The birthrate in the U.S. fell 4% in 2020 and immigration may be the solution, say economists

The birthrate in the U.S. is at a record low and some economists believe it will stay that way. This will send ripples through the economy for decades to come.

Birthrates have fallen steadily since the 2007-09 recession. In 2020, the U.S. had 3,605,201 births or 4% fewer than in 2019 — an early sign of a pandemic baby bust.

Kasey Buckles, an economics professor at Notre Dame, said that is a “huge” decline. She said it was likely due to economic uncertainty about the pandemic.

“If people aren’t feeling optimistic about their own situation, or the situation that their children will be born into and grow into, then you tend to see fewer births,” Buckles said.

The babies born in 2020 will be 16 in 2036 when they could be considered part of the labor force.

One way economists measure the fertility rate is comparing it with the replacement level, the point at which a population can replace itself.

The total fertility rate was 1,637.5 births per 1,000 women in 2019, which is below the statistical replacement level of 2,100 births. A fertility rate below the replacement level means that the population is declining.

Anne Morse, a survey statistician with the U.S. Census, said the U.S. typically fluctuates around the replacement level but in the long run the country has been slightly below it.

Both workers and consumers are needed for economic growth. If there are fewer people buying products then the economy is going to slow down.

“We also need people’s innovation,” Buckles said. “We need the people that are going to invent things and cure diseases and produce art and all of these things to keep the economy growing.”

In order to maintain the current standard of living, businesses will need to rely on immigrants for labor if the birthrate stays low, according to economists. Immigrants are projected to add 17.6 million people to the working age population in the U.S. by 2035, according to the Pew Research Center.

Immigration is already changing the composition of the labor force, contributing to a lower birthrate. Compared with other ethnicities, Asian women have historically lower birthrates and increasingly more Asians are immigrating to the U.S.

Morse said in general there is still a gap in birthrates by race and ethnicity but it’s smaller than it used to be.

Hispanic women in the U.S. have seen a decrease in births but still have a slightly higher birthrate than other ethnicities.

The one upside to fewer people in the labor force is that workers will have more bargaining power for increased wages and better conditions.

But when there are fewer workers in the labor market, there will also be fewer people to fund retirees and programs like Social Security and Medicare. 

In 1960, there were 5.1 workers for every retiree, but in 2040 it is projected to be 2.1. Babies born in 2020 would be 19 in 2040.

This strain on government systems like Medicare and Social Security may mean people will retire later and receive fewer benefits.

Buckles said from a policy and business perspective, there may be an increase in retirement age or incentives for people to retire later. Businesses may also try to attract more women or young workers, who have a low or declining participation rate in the labor force.

Buckles also said a drop in unintended births could contribute to the lower birthrate being a permanent change.

Teen births are down 60% since 2007, which Buckles says is “astonishing” for such a short amount of time. Births to unmarried women and women aged 20 to 24 are also down over that period, which could mean women are delaying having children.

Guillaume Vandenbroucke, economist and research officer at the St. Louis Federal Reserve, said there is a negative relationship between income and fertility — individuals with more income have historically had lower birthrates.

Some people consider what economists call the quality-quantity trade off when deciding whether or not to have children, debating how many resources they can invest for their children’s education and health.

The implementation of the Affordable Care Act made long acting contraceptives more affordable for women, increasing access to birth control and more effective birth control. 

“It means that women are better able to make choices about their lives,” Buckles said. “And the kids that we do have are more likely to be wanted, which is understandably associated with better outcomes, better well-being for those kids.”

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