A recent Wall Street Journal article revealed that the world’s birthrate is sinking at an alarming rate. In the not-so-distant future, the global fertility rate will drop below the point needed to keep the population constant…and it may have already reached that level.
“Fertility is falling almost everywhere, for women across all levels of income, education and labor-force participation. The falling birthrates come with huge implications for the way people live, how economies grow, and the standings of the world’s superpowers. In high-income nations, fertility fell below replacement in the 1970s, and took a leg down during the pandemic. It’s dropping in developing countries, too. India surpassed China as the most populous country last year, yet its fertility is now below replacement.”
Experts are concerned about shrinking workforces globally, which would stifle economic growth, lead to more underfunded pensions, declining social benefits, and worse.
Domestically, fewer young Americans mean decreased socio-economic vitality, less cheap labor, fewer earners to contribute to Social Security, and a dearth of Americans to fuel our small businesses. It also means that a larger percentage of aging Americans will need care and government support. Unfortunately, those shortfalls can only be addressed by raising taxes and/or reducing benefits…Not a good thing if you’re headed for retirement in 10-30 years.
Risks to the Economy
Economic pressures are intensifying in concert with the declines in populations. Since the pandemic, labor shortages have become endemic throughout developed countries. This is expected to worsen in coming years as the post-crisis drop in birthrates yields an ever-shrinking inflow of young workers, placing more strain on healthcare and retirement systems.
At a deeper level, some of these voids can be filled by immigrant workers. Still, illegal immigrants pay no taxes and a large number of foreign workers may be sending assets back to their native countries to support their families, while others tend to be ultra-savers with far more frugal spending habits than the typical American. In short, these are real threats to our country’s financial future and could certainly impact Social Security and other retirement programs down the road. Are you taking these risks into consideration? And if so, what are you doing to mitigate them?
Link to WSJ article: https://www.wsj.com/world/birthrates-global-decline-cause-ddaf8be2?st=g684f9azj879zt5&reflink=desktopwebshare_permalink
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