Declining Fertility in America

Declining Fertility in America Lyman Stone DECEMBER 2018 AMERICAN ENTERPRISE INSTITUTE Declining Fertility in America Lyman Stone DECEMBER 2018 AMERICAN ENTERPRISE INSTITUTE © 2018 by the American Enterprise Institute. All rights reserved. The American Enterprise Institute (AEI) is a nonpartisan, nonprofit, 501(c)(3) educational organization and does not take institutional positions on any issues. The views expressed here are those of the author(s). Executive Summary irth rates in America are declining, leading to The problem, then, is not about Americans not valu- B one of the lowest rates of population growth on ing childbearing, but about barriers to childbearing record, soon to become the lowest ever. This will likely (and, implicitly, barriers to marriage and independent have far-reaching negative economic consequences. family formation). These barriers are numerous: Furthermore, the trend is shared with many indus- trialized nations and is observed across geographic • Increased young adult debt service costs due to areas and ethnic groups in the United States, including student loans; immigrant women and previously high-fertility states such as Utah and Hawaii. • Decreasing young adult homeownership due to This decline is led by falling birth rates for women rapidly rising housing costs and student loans; under 30, but in recent years, even women in their 30s have seen falling birth rates. These declines will almost • Increasing years spent actively enrolled in edu- certainly result in millennial women ultimately having cational institutions, which tends to reduce fewer children than previous generations had. birth rates dramatically while enrolled; Most of these changes in age-specific birth rates, however, can be attributed to changing marital pat- • Higher cost of market-based childcare, alongside terns. Controlling for marital status, fertility in the rising need for hired childcare due to diminished United States has been roughly stable for the past extended family support and more two-earner decade and a half. Most changes in marital status, families; and in turn, can be attributed to the increasing delay in young people getting married. In other words, declin- • Changed social and cultural expectations of par- ing fertility is really about delayed marriage. ents and parenting, making children and child- This trend cannot be reversed with “technological” bearing more burdensome than for previous or “technocratic” solutions. Even significant improve- generations. ments in reproductive technology would be insuf- ficient to boost fertility to replacement levels, and Some of these barriers, such as student loan bur- even significant restrictions of abortion or contracep- dens or housing costs, may be readily addressed tives would only modestly alter birth rates. Known through various policy changes. Other barriers are environmental factors affecting fertility, such as lead more difficult to surmount, such as societal expecta- exposure, should be addressed, but even if addressed, tions about parenting styles or market norms about they would alter birth rates only modestly. years of education required for work. Young fami- Declining fertility also cannot be reversed by a lies today face a sufficiently wide range of challenges campaign to alter Americans’ ideals or desires for to childbearing, and policy responses are likely to be children. Americans already report high desired fertil- sufficiently anemic, that a major recovery in fertility, and, indeed, fertility desires are already naturally ity seems unlikely. Rather, fertility will likely remain rising. Americans want to have more children than below the historic average until the next recession, they are actually having, even among young women. when it will plummet even lower. 3 Declining Fertility in America Lyman Stone round the country, maternity wards are seeing six in 1913, when the size of the congressional delega- A less demand for their services, churches are tion held steady until 1963. seeing fewer babies brought in for baptism, and Those good times did not last. Since the peak toy stores are struggling to stay in business. Fewer in 1947, births in West Virginia fell steadily to the babies are being born in absolute terms and espe- mid-1990s, when they leveled out around 20,000 cially in terms of the national birth rate. Depending babies per year. But lately, the birth rate has fallen on how it is measured, birth rates are either at their again, and births in 2018 will probably come to about lowest point in history or approaching it quickly. only 18,000 in total, just a third of what they were in What is causing this decline? Is it secularism? Eco- 1947 (Figure 1). nomic demoralization? The decline of the family? West Virginia’s experience is atypical in its severity, High housing costs? but not in its direction. Birth rates are falling around Explanations for the ongoing baby bust are as the United States (Figure 2). The total number of numerous as they are panicky. And indeed, figur- births in Maine, Michigan, Mississippi, Pennsylvania, ing out the cause of the decline, and hopefully how and Rhode Island have all fallen by about half since to prevent it, is a vital question for policymakers and their peaks. As of 2018, no state in the union has births the nation on the whole. Lower birth rates could at, or even close to, a peak. Even states with popula- mean slower economic growth, insolvent public obli- tion booms such as Florida or Washington have birth gations, and a growing culture of intergenerational counts 5 or 10 percent below their peaks. despair. Luckily, there is a large amount of research on Falling birth rates are a major contributor to the fertility, so the causes and consequences of the baby falling national rate of population growth. If the trend bust can be teased out and analyzed. from 2010 to 2017 continues—a trend largely attribut- able to fewer births—2010–20 will likely see the lowest rate of population growth of any decennial period Where Have the Babies Gone? in American history except for the 1930s. The academic literature on the causal impact of In 1947, 55,000 babies were born in West Virginia, population shocks on various economic outcomes according to data from the Centers for Disease Con- does not yet have a consensus view. Generally, how- trol. This was the highest it had ever been. But from ever, a host of potential problems can be imagined. For the 1900s to 1940, at least 40,000 children were example, if population growth slows nationally, then born almost every year. The coal industry was lead- demand for housing will not rise as much. If popula- ing the way in industrializing the rural, underdevel- tion change turns negative, then demand for housing oped heartland of Appalachia, so the population was could enter into a permanent decline. Imagine how booming. West Virginia’s congressional delegation many American households’ finances will be insol- rose steadily from three representatives before 1883, vent if home values entered a permanent decline. Or, to four after redistricting, to five in 1903, and then to more simply, ask someone from a shrinking town in 5 DECLINING FERTILITY IN AMERICA LYMAN STONE Figure 1. West Virginia Annual Births 60,000 50,000 40,000 30,000 20,000 Total Live Births per Year 10,000 0 5 2011 191 1921 1951 1981 2017 1927 1933 1939 1945 1957 1963 1969 1975 1987 1993 1999 2005 Source: Centers for Disease Control and Prevention, National Vital Statistics Reports, https://www.cdc.gov/nchs/products/nvsr.htm; Integrated Public Use Microdata Series, National Historical Geographic Information System, “Vital Statistics,” https://www.nhgis.org/; and Centers for Disease Control and Prevention, Wonder, https://wonder.cdc.gov/. Appalachia, or even from Detroit, what durable popu- because the pool of customers is never growing. lation decline does to the real estate market. In Japan, Instead, entrepreneurs will always be competing where population growth has already turned nega- directly with existing brands. As such, fewer firms tive, real estate prices have shown no growth even in will likely capture more economic growth, yielding high-demand cities such as Tokyo. more monopoly power for a few brands and com- Consider the solvency of intergenerational trans- panies. Again, regions with economic decline are fer systems such as Social Security and Medicare or already familiar with this effect, as declining places even the performance of the stock market. Without depend more on a few big employers, which enables as many young workers to pay into Social Security those employers to “capture” the local government and Medicare or buy the hot dogs and iPhone apps and demand tax breaks and other benefits or keep that make corporate shares worth holding, the retire- wages low. ment prospects for American workers will dim. Their Some research does suggest that falling population 401(k)s will not be worth as much, they will have long can have good effects, such as by encouraging automa- lines at the hospital, and their Social Security checks tion and increased capital intensity. But while these will perhaps be smaller than they expected. In other strategies can keep the economy afloat in aggregate, words, in a low-fertility world, Americans may have to they increase the economic returns to the ownership work longer and harder before retiring. class while leaving workers with fewer opportunities. If the size of the economic pie is not growing as In the past, these displaced workers found jobs quickly, it will

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