Why America’s Population Advantage Has Evaporated | #healthcare | #elderly | #seniors
Fifteen years ago, population growth was one of America’s 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 birth-rate 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. And the country’s youthfulness implied a bright future for its economy, its asset markets and the solvency of its pension and health care systems.
Fast forward a decade and a half, and this vision of demographic dominance seems to have gone up in smoke. Data from the 2020 Census indicates that the US population is now growing more slowly than at any time since World War II. The country isn’t shrinking yet, but if we don’t correct course, we are 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 we’re 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 both the World Bank and the Population Reference Bureau, by 2018 the US total fertility rate has fallen to around 1.73, in line with the likes of Denmark and the UK.
And 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 isn’t 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 birth rate has fallen enormously, from 61.8 per 1000 teenage girls in 1990 to just 17.4 by 2018 — a 72% decrease. That’s a positive development; we don’t 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% more children than their White counterparts; by 2018, the difference had shrunk to less than 20% . This is a sign of successful cultural integration of the descendants of immigrants, as well as upward economic mobility among Hispanics.
But the fertility drop isn’t completely benign. As economist Lyman Stone reports, 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 American 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. But 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. But the US could have raised its legal immigration numbers to compensate, and it didn’t.
With immigration and fertility both down, the US is projected to age rapidly. Even before Covid, the median age was projected to rise to 43 by 2060 from 38 today. The size of the 55+ 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 America will age gracefully. But as other rich countries have discovered, a graying population entails two big problems: economic burden and loss of national power.
The economics of aging revolves around a very simple fact: Old people stop being able to work. And 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 old 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’s projected to be only half that.
So 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’s what the American workers of 2060 will be facing if we stay on our present course. Of course, mathematically, this will hold down living standards; fewer working people means less output per person in the total population.
But that isn’t 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. Another paper by Shekhar Aiyar, Christian Ebeke and Xiaobo Shao 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, we’re in trouble.
In other words, if the US doesn’t do something about its slowing population growth, it could see a halt to improving living standards as well.
And for many, living standards aren’t 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 like Germany and Japan. But now, the US appears to be entering a period of intensified competition with a new rival — China — whose population is four times our own.
As writer and Bloomberg Opinion contributor Matt Yglesias notes, a growing US population would put America in a much stronger position vis-à-vis its much larger rival. China’s population has plateaued and will soon shrink, if it hasn’t started to do so already. But 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. We don’t have to go all the way to one billion Americans, as Yglesias suggests, in order to bolster our position, but we should at least make sure to grow instead of shrink.
Opponents of population growth often argue that it’s bad for the planet, that by having more babies or bringing in more immigrants, we’ll be increasing the use of natural resources. But this isn’t necessarily true; over 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, I’ve argued that it makes sense to develop a national population policy. Fortunately, such a policy would probably look a lot like what 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 Senate Republicans, especially at a time when anxiety over immigration has become all-consuming on the political right. But Biden still has an obligation to try. Meanwhile, Biden can unilaterally raise the cap on refugee admissions, which he did on Monday.
But 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 $250 to $300 per month per kid that was a centerpiece of the president’s earlier Covid 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’s also a pro-natalist bill — a way to make raising children a lot 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 $2,800 to $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’t make up the entire gap, they’ll 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 America wants to be. We can choose to be a graying nation, looking inward and grimly awaiting the days of the thinning herd, even as we prepare to shoulder the heavy burden of supporting the elderly on our diminishing shoulders. Or we can choose to be a great nation: a vigorous, future-oriented, positive country confident enough in ourselves to believe that there should be more of us.