By RICK NEWMAN
It sounds like one of
those stories you can safely ignore: The U.S. birth rate has hit a record low,
led by a big drop in the portion of immigrant women having babies.
This development doesn't directly affect anybody,
since it's one of those long-term societal trends that occurs in small
increments and doesn't change the unemployment rate, the price of gas, the direction
of the stock market or any of the big economic forces that make our lives
better or worse today. And since the trend is strongest among immigrants, it
sounds like maybe this is something happening in a shadowy part of the economy
that doesn't matter all that much.
But it does matter, and if the trend persists, it
could mean lower living standards for most Americans in the future.
It may seem intuitively obvious that a slower-growing
or declining population is good for the economy, especially when you think
about starving children in poor parts of the world where there's not enough
food for everybody. In places where resources are severely limited—and economic
policies are dysfunctional—it may be true that a growing population is a bad
thing.
But that's usually because such economies are static,
and instead of creating wealth they typically just divide up what's already
there. That's not the situation in America, which has a dynamic economy that
creates wealth and more than enough resources for all of its citizens.
On the contrary, one of the great strengths of the
U.S. economy, especially compared to Europe and Japan, is a relatively high
birth rate, which keep the population young, on average, and population growth
robust. "Everybody comes into world with one mouth and two hands,"
says economist Donald Boudreaux of George Mason University. "It's
generally true that most people produce more than they consume."
A growing population is good for the economy when
rising productivity continually reduces the amount of resources required to
produce a given amount of output. Even now, with the U.S. economy in a rut and
too many people out of work, productivity is rising, which means a larger
population would generate more wealth per person than a smaller one. Boudreaux
points out that Manhattan, one of the mostly densely populated places in
America, is also one of the wealthiest, whereas rural states like Mississippi
are sparsely populated, and much poorer.
The sizeable drop in the U.S. birth rate, reported
recently by the Pew Research Center, has probably occurred because of the
struggling economy. Though Pew didn't investigate the reasons behind the
decline, birth rates tend to rise and fall based on how optimistic or
pessimistic people feel. The U.S. birth rate peaked in 1957 (hence the
"baby boom" generation), when the economy was booming and the unemployment
rate was about 4.5 percent. It sagged in the 1970s, when inflation and other
problems battered U.S. workers. The birth rate stabilized in the 1980s and
stayed more or less level, until starting to dip again in 2008.
Since then, younger Americans have been waiting longer
to get married, often because of economic difficulties. Married couples may be
waiting longer to have kids, or having fewer kids, for the same reason. While
the trends are more pronounced among immigrants, they're occurring throughout
the U.S. population.
These types of demographic trends get the attention of
economists when big changes might raise or lower the economy's capacity to
grow—which could be happening now. Fewer marriages and fewer children lower the
rate of household formation, which means people spend less on everything from
appliances to clothing. "Fertility rates have plunged, and that will have
an impact on future consumer spending," says Nigel Gault, chief U.S.
economists at forecasting firm IHS Global Insight.
That trend could reverse itself if the economy picks
up for good and Americans become convinced that happier days lie ahead. But for
now, a dearth of babies and a limp economy may be reinforcing each other. A few more babies would be
good for business.
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