THE THREAT OF DEPOPULATION
Another thing to worry about.
The Advocacy Newsletter: Connecting.... the Dots
Volume 10 Number 504
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The population growth in the United States has been decelerating, putting the economic and social safety net at risk in the future. This is because population growth is vital for maintaining a strong economy and preserving the social fabric of our country. Population growth over the 12-month period from July 1, 2020, through July 1, 2021, stood at an unprecedented low of just 0.12%. This is the lowest annual growth since the Census Bureau began collecting such statistics in 1900 and reflects how all components of population change—deaths, births, and immigration levels—were impacted during a period when the COVID-19 pandemic became most prevalent.
Image by Chris Waldt
Causes: There are a number of reasons this is happening: the rising cost of living, due to inflation, is causing many young people to rethink having a family or extended families. Some better-educated people are doing this as a lifestyle choice, deciding they don’t want to lose the freedom of being childless. Also, more than in the past, couples are marrying on average at an older age, thereby limiting the childbearing years.
Outcomes: As fewer children are born, the population begins to skew older, and there are more elderly citizens relative to those working, putting a strain on available funds for Social Security, Medicare and Medicaid. While to some extent this situation can be mitigated by having a robust immigration program, the newly elected administration is dedicated to stopping the influx of immigrants in our country.
Strategies: Accordingly, businesses are planning now for how to manage the risks, which are expected to become more pronounced in coming years. Some of the ways they are doing this is by extending the ages of retained employees, to keep them in the labor force beyond the conventional retirement age. Another is the increasing use of robots to replace workers. Also, as artificial intelligence, AI, is becoming more prominent, it is expected to reduce the reliance on live workers.
Coping: The United States is not alone among developed economic nations in facing population slowdown. it is occurring among countries in the European Union, South Korea, and most notably in Japan, all noting decelerating rates of population growth. These countries all have seen increasing prices for groceries, and essential expenditures outpace people’s salaries, leaving them with less disposable income to save.
At the same time, having kids is becoming more expensive by the year. It is expected that on average it will cost a middle-class family close to $250,000 to raise a child to the age of 18. And then there is the alarming cost of sending a youngster to college. Even following the recovery since Covid-19, persistent inflation and high interest rates contribute to preventing many Americans from having a family.
We see that young Americans are more likely than older generations to spend their money on leisure for themselves, such as travel. In a Harris Poll, two thirds of young adults agree that the freedom that comes with not having kids brings them happiness. If this trend continues it is predicted the annual number of births in the U.S. will fall below the annual number of deaths by 2043.
Consequences: The most evident consequence of population decline is the increase of the elderly population relative to the working age population, which will place greater pressure on public services due to more people relying on them, while fewer people are working to help finance them. In 2021, the proportion of Americans over the age of 65 stood at nearly 17 percent, nearly double the 9 percent in 1960, and is projected to rise to 29 percent by the end of the century. Meanwhile, the declining birth rate will result in fewer young people joining the workforce. It is predicted that the size of the U.S. labor force, coupled with the increasing demand for healthcare and social services, is already presenting challenges, as Social Security benefits have exceeded money coming in since 2021. Unless Congress does something to raise contributions (or to cut benefits), the program is expected to be short of cash to pay promised benefits by 2033. Meanwhile, Medicare will run out of money to pay hospitals and nursing homes caring for the elderly by 2031.
On the other hand, a smaller workforce can mitigate against unemployment, leading to a higher level of prosperity as it will help drive up income–industry will have to offer competitive wages and benefits in a tightened labor force. It is the old axiom of “supply and demand.”
Business Strategies: A workplace depleted of young talent, with more capacity to efficiently learn new concepts and processes, is likely to negatively impact sectors ranging from IT to medicine and legal, among others. Likewise, industries dependent on younger consumers, like retail, apparel, sports, and entertainment, could experience downturns to expected revenues. The current government administrations have sought to boost domestic manufacturing in recent years, yet a changing labor pool in the years ahead may not provide enough skilled workers and could undermine these efforts.
Accordingly, as a byproduct of the aging population, the average age of the workplace itself is growing, and the U.S. and other G7 countries are shifting to workers over the age of 55. And with a dire economic situation, people are choosing to retire later, and governments are increasing the legal retirement age, as France did in 2023. To stay competitive in the declining pool of younger workers, companies may choose to entice them with incentives like flexibility with remote working situations, more professional development opportunities, student loan assistance, lessening academic requirements for new applicants, and of course, higher wages and better working conditions.
Role of Automation: This could provide a much-needed solution for companies that face current or anticipated labor shortages because of a slowing and aging population. For decades, Japan, the country that has suffered the most due to an aging and declining workforce, has been successful in utilizing industrial robots in manufacturing and service sectors, to stem the effects of its demographic challenges. The recent roll-out of ChatGPT, a prime AI source, is providing an avenue through which industries can mitigate stagnating or declining labor forces in years to come.
Immigration: Despite opposition by the incoming administration, greater immigration can alleviate shortages in such industries as: agriculture, construction, leisure, hospitality, manufacturing, nursing aides, and housekeepers. As immigration has already been the largest contributor to U.S. population growth for years, it would even need to be scaled up significantly in order to alter current population projections. Considering political divides on immigration policy, it may not be an easy fix.
Summary: This is a difficult and complex problem that our society is being forced to address. Historically, our nation has shown the ability to rise to the occasion at other times through resourcefulness and will to succeed. It will be important to our future that our society ensures that quality education and training opportunities are prioritized. Understanding and preparing for this overall trend will help us prepare, as the U.S. demographic picture changes for each future generation.
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"Population stabilization should become a priority for sustainable development".
--Population Matters, UK based charity.
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