MIKE WALDEN COLUMN: Should we worry about the declining birth rate?

Published 1:43 pm Thursday, June 20, 2024

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One of the benefits of aging is that you often see problems completely turn around. In the 1990s there were worries about the declining national debt — yes, I said declining debt. Now, of course, the surging national debt is a major issue. Also, in the early 2000s, prices were falling — yes, falling — and economists worried about the implications for worker wages and business investment.

Mike Walden

Today, there’s been another turnaround in a major factor. For most of the post-World War II period there have been worries about overpopulation. Indeed, in the 1970s there were proposals to limit the number of births per family. To add some humor to the issue, I’m reminded of former New York Gov. Nelson Rockefeller’s response to a constituent’s suggestion that families be limited to two births. Rockefeller replied, “I was the third child!” But now the concern for many countries is depopulation.
What has created this worry? It’s the dramatic drop in the birth rate. In both the nation as well as in North Carolina, birth rates have fallen below replacement levels — meaning there are not enough births to replace deaths. Without other changes, such as immigration, longer life spans or, at the state level, in-migration of people from other states, both the population and labor force will decline.
Globally, the population is not yet falling, but it is projected to begin retreating in 2080. However, several European countries, Japan and China are already losing population. Demographers predict population reductions could start in the U.S. in 2080, but due to the importance of immigration, there is uncertainty about this forecast.
What is behind the big drop in birth rates? Because the reasons can vary from country to county, I’ll focus on possible answers proposed for the U.S. Beware that some of the offered answers can be considered controversial, so use your judgment.
One answer is a perceived increase in individualism, particularly among young people. The notion is that many young people have made their career and personal satisfaction top priorities, hence reducing their interest in having and raising children.
On a more practical note, the rising cost of raising children can be a deterrent to having children. The federal government annually estimates the cost of raising a child to age 17, and the current amount is $233,000.
With life spans increasing, some young families may perceive a tradeoff between devoting time and money to raising children, or using those resources to care for aging parents. If they can’t do both, then a choice has to be made.
Last is an answer I frequently hear from my young friends. It is that young people are fearful of the future, and consequently they question if they should bring children into the world.
Being trained as an economist, I look at issues from a benefit and cost perspective. So what are the benefits and what are the costs to a lower birth rate that could ultimately mean a reduced population?
Benefits could be less of many things we don’t like: pollution, climate change, waste, traffic congestion and numerous others. There’s even the possibility of some lower prices. For example, one of the reasons costs for shelter have risen so fast is that we have more people competing for good locations to live. Land at preferred locations is fixed in supply. With a slower-growing population, but especially with a population that is declining, price pressures on land and housing would lessen. There would also be less conversion of farmland to housing developments, thereby preserving land for growing and producing food.
But what would be the costs — or downsides — of slower population growth, or even negative growth? A big one would be higher dependency ratios, meaning more older and retired people compared to younger and working people. This would mean relatively more money spent on medical care and retirement support, especially from publicly funded programs such as Medicare and Social Security. These systems rely on working individuals to contribute to the support of older people. Indeed, the major reason Social Security is facing a solvency problem in the next decade is because of a rising dependency ratio. In summary, there could be a shortage of workers to support the older generation.
Also, since saving is typically done by younger people, some economists think stagnant or declining population growth would lead to lower savings, and hence higher interest rates for borrowers.
There’s also the viewpoint that the young inject creativity and vitality into the economy, often because they look at the world differently and are willing to take more risks than older individuals. Hence, in a no-population growth country, would we have less innovation?
These are weighty topics and questions to consider. It’s also important to note there are many moving parts to the question of population growth. Birth rates are one, but so too are immigration, worker productivity and technology.
New workers can come from foreign countries, existing workers can be trained to produce more output, and advances in technology can be tapped to fill worker shortfalls. AI (artificial intelligence) is a good example of the latter.
The argument can be made that everything in a society begins with population and population growth. Population is fundamental. Will we have a future of fewer people? If so, should we consider it a plus or a minus? This could be one of the most important “You Decide” questions ever.

Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.