Fifteen years ago, population growth was one of the US’ core advantages over other nations. With a fertility rate close to the replacement rate of 2.1 children per woman — the level necessary for long-term population stability — the US had somehow avoided the birthrate collapse that had characterized other rich countries, and more than a few poor ones. Add copious immigration on top of that, and our demographic future seemed assured.
Projections had the US substantially increasing its size relative to its main potential rival, China, over the course of the century. The country’s youthfulness, as well, implied a bright future for its economy, its asset markets and the solvency of its pension and healthcare systems.
Fast forward a decade and a half, and this vision of demographic dominance seems to have gone up in smoke.
Illustration: Yusha
Data from last year’s census showed that the US population is growing more slowly than at any time since World War II. The country is not shrinking yet, but if it does not correct course, it is certain to stagnate in size.
Why is this happening? Why does it matter? And what can be done about it? None of these questions have simple answers, but the US is going to have to grapple with all of them in the years to come.
A GRAYING AMERICA
Ultimately there are two ways a nation’s population can grow: having babies or taking in immigrants. The US used to be very good at both of these things, but no longer.
According to the World Bank and the Population Reference Bureau, by 2018 the US total fertility rate had fallen from 2.1 in 2006 to about 1.73 children per woman, in line with the likes of Denmark and the UK.
That was before COVID-19; a pandemic baby bust will speed the US toward a low-fertility future.
Some estimate fertility is now down to 1.6, similar to Germany.
This is not merely a matter of pessimistic Americans giving up on the future, or crumbling under the weight of childrearing’s excessive cost. Some of this is happening for good reasons. For example, the teen birthrate has fallen enormously, from 61.8 per 1,000 teenage girls in 1990, to just 17.4 by 2018 — a 72 percent decrease. That is a positive development; we do not want kids having kids.
Another positive cause of fertility decline has been the assimilation of Hispanic Americans to US fertility norms. In 2007, Hispanic American women had about 67 percent more children than their white counterparts. By 2018, the difference had shrunk to less than 20 percent. This is a sign of successful cultural integration of the descendants of immigrants, as well as upward economic mobility among Hispanics.
Yet the fertility drop is not completely benign. As economist Lyman Stone has reported, surveys show a gap between real and desired fertility since around the time of the Great Recession.
The average number of children women say they want has actually risen to 2.6. That implies that US parents lack the financial resources to have as many kids as they would like.
If fertility falls, the other way a country can grow its population is through immigration. Here, too, the once-mighty US has faltered. Immigrants are still coming in, but at a much lower level relative to population.
As with fertility, this is not entirely for bad reasons. The big driver of the immigration slowdown was the reversal of net illegal arrivals seen around the time of the Great Recession. However, the US could have raised its legal immigration numbers to compensate, and it did not.
With immigration and fertility both down, the US is projected to age rapidly. Even before COVID-19, the median age was projected to rise to 43 by 2060 from 38 today. The size of the 55-plus age group is growing rapidly, while the number of young people is barely budging.
WHY POPULATION MATTERS
The question then naturally arises: Why should we care? You might be tempted to look at all these numbers and shrug, and simply hope that the US will age gracefully. However, a graying population, as other rich countries have discovered, entails two big problems: economic burden and loss of national power.
The economics of aging revolves around the simple fact that old people eventually cease being able to work. That means their consumption must be supported by the efforts of younger working people. This support happens both financially — through pensions, Social Security and the money people pay to take care of their aged family members — and directly, through elder-care work.
As the population ages, the number of working-age people available to support each elderly person decreases. This puts an increasing financial and physical burden on the young.
In 2010, the number of working-age adults per older adult was 4.8. By 2060, it is projected to be only half that.
Based on that projection, you can take whatever economic burden a young working person currently shoulders to take care of the old — payroll taxes, elder-care duties, nursing home payments — and double it. That is what the US workers of 2060 will be facing if the US stays on its present course. Of course, mathematically, this will likely hold down living standards. Fewer working people means less output per person in the total population.
That is not the only economic cost of aging. It also tends to reduce productivity growth, which pushes living standards down even more. A 2016 paper by economists Nicole Maestas, Kathleen J. Mullen and David Powell looked at US states and found that the slowdown in productivity due to an aging population is even bigger than the mechanical effect of the shrinking of the labor force. A 2016 IMF working paper looked at European countries and found the same.
