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The Mixed Blessing Of Falling Birth Rates

The developed world is doing something unprecedented: It’s no longer reproducing. That’s great for the environment and very good for the work and housing prospects of the relative handful of kids that are being born (since fewer workers mean rising pay and fewer households mean cheaper real estate). But it’s bad for retirees who will have their benefits slashed when there are too few workers to support them.

Let’s begin with some charts from today’s Wall Street Journal. The first shows women waiting longer to have kids, with the average age for first birth rising from 21 in 1968 to 26 today:

birth rates by child

The second shows the result, which is plunging birth rates among younger age groups:

birth rates by age

This is due to a few (admittedly somewhat contradictory) things. First, college-educated women tend to make more money, which raises the opportunity cost of starting a family. Second, soaring student debt for those same college graduates makes work more necessary and the added expense of kids more terrifying. Third, the rise of the gig economy makes Millennial finances more precarious than for any other post-Depression generation, leading many to feel too overwhelmed to even consider starting a family. Fourth, kids are obnoxious (sorry, that’s just me venting about some hopefully very temporary family stuff).

Add it all up, and Americans (along with Japanese, Germans, and Italians) are having too few kids to replace their existing populations.

Immigration will no doubt take up some of the resulting slack, but not all of it because new arrivals soon adopt their host country’s breeding attitude. In the US, for instance, Hispanic birth rates are falling faster than for non-Hispanics.

Hispanic birth rates

Falling birth rates seem to be the new normal, with shrinking populations not far behind. In a wildly overcrowded world (watch the following video if you doubt the truth of this) …

… fewer humans solve a lot of problems. But why write about this trend in a gloom-and-doom finance blog? Because of the impact of falling working-age populations on the global financial system. The only way for Millennials to pay for Boomers’ Social Security and Medicare would be for the latter to confiscate 90% of the former’s paychecks. That won’t happen, so something else has to, most likely massive benefit cuts via hidden inflation.

In other words, we aggressively depreciate the dollar (and euro and yen) while raising retirement benefits by some fraction of that rate, thus stiffing retirees in a way that many won’t notice, at least for a while.

The side effect of this purposeful inflation will be a massive shift of capital out of financial assets like government bonds that depend for their value on the stability of the underlying currency, and into real assets like oil wells, farmland and precious metals which governments can’t create with a mouse click. So buy gold, sit back and enjoy the show.

 

Emigrate While You Still Can

16 thoughts on "The Mixed Blessing Of Falling Birth Rates"

  1. The LA metro area has 13 Million residents. Among them are 60,000 homeless living on the streets. They are unwashed, jobless,diseased, druggies who still need to eat and poop/pee on the streets and at night break and enter to steal to fund their drug needs. This is the perfect setting for a disease pandemic outbreak as we had in 1918.

  2. I live in Spokane and based on what I observe it is hard to believe that the birth rate is dropping here. One trend that I see in my part of town is that grandparents are becoming the primary caregivers for their grandchildren. In fact, I would not be surprised to see boomers eventually becoming caregivers for their children as well. It may be that boomers are going to earn that 90% they are taking from younger generations. : ) I also am starting to see multi-generational households in our single-family zoned neighborhood.

    As a 60-year-old, I fully expect the government to move the social security goal posts again in the near future. My bigger concern is property taxes being used to fund just about everything once the SHTF.

    1. Matt, Raising property taxes by elected officials to get more money to spend is a given. Most property owners do not have the time or ability to raise a challenge to the bureaucracy.

  3. Another possibility is increasing FICA taxes. That could take the
    form of raising (or eliminating) the limit on payroll which is now
    around $126,000, or raising the wage base (higher pay, or even a
    “minimum guaranteed income,”) both of which would be supported by the
    hoi polloi.

    Other
    possibilities – but not so popular with retirees who vote – would be
    elimination of COLA (Cost of Living Adjustments) on the SS payouts, more
    aggressive raising of the retirement age, and the elimination of the
    “early retirement” payment options.

  4. Bringing highly educated people into the US, no matter their color,or religion, will benefit the US. Muslim is not a religion but a form of dictatorial control that practices female genital mutilation, stoning of women to death, and hate of all peaceful religions. Flooding the US with uneducated, diseased, unskilled, welfarites, druggies, and criminals will quickly reduce the US to third world status.

  5. A falling US Birth rate will mean less required health care, education, cars sold, water+wastewater requirements. etc. But if we continue with open borders flooding the US with unvacinated disease spreading illegal aliens who cannot speak English, have no job skills, are criminals and drug sellors all bets are off.

    1. I’m not sure your comment is politically correct for 2019…

      I applaud you for having the stones to post it!

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