Millennials are having fewer children compared to previous generations, which could negatively impact economic growth for more than a decade.
Some child-free millennials, known as DINKs (Double Income, No Kids), are using the money saved from not having children to indulge in luxury vacations, flashy boats, and other high-end purchases. However, this type of spending won't be enough to counterbalance the economic slowdown caused by a declining population, especially given the dramatic drop in the U.S. birthrate over the past 50 years, according to economists interviewed by Business Insider.
In 2022, the birth rate in the U.S. was just 11.1 births per 1,000 people, as reported by the Centers for Disease Control and Prevention. This represents a 53% decline from the 23.7 births per 1,000 people recorded in 1960.
The decline in births has been especially pronounced since the pandemic, says James Pomeroy, a global economist at HSBC. He notes that the national birthrate is currently decreasing by about 2% annually and did not rebound in 2023 as experts had anticipated.
This trend puts the U.S. at risk of experiencing "extremely low" population levels in the long term, similar to the situation in China, where the government is offering financial incentives to encourage people to have more children.
"These declining birth rates have significant long-term economic impacts," Pomeroy said. "By the time we reach 2030, the birth rate could be vastly different from the projections made at the beginning of the decade."
The economic impact of millennials having fewer children may be more severe than the effects of an aging baby boomer population, with the most serious consequences expected 10-15 years from now, according to Pomeroy. He compares the situation to Japan, which had a similar birth rate in the 1990s and experienced its "worst" economic growth period about a decade later, as its workforce shrank and the country faced several years of negative GDP growth.
The declining U.S. birthrate could reduce GDP growth by 1-2 percentage points annually, according to Todd Buchholz, a former White House economist. Over several decades, this could slash the U.S. growth rate by a third, or negate the productivity gains from advances in artificial intelligence. In a worst-case scenario, GDP growth could drop by 3-4 percentage points, Pomeroy warned.
Fewer births mean fewer workers in the economy.
"It becomes more challenging to find people for various jobs, like cutting hair, doing nails, or operating x-ray machines in hospitals," Pomeroy said. "The sheer decline in the number of people becomes a significant issue."
Decreasing fertility rates also complicate funding Social Security, especially as baby boomers retire. The peak burden on the U.S. economy from baby boomers is expected in 2029, when all boomers will be 65 or older.
"We're going to face significant challenges in funding retirement benefits," Buchholz added. "The deficits in Medicare and Social Security are going to be substantial."
If the birthrate doesn't increase soon, Buchholz estimates there could eventually be just two full-time workers for every retiree, down from around 20 workers per retiree in the 1930s.
