The Messy Economic Truth that the “Birth Rate Panic” Reveals

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Some of you recently shared articles about the so-called “birth rate panic,” pointing out that the intersection of economic policy with people’s decision to have children felt a little…off. So, I decided to dig into the coverage, some of the gaps I see, the cultural scapegoats, and of course, the bigger issue of treating our economy like a global MLM.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew content and additional fact checking comes from Scott Wilson.

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Mentioned in the Episode

• Birth rate panic articles from The Economist and Wall Street Journal

• Timeline and history of oral contraception (Journal of Ethics)

• US replacement rate (WSJ)

• South Korea replacement rate (The Economist)

• Census data (US.gov)

• “You can’t even pay people to have babies” (Vox)

• “Anti-family systems” in the US (NYT)

• Average age of first-time mothers (NYT)

• Infertility statistics (CDC)

• Majority of Americans live in “fertility desert” (WWNO)

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Katie:

“Suddenly there aren’t enough babies and the whole world is alarmed,” warns the Wall Street Journal. “Can the rich world escape Its baby crisis?” The Economist asks.

And just like that, suddenly we are swept up in one of the most bizarre policy and economic conversations I’ve ever witnessed, particularly in light of the political climate we exist within right now where abortion, IVF, and childless cat ladies are frequently subjects of conversation. And I got to say, getting pretty tired of pundits talking about my womb like it’s a Motel 6 that can be rented by the gestation cycle.

But I want to talk about some of the coverage that I’m seeing and where I think a lot of it’s missing the mark, maybe missing the point entirely and maybe offer up some, I don’t know, insensitive conjecture on how I would fix this issue if I were queen for a day. You’re probably going to be reading and hearing a lot more about this in the coming months and years, and I want to talk about why people frame this as an economic issue—the arguments, the counter arguments, and also the creep-as-**** plans for interfering with people’s decisions to reproduce or not. What could go wrong?

Welcome back, Rich Human 3D printers. I’m Katie Gatti Tassin, and this is The Money with Katie Show. Today we’re talking about the recent influx of birth rate panic in the zeitgeist, because I think it’s a discussion that can lead us to some interesting places.

So first things first, let’s set the stage. Why is this an economic issue? Why are you reading about this in the Wall Street Journal and the Economist, publications like that? And why is the media treating it like a crisis? The simple answer is our society is effectively a massive MLM that is running out of new people to recruit and it is becoming top heavy. So our entire economic system globally was predicated on the idea that constant growth was going to be possible because there’s always going to be more young people than old people. There will always be more people…which is funny, because a couple of decades ago, people were panicking about the opposite problem.

In 1968, a book called The Population Bomb predicted population growth would outpace agricultural growth and mass starvation would ensue, but then that didn’t happen. Instead, the UN estimate of live births per woman has been steadily falling since the 1960s. This is a fact that the aforementioned Wall Street Journal article mentions then explores myriad explanations like, oh, well, women are entering the workforce. They’re girlbossing too hard, right? They’re not having kids, they’re not getting married, but they don’t talk about the one thing that I feel like is the most obvious shift.

And if you’re like me, you hear that statistic and you immediately Google, “when did the birth control pill come out” and bada bing, bada boom, what do you know? 1960. This was the first time that women could reliably medically exercise control and discreet control, I would note, over when they became pregnant. And I’m definitely being petty, but I just felt a little bit strange to me that a 3000 -ord deep dive on why birth rates are falling since the 1960s didn’t breathe a mention of the very invention of the birth control pill even one time.

So anyway, women get all hopped up on bodily autonomy. Suddenly a lot of them are choosing not to have five children each. Call me shortsighted, demographers but I am very pro this historical development. Still, financially since our economic system is a giant Ponzi scheme, the problem we now face is a shrinking workforce and a shrinking workforce leads to underfunded tax revenues and therefore shrinking social programs and slowing economic growth. Fewer people growing food, fewer people building homes, fewer people working in healthcare. You get the point. There is a lot of debt in the world that suddenly becomes pretty unpayable if things stop growing. Think about it like that global Rodan and Fields collapse. Yeah, because the growth is what creates the funds that pay off all the debt. So things can kind of get cataclysmic quickly.

