Why Americans Aren’t Having Babies—and How It Hurts Us

Gabrielle Karol
Posted

FertilityAmericans aren’t having babies, and the economy’s to blame.

After all, who has enough cash to save up for food, clothing, college for another human being? Due to the recent recession, the fertility rate has fallen to its lowest point in 25 years.

The fertility rate is measured as the average number of children per woman, and right now the American rate is down to 1.87 children per woman. This number represents a sharp decrease of 12% since 2007.

Kids are expensive (obviously), so when the economy is shaky, it makes sense for individuals to reevaluate whether they can really afford to have their first child, or add a second child to their family. But while this thinking is prudent on a personal finance level, this trend is potentially dangerous for the economy as a whole.

We’ll break down what lower fertility could mean for the economy … and how this trend could potentially improve motherhood in the United States.

As Countries Develop, Fertility Rates Usually Drop

In the United States, for instance, the average fertility rate was 3.67 children per woman between the years of 1875 and 1925, dropping to a little above 2 children per woman in the second half of the 20th century. And that’s a good place to be, because 2.1 is the fertility rate sweet spot: It’s the replacement rate, ensuring that a country’s population doesn’t decline over time. (Because two parents each replace themselves, and then some. Get it?)

Many European and Asian countries in the past few decades have struggled to maintain this replacement rate, falling closer to an average of one child per woman. This leads to an increasingly aging population. For many years, the United States was seemingly immune to this trend—until now.

At first glance, a lower fertility rate would seem to have positive implications for an economy. A country’s government would spend less on education costs; mothers would be able to return more quickly and easily to the workforce, which would increase productivity; and families would have more expendable income, which helps consumer spending.

But these short-term benefits are quickly outweighed by the more serious long-term consequences.

How a Lower Fertility Rate Hurts the Economy

A fertility rate lower than the replacement rate of 2.1 leads to a proportionally older population over time and, eventually, a smaller population. Here’s how that damages a country’s economic future:

1. The dependency ratio increases.

With an aging population, there are increasingly more citizens who are retired or unable to work due to illness or ageism. This leaves them dependent on younger generations or on the state. Over the next seven decades, the ratio of citizens 65+ to working-age citizens is expected to double in the United States. Which brings us to …

2. Government programs are overburdened.

With fewer workers, there are fewer citizens paying taxes to keep government programs afloat. In Italy, where the fertility rate is currently about 1.4, 22% of the population is currently supported by a pension, which consumes 15% of the country’s gross domestic product. In the United States, Social Security is expected to stop being able to deliver full, expected benefits in 2037.

3. Older citizens spend less.

Because retired citizens often have lower budgets or fixed incomes, they spend less than younger, working citizens, hurting the economy. In Italy, workers younger than 35 spend nearly €900 more per month than citizens ages 65 or older.

Considering that nearly 75% of Americans nearing the retirement age have less than $30,000 in their retirement accounts, the decreased spending for this group will likely have large repercussions for our country’s spending–and those retiring in the next 20 years who were depending on Social Security will continue the same trend.

4. Workers without children spend less, too.

Research from The Sustainable Demographic Dividend shows that large sectors of the economy flourish and depend upon married couples having children. Sectors dependent on families go beyond kids’ clothing makers or toy companies; families spend more on groceries, health care, home maintenance, household products, insurance and child care, so all of those sectors will take a hit as the fertility rate decreases.

5. Entrepreneurism and advancement decrease.

Studies have shown that most new companies are started by people in their late 20s and early 30s, and that young workers are more inventive, creative and likely to take risks. An aging population means fewer human resources that are the most likely to push a country forward by creating new jobs, new technologies and new sectors of industry.

For example, Sweden was one of the first developed countries to see its fertility rate fall below the replacement level, and only one of the country’s 50 largest companies was created after 1970.

How to Save America’s Economic Future

One of the probable reasons the United States kept its fertility rate higher for longer than most is its immigration policy, as recent immigrants have more children than native-born citizens. However, we’ve seen that in other countries, immigrants quickly adopt the childbearing norms of the countries’ native-born citizens. In Germany, first-generation immigrants often have higher fertility rates, but second-generation immigrants reproduce at nearly the same rate as native Germans.

