The Baby Bust and Its Impact on Work

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Jan 24, 2022

The pandemic lockdowns were supposed to produce a new baby boom. It was assumed that nature would take its course when people were closeted together for long periods. But the opposite has happened: The population grew at the lowest rate on record. 

The U.S. added 393,000 people, an increase of just 0.1% in the last year. That included 148,000 more births than deaths, and 245,000 immigrants. It was the first year in which growth from births exceeding deaths fell below net arrivals from abroad. Birthrates have been falling steadily since 2007, and immigration has greatly reduced. This year’s total was just over half that of 2020, and a quarter that of 2016, when it was over a million.

The signs that the U.S. is facing a long slide in population are everywhere. In many states, maternity hospitals are closing because of a small number of births. School districts are shuttering schools because of a lack of enrollment. 

And there are other indicators that the U.S. is in a sustained period of population stagnation. Marriage and fertility rates in America had already been falling — in 2020 the marriage rate fell to 33 per 1,000 of the unmarried population, and the lifetime fertility rate to 1.64 per woman, well below the replacement level of  2.1 needed to maintain the population. 

The pandemic has exacerbated that. A major study found that among people between 18 to 55, 17% reported their desire to have children had decreased since the start of the pandemic.  

Historically, the poor have been more likely to have children than more educated and affluent Americans. But childlessness is rising among less-educated, lower-income men and women, a trend that Covid has amplified. Forty-nine percent of lower-income adults reported not wanting children, compared to 44% of upper-income Americans. This is especially true of low-income men, the majority of whom report wishing not to have children.

In retrospect, it’s not surprising that Covid produced a baby bust. Marriages were postponed, and dating suffered. The trend of rising out-of-wedlock births peaked in the first decade of this century. The birth dearth became a baby bust. Regrettably, the most likely scenario going forward is that we’ll continue to see a decline in childbearing.

Implications for Employers

In my last post, I speculated that the labor market may already have reached full employment. That may remain true for the foreseeable future, as the population, and consequently the labor force does not grow. 

Already, most growth in the labor force happens because of immigration. Despite a record number of attempts to cross the southern border illegally, net immigration remains low. Most of those caught trying to cross the border illegally are sent back, while the pandemic has slowed legal immigration channels. Visa processing is at about half normal levels and the refugee-admissions program is at a standstill.

Covid has fundamentally changed the labor force, with millions having quit and not likely to return. Short of a recession, there will be consistent upward pressure on wages because of inflation and the continuing shortage of workers. Lower rates of population growth mean a higher economic dependency ratio, the number of older people supported by the younger working-age population. This will inevitably force a rise in payroll taxes to fund ever larger commitments in social security and medicare.

Employers may have no option but to either find a way to increase automation or cut back on goods and services they can deliver. A restaurant I frequent decided to use a robot to deliver food and bus tables, after months of trying to find staff and failing to do so. That may become the norm across America, as labor remains chronically short and expensive.

The Decline Is Global

Demographers predict that by the second half of the century or even earlier, the global population will enter a sustained decline for the first time ever. By 2050, 1 in 6 people in the world will be over the age of 65, up from 1 in 11 in 2019. 

Furthermore, the U.N. projects that 55 countries, including China, will see their populations decline between now and 2050. Germany’s workforce is expected to peak as soon as 2023 and then shrink by up to five million people by 2030. 

Population decline is predicted to accelerate exponentially starting around 2040 in much of the world, outside of Africa. Already, universities in South Korea can’t find enough students; in Germany, hundreds of thousands of empty properties have been razed, with the land turned into parks; ghost towns are emerging in Japan.

We’re not heading for a future like the one in The Children of Men, but the combination of low fertility and people living longer lives means fewer workers and more retirees. Managing this will require finding ways for old people to keep working. 

The Japanese, with the fastest aging society, show what may happen elsewhere. In Japan, nearly half of people between 65 and 69 and a third of those aged 70 to 74 have jobs. Japan’s gerontological society has called for reclassifying those aged 65 to 74 as “pre-old.” 

Projections by the Census Bureau show the U.S. population is expected to continue growing at a slowing pace, reaching around 370 million by 2035. After that, most baby boomers would reach retirement age, capping the growth. The population will start to decline after that, unless immigration increases enough to exceed the decline. 

And indeed, the U.S. remains a magnet for immigrants, but a global decline in population means that other countries will do more to try and keep their labor forces at home, and the competition for that talent will also increase. That future seems like a long way off, but it’ll be here before we know it.