This is partially why I find this entire dilemma so fascinating. It not only raises the question about people’s choices and moving toward a world where procreation is something you could theoretically have control over, but it also calls into question the entire structure of our economic system and therefore society.

It is one of the first cracks that is starting to show in a really obvious way in the infinite growth scheme to say nothing of the fact that the opposite scenario, aka the earth being totally overrun by way too many billions of people also poses a pretty huge problem.

That said, I think some of the fear about tax revenues is a little overblown, particularly because most of the tax revenue panic is in reference to programs like Social Security. And the taxes that you pay on Social Security wages are capped at around $170,000, and the vast majority of the wage growth of the last 20 years has happened above that point, which means if you were really concerned about midterm consequences of a smaller workforce’s tax base for funding senior pension programs, you can just lift the cap on the Social Security tax limit and let everyone pay 6.2% on their entire income.

But right now, gen Z as a generation is about as large as the Boomers, which is a conversation we’re going to really explore in our next full episode next week. And when you look at the population as split between people under age 65 and people over age 65 aka people who are theoretically working age and those who are not in the crudest terms, 83% of the population is working age. So if that trend began reversing such that each generation was meaningfully smaller than the last, eventually a lack of money would not really be the main problem. Your main problem would be a lack of people to do the jobs that have to get done; the essential workers who are historically treated so well in the United States.

Now, we could spend the rest of this episode unpacking that, but in the interest of staying on topic, I’m just going to put a pin in the worldwide Bernie Madoff of it all. And I’m just going to say in that respect, it is less about a desire that the population is constantly growing, but more so that the way we’ve structured our entire system is incompatible with a declining population. So what do we mean when we say declining? What is the current state of things?

We’ll get right back to it after a quick break.

So where are we currently with babies being born and the rates that we’re at now? There are demographers and population economists whose entire job revolves around projecting what the population will be and how many babies will be born. So the population replacement rate or the number of babies each woman must birth in order to keep the population constant is around 2.1. Currently, South Korea’s birth rate is the lowest in the world, at 0.7 kids per woman. The US is at around 1.6, and I will take this opportunity to note, I’ve just said the words “replacement rate.” Replacement rate sounds a lot like replacement theory, very different things. Replacement rate is just how many kids need to be born to keep population constant. Replacement theory is a far right white supremacist conspiracy that says we need more white babies. So between the weird sexist strains of this conversation and then those types of racist undertones, there’s an opportunity for a lot of other sketchy things to be going on here. So I just want to keep kind of bringing it back to good faith discussion wherever possible.

Regardless, as The Economist points out, a fertility rate of 1.6 means that without incoming immigration from countries that have higher birth rates, each generation of Americans will be a quarter smaller than the one that came before it, which spells trouble for a society where workforces are young and old folks retire and need care.

So the obvious next step is to ask, all right, well why aren’t people having more children? Why is the rate declining? And this is where the floodgates of my favorite diatribe usually tend to open. Modern parenting, at least if you’re trying to do it well, requires a certain intensity both of time and money, such that many couples are just choosing to have fewer children because it means they can funnel more of those limited resources into the kids that they do have.

In short, from the outside looking in, I think kids in the US kind of looks like a shit show. The expectations are high, the costs are higher. My guess is there are a lot of fence sitters who look at what’s on offer and go, “Not for me.” Now that it’s more socially acceptable not to have kids, I think fewer people are feeling pressured into it, and it’s worth saying that aloud. I think we’d be silly to assume that the birth rates before reflected people’s honest desires for their lives and families and weren’t just like a mixture of norms and religiosity and a lack of birth control.