This is increasingly true in the U.S. as well: Hispanic Americans have experienced the largest birthrate decline over the past five years. That means immigration isn’t a long-term answer for getting our birth numbers up.

But, if the government takes notice of this trend and enacts policies to help raise the U.S. birth rate, the upshot might be surprisingly helpful for women raising children, or planning to.

That’s because America might:

1. Economically incentivize child-rearing.

France has the second-highest fertility rate in Europe, likely because it has some of the strongest policies that help parents financially, including a payment of $1,300 to all mothers-to-be. France’s birth rate first started stalling in the 1930′s; since then, the government has continually enacted new policies to encourage greater reproduction. And it’s working–in 2006, France’s fertility rate jumped to 2.0 from 1.88 in 2000, and has stayed around the replacement rate since then. (For more information on their progressive policies, read this.)

2. Improve conditions for working mothers.

In the U.S., some mothers feel like they have to make the choice between motherhood and their careers. (At least, so say some commenters on Marissa Mayer’s high-profile appointment as Yahoo CEO and her high-profile pregnancy.) Sweden has tried to combat its low fertility rate by allowing women to “have it all”–a career and a family life–more easily. The Swedish government subsidizes child care, allows for more flexible work schedules and provides extensive parental leave.

Of course, researchers on this subject are quick to point out that the success of policies aimed at increasing the fertility rate often depend on the specific characteristics of the countries in question and the underlying reasons why fertility has declined in those countries. That said, policies aimed at lessening the financial burden of childbearing and improving work conditions for mothers may be essential to improving our country’s economic future outlook.

Better options for families and mothers, you say? Decreased fertility rates may have some good news for us, after all.

  • http://Www.Plantingourpennies.Com/ Mrs PoP

    Maybe it’s just the age I’ve gotten to, but I’ve found the complete opposite to be true among my peers. I have never known more pregnant women in my life (cumulatively!) than I have in the past few years.

    A couple friends even used their unemployment as an extended maternity leave, so even though the economic troubles hit them, it didn’t stop them from having kids.

    http://Www.Plantingourpennies.Com

  • Gimmegotchagoo

    This viewpoint is what is wrong with the world…we could use a couple billion less people on the planet.

  • Gimmegotchagoo

    This viewpoint is what is wrong with the world…we could use a couple billion less people on the planet.

  • http://twitter.com/dawn_quirk Dawn Quirk Buerkle

    I see babies and pregnant people everywhere. I have to say that I do not believe these stats. I am sure they are based on real numbers but I suspect that they are being interpreted with an agenda.
    Completely agree that we need a few billion less people on the planet. We would figure out how to take care of ourselves without doing it on the backs of the unborn.

  • June2012

    I’m pregnant with my first child, and the financial hit will be a bit daunting as I’m taking unpaid maternity leave. FMLA is pretty useless if you ask me… it only guarantees unpaid leave and forces you to pay for your entire health-care premium as well. The U.S. is the only industrialized nation that does not offer some form of paid maternity leave, BTW!

  • guest

    I work in public service and young, low income women are still having multiple children and we (the working class) are providing their food, medical care, housing and utilities for 18 or more years. Yes, that’s definitely going to put a deny in the governments pocketbook.

  • Not a mommy

    The decision not to have children, for me, is not so much financial as it is emotional.  I have the courage and insight to admit that motherhood is just not for me– I did not have very good role models growing up and I have very weak support system (again, not just financial) in my life now.  I think it is a good thing that people who really have no business rearing children are able to be childless without the pressure or prejudices that our mothers and grandmothers would have faced in their youth.  To me, the burgeoning foster care programs attest that more women should be making this choice if they are not able to raise their children with the most basic necessities of life: food, shelter, safety, education, love and respect.  

  • Lament

    I agree that America needs to increase fertility, many of my friends have waited until their mid to late 30′s, even early 40′s to have their first child. This wait has been an up hill struggle for most, having issues with getting pregnant and not willing to try again. Leaving an only child left with the responsibility of taking care of their aging parents.
    As to the people who say we could use less people on this planet, YOU SHOULD BE ASHAMED OF YOURSELVES! You’re not thinking of the mothers who lose their children to illness, accidents, natural disasters, war, genocide! Or the children that watch their parents die from illness, accidents, natural disasters, war, genocides. You have no idea what you are talking about! I feel sorry for you.

