily solve the birth rate.

Is solving this problem particularly urgent?

When Social Security was started in the late 1930s, there were about 40 workers per retiree.

Now, there are approximately two-and-a-half to three workers per retiree.

In our lifetimes, we're going to reach the point where we do not have enough people to support our current funding obligations. Without program or demographic changes, this could occur in the next 10-20 years.

So, what should we do?

There are three things we should think about in particular.

The first: We could structure our tax and pay systems differently for old age support. Social Security made a huge difference in people's lives when it was introduced in 1937. The economy looks really different than it did then. Maybe it's time to update the whole system.

The other thing we can do is not necessarily an option in all developed countries.

Broadly speaking, we could rethink our attitudes toward immigration. There are a lot of prime, working-age adults who would love to come and work and pay taxes in the United States. And adding adults is a lot quicker than trying to get people to have a baby now and waiting for 25 years for that baby to contribute to our tax base.

Last, we should think broadly about why fewer people want to have children in the United States. Policies that make life easier and better for children and families often have long-run benefits.

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No Easy Fix for Low U.S. Birth Rate, Economics Professor Says

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A declining birth rate is bad news for the economy. But Economics Professor Siobhan O'Keefe says there are no easy fixes for graying workforces.

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You Decide: Will There Be a Permanent Labor Shortage?

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You Decide: Will There Be a Permanent Labor Shortage?

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College of Agriculture and Life Sciences

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You Decide: Will There Be a Permanent Labor Shortage? - College of Agriculture and Life Sciences

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Labor shortages can have a large impact on the economy and its outcomes. How can our society adapt to changing normals?

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Want Another Perspective on the U.S. Labor Shortage? Talk to a Demographer

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Want Another Perspective on the U.S. Labor Shortage? Talk to a Demographer

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Without Remedy, Countries With Aging Populations Are Set for Weaker Income Growth, Says OECD

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Without Remedy, Countries With Aging Populations Are Set for Weaker Income Growth, Says OECD

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Without Remedy, Countries With Aging Populations Are Set for Weaker Income Growth, Says OECD

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Incomes in rich countries are going to grow much more slowly as populations age unless more women, older people and migrants can be persuaded to work, the OECD said.

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The global impact of declining birth rates

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As birth rates around the world continue to shrink, world governments are spending billions of dollars to combat this. Yet, there has been little progress in slowing down the continued shrinking birth