It reminds me a little bit of the argument that people make when they kind of bemoan the fact that fewer people used to get divorced. It’s like, oh, the divorce rate used to be so much lower. It’s like, yeah, not because people were happier, it’s because women were trapped. The difference here is that getting divorced doesn’t knock down the first tiny domino that ends with a giant domino labeled “potential mass starvation and population collapse” but one thing at a time.

The Wall Street Journal article I quoted earlier mentioned this idea of social contagion, that when a culture begins to prefer smaller families, that kind of just becomes the norm. And I don’t know, I’m not sure how much I buy into that explanation, but it doesn’t seem altogether unlikely. And it is true that if you look up census data from 1960, 11% of families used to have four or more children, and that number’s only 3% today. So I don’t know, if you didn’t grow up in a large family, you’re probably less likely to have one yourself, and then it just kind of perpetuates.

So it’s a natural and obvious next step to go: Alright, well, this country does not have universal childcare. College costs a million dollars. There’s no guaranteed paid leave. There’s no paid sick time. Yeah, obviously nobody’s going to voluntarily have a bunch of kids, which is all true. But it is there that we run into a little bit of a problem.

Norway shows up and really throws a wrench in my argument when I want to live out and be like, “Let’s give people free childcare in college. People in the US aren’t having kids because of this lack of amenities.” Norway gives nearly a year of paid time off to parents, and they have practically free childcare and their birth rate, it has fluctuated in recent years, but currently it’s actually slightly lower than the US is. It’s around 1.5 like the US is right in line with Denmark and Sweden, the other two countries that we often point to on this show as having extremely favorable parental and family policy. Then there are plenty of countries like Finland, Italy, Spain, where we’ll usually look at their policies, their cultures even around child rearing as far more preferable to that in the US and their birth rates are even lower. 1.3, 1.4; we’re moving in the wrong direction.

The point is, as much as I have teed this up for myself thinking this was going to be a slam dunk for my “woke left” talking points, I regret to inform myself and all of you that maybe it really is less about parent-friendly policies and cultures, and more about women’s bodily autonomy, which is why it is so frightening because that seems to be the area that a lot of policymakers are choosing to focus on stripping back.

So what are other countries doing about this problem? According to Vox, the solutions that different governments have tried so far to stem the tides of population decline range from five figure checks to thinly veiled threats; carrots, sticks, et cetera. Japan’s pronatalist policy made maternity carefree, and they started paying a stipend at birth back in the early 2000s, and birth rates increased between 2005 and 2015. So things are working, things are moving in the right direction, but then they started falling again.

And The Economist reported that researchers did once find a small but enduring rise in the birth rate as a result of policies in Nordic countries, which combined maternity leave with generous childcare in the 1980s. Officials expected that the impact of these egalitarian schemes would grow with time as social attitudes adjusted to make life easier for working mothers. But women in Denmark, Norway, and Sweden who started having children in 1980 turned out to have fewer than those who started a decade earlier.

France is another country that’s trying to spend its way to higher birth rates since 2000. It’s spent roughly 3.5% to 4% of its GDP each year on services and tax breaks for parents, meaning it has the highest protist spend in the OECD composed of mostly high income countries. But in 2022 fewer children were born in France than at any other point since World War II.

So a lot of countries are trying variations of this, paying people directly to have kids making childcare free. But this is a really, really expensive way to try to entice people to have kids as the cost per successful birth is sometimes above a million dollars in state spending. And yeah, I’m not really sure how that’s possible, but the TLDR is that it turns out it’s really not that cheap to persuade someone to make an irreversible life altering choice.

So is it true that the US has, as the New York Times says, profoundly anti-family systems? Yes. Yes, it is. And also the lack of support does not appear to be the sole causal factor in shrinking birth rates since we can clearly observe these trends happening elsewhere. Now, that doesn’t mean we shouldn’t try to improve life for families, of course, but it’s probably not going to be a one-time payment or policy intervention tied to the act of giving birth or what happens in the immediate months that follow that reverses this trend, assuming this is even a trend that needs to be reversed, right? I think that that assumption is also doing a lot of heavy lifting here.