    • Gimmegotchagoo

      No, it is you who should be ashamed of yourself. (I don’t even have to use caps for that to stand out) Your lack of education on how overpopulation is actually -causing- illness, disease, starvation, deforestation, poverty, young deaths (and death in general), wars and scarcity of natural resources around the world is blatant. Your apparent lack of care for anyone other than yourself and your first world mentality is whats to be felt sorry for. Its what is going to destroy us. Children don’t take care of their parents regardless when they get old in America any longer. Children aren’t being taught about responsibility or to care about anyone else than number one, which is apparent in your mindset. Also…your statement about children who’s parents die…you don’t think (obviously you don’t) that people who choose to not have children of their own would be better off adopting children who are already here in this world and don’t have a family to care for them any more? You need a strong reality check.I feel sorry that people like you exist.  

  • sgcolumbia

    It would be interesting to see more nuanced articles come from LearnVest on economic issues. While most of what you said is true, there is another angle that you completely neglected, and that is that this planet will have trouble sustaining the 10 billion people that we are expected to have by 2100. While it’s true that countries show a decrease in birth rate as they develop, it’s also true that developed countries have a higher per capita footprint. In other words, people in developed countries consume at a much greater rate than those in developing countries. So for every one American child that is born, that’s like putting 3 or 4 children into the developing world (those numbers are arbitrary, but you get my point).

    That is not to say that we should stop having children. But it is to say that perhaps an economy based solely on growth, wealth, and resource consumption is one that is inherently unsustainable, and that we need to look at other metrics, like quality of life. Our GDP can (and does) grow if we add more prisons, pollution, divorces, and wars. It grows if we cut down more forests, use all the fish in the ocean, and produce more landfills.

    I only make this argument because you tied population growth to economic growth, and the fact is that we need to be more thoughtful about both. It’s not as straightforward as our individual contributions, and I know plenty of women who have opted not to have children because they know it will only contribute to global problems.

    • Gimmegotchagoo

      Very well put. 

  • kal98

    just keep immigration of 3rd world people who have plenty of starving children! this is horrid article!  we have billions of people what we need is education where I live almost every mother is unwed, unemployed and gets fantastic welfare so stop it! just the trillions of dollars stolen from the working class plus their stolen pensions would easily fill any economic gaps what dribble this is!

  • jill be nimple

    This post is just irresponsible and suggests an immature point of view supported by emotion. A reduction in birth rates is a good thing. The planet cannot continue to sustain us if birth rates don’t drop. France is a terrible example. As much as I am a Francophile, their social policies are not sustainable either. Have you noticed France’s dire economic problems? It hasn’t created enough wealth to fund its social programs.

  • http://twitter.com/Eva_fate Eva Rinaldi

    Um… call me crazy but there aren’t currently enough jobs for everyone, and as technology advances that’s going to be getting worse. There are also serious questions about certain resources being overtaxed because of the rates the current population is using them at. 

    It would be better for the environment and the chances of each future child to get a good job and have a stable future if the population were lower. 

  • Caca

    Asians need to stop procreating. They make a ridiculous amount of children.

    • SDchargers

      With all the insightful responses, that sentence of cognitive brilliance is what you chose to contribute… You dont know what you are talking about. That has to be one of the most ignorant statements I’ve read in a long time, and I won’t waste anymore time explaining why.

  • Reality

    I don’t buy this one bit, I see people breeding like rats, always the dumb and poor. Having beyond 4 kids in low income. Their should be an intelligence test given out in gradeschool to have certain future losers fixed.

  • Mark Schmidt

    America’s growth rate has never been in a decline as far as records go back. By 2030, the population in America is estimated to increase by 50 million by the US Census bureau. While this has a lot to do with immigration (illegal or legal), a couple having one or no children is not something that should be discouraged. In fact, couples that choose not to have children are also making a decision that puts less strain on our natural resources.