The United States, with its aging population and decreased birthrate, is at the forefront of a worldwide population decline that threatens to batter work, wealth, well-being, and retirement, as outlined in a recent report from the McKinsey Global Institute.
The report, “Dependency and depopulation? Confronting the consequences of a new demographic reality,” puts the United States and North America within the “first wave” of global regions affected. People living in such regions are starting to feel the effects of birthrates falling below a replacement rate of 2.1 children per family, requiring that a shrinking workforce support a surplus of elderly people beyond typical working ages, the report says – though it adds additional factors so far have softened the impact in the United States.
Europe, economically advanced countries in Asia, and “Greater China” also fall into the first wave, with the entire world outside of Sub-Saharan Africa expected to feel the impact of a declining population in subsequent waves over coming decades, the report says, citing U.N. population projections.
In North America, birthrates dropped below the 2.1 replacement rate decades ago, with the number of children per family declining from 3.0 to 1.6 from 1960 to 2023, the report notes. In the United States, where the working-age percentage share of the population peaked in 2007, there would have been 52% more babies born and 8% fewer senior citizens if not for a fertility decline and life-span increase from 1960 to 2021, the report adds.
Increasing the Birthrate – and More
America’s birthrate decrease, which so far has been partly offset by immigration, hourly productivity growth, people working to older ages, and other factors, could ultimately threaten quality of life – and the aging population will continue to boost demand for and consumption of certain resources such as health care.
“Absent action, younger people will inherit lower economic growth and shoulder the cost of more retirees, while the traditional flow of wealth between generations erodes,” the report’s authors write broadly of how depopulation will affect nations. “Long-standing work practices and the social contract must change. More fundamentally, countries will need to raise fertility rates to avert depopulation — a societal shift without precedent in modern history.”
Besides the challenge of increasing birthrates, the report proposes additional action.
“A combination of higher productivity, more work per person, effective migration, and higher fertility rates can ensure global prosperity for the future,” the report suggests. “That said, no one of those levers alone will be enough, and each presents challenges.”
The report notes the United States and some other advanced economies are expected to benefit from such offsetting factors, including the ability of their economies to draw immigrants seeking work.
“Projections suggest that some countries with fertility rates below replacement, including France, the United Kingdom, and the United States, will have continued population growth through 2100 based on positive net migration,” the authors write.
With regard to the low birthrate, however, even an immediate reversal would not contribute to a solution for years.
“Even if … fertility rates were to jump overnight to the replacement rate, it would take 20 years, give or take, for those additional babies to become adults and begin contributing to economic growth through work,” the report notes.
Learn more about the report’s findings and the challenges it outlines here.
