This is a fascinating report from beginning to end, but particularly which
in part you authored, which has to do with fertility rates in the United
States and what that could do for economic growth.
First of all, give us a sense of where we are on utility fertility rates in the
United States and whether this is a temporary thing or it may take care of
itself. Sure, so the U.S.
fertility rate has plummeted for the past 15 years.
And so the problem here is that now we are at a level of fertility in this
country that is below replacement level, meaning without immigration, the
population will not maintain our size. And so what's been happening is for 15
years, annual birth rates have gone down.
And now we're at a point where the average number of children born to a
woman in the U.S. is substantially below the sort of magic
number of two point one that would keep us at replacement population level.
It's now one point six seven. My look at the data suggests that it's
unlikely to turn around anytime soon. So what we've really seen is that the
decrease in births is very widespread. It's coming from across demographic
groups. It's coming across the country.
It doesn't seem to be driven by any sort of sharp policy or economic change in
the past 15 years. Rather, it seems to reflect more recent
cohorts of young adults having fewer children or remaining childless more
often than cohorts in the previous past. And so this suggests that there's been a
general trend away from having children, from having multiple children.
And if we look to other high income countries that have been dealing with
this for decades, it's it's probably going to be stubbornly low.
That's my best guess. So, Professor, here on Wall Street week,
we speak to investors in particular. What are the possible consequences that
in terms of economic growth? Because really we have to depend upon
future economic growth. What is that decline in fertility likely
to do to us? The decline in birth rates has meant a
decline in population growth, and the most immediate effect of this is likely
to be a shrinking size of the working age population.
So the working age population in the US has been stagnant for for over a decade
now. And given the decrease in birth rates
we've been experiencing for the past 15 years in the not too distant future.
Again, absent an increase in immigration, we're simply going to have
fewer people of working age. Now that that's consequential, both in a
fiscal sense, meaning that it's going to put fiscal pressures on our social
social security system. Funding for Medicare, disability
insurance. But it also it also poses economic
headwinds in the sense that you have fewer people of working age.
And that doesn't necessarily just mean fewer people to produce stuff.
Lower economic and lower economic activity overall.
More worryingly, it could mean lower GDP per capita or a reduction in
productivity per person. A reduction in living standards, which
could have profound effects, obviously on investment, particularly in our
states. So what can we do about it?
Can we get that fertility rate back up or do we have to find a workaround?
Yeah. So here's where I think we can draw
lessons from other high income countries Japan, UK, Canada, other countries in
Europe, including Scandinavian countries that have been dealing with below
replacement level fertility for many decades.
You know, the first thing I would note is that despite efforts to turn things
around, fertility has remained below replacement level in those countries for
many decades. Lot of those places have implemented
explicitly pro NATO lists, policies, things like baby bonuses or child tax
credits, expanded parental leave, expanded subsidies for child care, all
things that should make the cost of having children lower or the ability to
combine work and kids easier. And yet the evidence from those kinds of
incremental policies is that they might lead to some modest increase in birth
rates in the short run, in particular, perhaps not persistently, but nothing of
this size that we would need to really lead
to a dramatic reversal of the decline in fertility or the stubbornly low
fertility rates anytime soon. So that suggests that it would be hard
to turn things around. And again, because it looks like what
we're seeing is really just a move away from having children or having multiple
children, as opposed to any sort of temporary response to some to some
discreet change, suggest that it's going to be really hard to turn the fertility
rate around. So where does that leave us?
Well, the obvious thing is to think about increasing immigration now.
Easier said than done in this country. Congress has been sort of derelict when
it comes to immigration reform for far too long now.
But given these demographic trends, the imperative for immigration reform, for
allowing more people to legally enter or stay in the country becomes that much
stronger. And there's lots of sensible reforms,
reform proposals out there, ways we could do this.
We could certainly have more of an employment driven immigration system
where like other countries do, including Canada, where we allow more people in
who are reasonably likely to contribute right away to our economic productivity.
We could also increase per country caps on the number of family members who were
allowed to immigrate to the country or stay in the country beyond immigration,
of course. Again, these demographic headwinds
emphasize the need for policies and conditions that promote innovation and
productivity growth. Easier said than done, though.
Recent spending bills in Congress aimed at investments in infrastructure
increases in spending on scientific development.
All of those are encouraging. All of those are steps in the right
direction. But getting innovation policy right is
very hard. And it's and it's about it will require
a lot more than just spending. It requires having the conditions in
place for competitive companies and innovators to flourish and thrive.
This is something that we take up in our in our report that you mentioned.
And of course, it will require a lot of investment in talent, not just importing
global talent through more immigration, but also really building the talent pool
among our native born population here in the U.S..