By Dr. Edward Seiler, vice president, Economics and Research, Dworbell, Inc.
It is generally accepted by economists that low rates of fertility are associated with long-term diminished economic growth.
This has been well documented in the European Union that has seen fertility rates fall since the 1960s to an average of 1.6 children per woman in her childbearing years (well below the “replacement” fertility rate of 2.1 that would keep the population steady). After taking immigration and longevity into account, the share of working-age people in Europe is expected to fall from about 70 percent today to somewhere between 50 and 55 percent in the long run (assuming labor rate participation rates stay the same). In addition to diminished long-term growth, this has many implications for the elderly population (e.g., pay-as-you-go social security programs are placed at risk, and health care services lack essential workers).
The story back home also appears to be headed the way of Europe and East Asia. At the top end of the age scale, America is aging. By 2035, one-third of all U.S. households will be headed by someone 65 and over and the number of households aged 80 and over will more than double to 16.2 million. At the lower end, we’re having fewer babies. The total fertility rate dropped to 1.76 in 2017, and recent data from the Centers for Disease Control and Prevention show that it declined again in 2018 to another record low of 1.72.
So, does this mean that unless birth rates or immigration increase that we are headed for diminished growth and its associated malaises?
In short, I don’t know. First, as unemployment rates have fallen we have seen increased labor force participation (including many seniors who are delaying retirement) and there is room for the participation to keep growing. Second, as technological automation increases we may be grateful that we have relatively fewer workers in the economy. Only time will tell.