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America’s demographic squeeze
A falling birth rate and much slower immigration presage long-term trouble ahead
Dec 15th 2012 | WASHINGTON, DC | from the print edition
ALTHOUGH America’s fiscal problems are among the worst in the rich world, its policymakers long took comfort that, when it came to demography, its outlook was one of the best. Because Americans have so many babies and welcome so many immigrants, they had more room to deal with the coming burden of pensions and health care for the elderly.
But the savage recession of 2007-09 and its aftermath have not just deepened America’s fiscal hole; they have weakened those demographic advantages. America’s fertility rate has been falling since 2007, as has net immigration. Compounding this, the share of the population that is active in the labour force has slipped, both because of ageing and because of the recession’s lingering effects.
On December 12th the Census Bureau said America’s projected population would rise 27% to 400m by 2050. That is 9% less than it projected for that year back in 2008. Those 65 and over will grow to 22% of the population by 2060 from 14% now, while the working-age population slips to 57% from 63%.
The new projections, based on the 2010 census, are based on recent trends in fertility and immigration. The number of babies born per 1,000 women of childbearing age (also called the “general” fertility rate) fell to 63 in the 12 months that ended in June of this year, the lowest since at least 1920, and well below the recent high of 69 recorded in 2007. That is partly because the average age of women of childbearing age has increased. The “total” fertility rate adjusts for the age of the population and extrapolates how many children each woman will have over her lifetime. This, too, has fallen, and at 1.9 it is below the replacement rate of 2.1. America’s fertility rate is still higher than the average for the OECD, but has fallen sharply since 2007.
Immigration has been an important component of America’s population growth, thanks both to the influx of new people and to their tendency to have more babies. Those advantages, too, have started to dwindle. A report by the Pew Research Centre notes that the birth rate has fallen especially sharply for immigrant women, to 88 per 1,000 women of reproductive age in 2010 from the recent peak of 102, though it remains well above that of American-born women. The Census Bureau reckons that net migration in 2011 was only 700,000, down 28% from 2006 and the lowest for at least a decade.
The main reason for the fall in both fertility and immigration is the economy. There are fewer opportunities on construction sites and elsewhere for immigrants. Children are expensive, so couples delay having them when their prospects dim. Gretchen Livingston, a demographer at Pew, notes that the only state in which births rose in 2009 was North Dakota, largely bypassed by recession, whereas they fell especially sharply in devastated Arizona, Nevada and Florida. This means that when the economy recovers, so should fertility. Policymakers have yet to panic; the Social Security Commission, which manages America’s public pension system, reckons fertility and immigration will bounce back in the next few years.
This may be too sanguine. Structural as well as cyclical factors are at work. Mark Mather of the Population Reference Bureau, a research outfit, notes that couples have been getting married ever later in life; in 2011 the median age at first marriage was 28.7 and 26.5 for men and women respectively, the highest on record. A rising share of women in their early 40s are childless. In this respect America may be following the experience of Europe.
Though it will be two decades before today’s lower fertility affects the ranks of workers, America can ill afford it. Growth in its labour force has slowed dramatically since the recession; in November it was only 1% larger than at the end of 2007, a period in which the working-age population grew by 5%. This is partly because of the weak economy, which has driven many people into early retirement, others on to disability payments, and some out of the job hunt altogether. Nevertheless, the Congressional Budget Office sees the potential labour force (that is, after excluding purely cyclical influences) as growing by only 0.5% a year in the coming decade, largely because the population is ageing. That puts ever more of the burden of supporting old-age benefits on a stagnant population of workers.
For politicians struggling over the deficit, these trends point to some remedies. One would be gradually to raise the eligibility age for Social Security and Medicare over coming decades, encouraging Americans to work longer. Another would be to allow more immigration. Neither would solve America’s immediate deficit problem; but they would make the long-term challenge more manageable.
from the print edition | United States