Why does aging hold down productivity? Part of it might be because older workers slow down a bit, but Maestas et al. estimate that an aging workforce also reduces productivity among younger workers. That suggests that the reduced productivity comes from corporate management dominated by older managers who become set in their ways and fail to exploit new technologies, new business models and new market opportunities.
Another subtler, more corrosive effect could come from the weakening of what economists call agglomeration. Without a large and growing domestic market to sell to, companies are loath to invest in a region, which hurts productivity within that region. If that happens to the US as a whole, the country is in trouble.
In other words, if the US does not do something about its slowing population growth, it could see a halt to improving living standards as well.
For many, living standards are not the only reason to care about population; they also care about national greatness. As the fourth-largest country in the world, the US enjoyed clear and devastating advantages over smaller 20th-century rivals such as Germany and Japan. However, the US now appears to be entering a period of intensified competition with a new rival — China — whose population is four times that of the US.
As journalist Matt Yglesias has noted, a growing US population would put the country in a much stronger position vis-a-vis its much larger rival.
China’s population has plateaued and will soon shrink, if it has not started to do so already. If the US allows its own population to stagnate, the gap between the two countries will remain vast, making it extremely hard for the US to balance China geopolitically in the long term. The US does not have to go all the way to 1 billion Americans, as Yglesias suggests, in order to bolster the country’s position, but it should at least make sure to grow instead of shrink.
Opponents of population growth often argue that it is bad for the planet, that by having more babies or bringing in more immigrants, a country will be increasing its use of natural resources. This is not necessarily true. In the past few decades, even as the US population has continued to grow, use of many resources — fresh water and various minerals — has fallen. Energy use has also stayed flat, and total carbon emissions have gone down substantially.
BIDEN TO THE RESCUE?
Given the economic and geopolitical threats from a shrinking population, it makes sense to develop a national population policy. Fortunately, such a policy would probably look much like what US President Joe Biden is already trying to do.
First and foremost, the easiest way to give population growth a quick boost is to allow in more immigrants. As part of an immigration reform package, Biden’s allies have unveiled a raft of proposals to make it much easier to enter the US legally, focusing especially on skilled immigration. These will be difficult to get past Republicans in the US Senate, especially at a time when anxiety over immigration has become all-consuming on the political right. Biden nonetheless still has an obligation to try. Meanwhile, he can unilaterally raise the cap on refugee admissions, which he did last week.
Yet even expanded immigration would only partially offset long-term US population decline. This is because many immigrants are already in their prime or even middle-aged when they arrive, and because continually expanding immigration to compensate for accelerating population decline is probably politically infeasible. If the US is going to stabilize its population, Americans need to have more children.
Since surveys show they want to have more kids, it seems likely that the main thing holding them back has to do with financial factors. The cost of child care, education and children’s health care have outpaced wages over the past few decades. By defraying these costs, the government can help young Americans have as many children as they desire.
Biden’s big new American Families Plan would be a big step towards doing this. The bill would extend the substantial child allowance of US$250 to US$300 per month per child that was a centerpiece of the president’s earlier COVID-19 relief bill. It would make pre-kindergarten and community college free, provide heavy subsidies for child care and create a new paid leave program. Many will think of this as an anti-poverty bill, but it is also a pro-natalist bill — a way to make raising children much cheaper.
The experience of other rich countries suggests that this would have a positive, though modest, impact on fertility.
Stone, surveying the effects of pro-natalist policies in other countries, concludes that raising US fertility back to replacement level might require an increase in child benefits of anywhere from US$2,800 to US$23,000 a year for the median parent. Biden’s plans fall at the low end of that range, but even if his new policies don not make up the entire gap, they will at least provide some boost to fertility if passed by Congress.
In the end, the question of population is a question of what kind of nation the US wants to be. It can choose to be a graying nation, looking inward and grimly awaiting the days of the thinning herd, even as it prepares to shoulder the heavy burden of supporting the elderly on diminishing shoulders. Or it can choose to be a great nation — a vigorous, future-oriented, positive country, confident enough in itself to believe that the world should have more of them.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University and writes at Noahpinion.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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