Can ‘baby busts’ mean economic booms? Why low birth rates and aging populations may not be the disaster we thought

“Contrary to the widespread expectation that these trends hamper economic growth, we find lower birth rates are associated with higher growth in GDP per working-age adult across countries and higher wage growth across US commuting zones,” according to the newly released report, Baby Busts and Growth Booms, distributed by the National Bureau of Economic Research.

Over the past 70 years, birth rates have declined on all continents, according to the report. But researchers found that for each percentage-point drop, there was a 26.8% increase in GDP per worker.

These patterns aren’t explained by factors such as higher levels of education, rising female labor force participation or a transition from agriculture to manufacturing. Rather, the researchers argue that they reflect the “labor-saving response of technology to the scarcity of younger workers.”

Indeed, they found that countries with lower birth rates correlate with more patents and high-tech activity.

The impact of lower fertility rates

The worldwide total fertility rate (the number of children per woman) dropped from 5.3 in the 1960s to 2.2 in 2024. The replacement level fertility (RLF) is typically considered to be 2.1 children per woman. In the U.S., the total fertility rate sits at 1.6 — well below the RLF.

The rate of population growth in the U.S. is expected to slow over the next 30 years, from an average of 0.3% a year over the next decade to 0.1% a year from 2037 to 2056, according to projections from the Congressional Budget Office (CBO).

By 2056, the population is expected to stop growing. Still, this will depend on rates of fertility, mortality and net immigration. In CBO’s projections, mortality rates decline, and the average life expectancy increases from 79.0 years in 2026 to 82.3 years in 2056.

“Net immigration (the number of people who migrate to the United States minus the number who leave) is projected to become an increasingly important source of population growth in the coming years, as declining fertility rates cause the annual number of deaths to exceed the annual number of births starting in 2030,” according to CBO.

The authors of the Baby Busts and Growth Booms report warn that the demographic changes currently underway “may spur institutional changes, policies, and additional human capital investments” that “may counteract any negative effects of aging and population declines.”

One issue could be Social Security. Already, the Social Security retirement trust fund is expected to run out by 2032.

With fewer younger people in the workforce (and a growing population of retirees), the Social Security retirement program will be paying out more in benefits than it receives in revenue once that trust fund is depleted.

This doesn’t mean retirees will no longer receive a benefit; rather, their benefit would be slashed by 24% — unless action is taken now.

How to protect your retirement savings

Having more babies isn’t the answer. Not everyone wants to have children. And, with the ever-increasing costs of raising a child, having larger families may not be a viable option even for those who want them.

Nowadays, “childcare is more expensive than rent in 17 states and Washington, D.C.,” according to an analysis by the Economic Policy Institute (EPI).

And for women who have to step away from the workforce to raise young children (in some cases because it makes more economic sense than paying for daycare), that means missing out on their peak earning years that would help boost their Social Security retirement benefit and retirement savings.

So, while declining birth rates may actually lead to “higher total factor productivity, larger capital stocks, a shift toward exports in high-tech industries, and more labour-saving patenting,” according to the Baby Busts and Growth Booms report, it may have a less-than-positive effect on your Social Security benefits.

To secure your retirement, most financial experts recommend setting aside 10% to 15% of your income throughout your working years.

You can do this through employer-sponsored plans such as 401(k)s or 403(b)s, individual retirement accounts (IRAs) including traditional and Roth IRAs, as well as pension plans and annuities. Take advantage of employer matches if they’re available to you and try to max out your contributions, if possible.