To be fair, I think there’s a strong case to be made that artificial intervention in people’s decision to have or not have kids is just kicking the can down the road with the “whole infinite growth on a marble with finite resources hurdling through space” thing. Like the fact that we have roped ourselves into needing constant and consistent growth is probably suboptimal, right? Anyway, we’ll continue this after a quick break.

Okay. Then there’s the question of for whom birth rates are falling most and this is the question that really interested me, because again, there is this trope in the media of the single, selfish, childless cat lady who’s flashing her boobs and drinking her espresso martinis at bachelorette parties that like, eh, she just won’t settle down until her biologically predetermined barefoot in the kitchen lifestyle and put that team on her back, dammit!

But the next time someone tries to tell you that, tell ’em this: More than half of the decline can be attributed to the fact that we have done such a good job in eliminating teenage pregnancy. Yeah, that’s right. So who wants to complain about falling birth rates now? The producers of 16 and Pregnant?

The fertility rate for girls—yes, girls—aged 15 to 19 has fallen by a whopping 77%. If most of the decline is happening for super young women, what is happening with the other women you ask? Well, it is actually slowly increasing. For women aged 30 and over in 1990, teenage pregnancies accounted for one in eight births, and by 2022, the number had fallen to one in 25. The average age of the first birth in the US is now 27 compared to 21 in 1972.

And here we are again. This serves to highlight why this topic in general can become so freaking uncomfortable because you start out having a reasonable chat about birth rates in a shrinking population and what’s going to happen to a food supply. And then before you know what, you are uterus deep in a profoundly alarming conversation with someone who sees women as breeding stock and believes literally—I am practically pulling these quotes from a Wall Street Journal comment section— teenagers should be getting pregnant because they are fertile or whatever, and women’s purpose on the planet is to reproduce someone. Actually, a woman commented that on one of my posts once that a woman’s purpose is reproduction. You’ve probably seen that clip that’s like, oh, the whole purpose of the postmenopausal female. It is deeply concerning. It is gross. The language is gross. And you know what? I can get on board with writing out the harebrained pyramid scheme until the earth implodes. Sure. But you know what? Forcing people to birth children they do not want is barbaric. And again, it is creepy. That’s where I draw the line.

So all of that here brings me to my magical conclusion. This is my “queen for a day” policy recommendation. My friend Kate Kennedy, she has a podcast. It’s called Be There in Five, and she released an episode recently about her first year of motherhood. She’s in her thirties. And something she said that stuck out to me was that she feels like part of the reason she really enjoys motherhood and is looking forward to having another kid is because she got to wait to become a mom. She said she got to live life on her terms in her twenties. She got to really run wild with her career and make big gains. She became financially stable and now she and her husband, they can afford good in-home childcare. She really enjoys being a parent. And she expressed that a lot of her friends who were in a similar boat do too.

And the conversation about whether to have children or not so often positions parenting as oppositional to freedom and to stability and to career success. And that usually devolves into this essentialized debate about priorities. It’s framed as a question of whether you’re selfish or not, what are you willing to give up? And it occurs to me that much of the politicization of the topic often centers on forcing childbirth on people who do not want it through efforts to ban abortion or trying to directly pay young people to have kids. What if we focused on the people who do want it? I wonder how much of the hardship around parenting is at least a little bit ameliorated by delaying childbearing, which brings me to my queen for a day policy recommendation to politicians who are really freaked out about birth rates falling…

According to the CDC, 13% of women have trouble getting pregnant and 9% of men experience fertility issues. And we know that fertility begins declining at age 35, but 90% of fertility issues can be solved with medical intervention. So what’s the catch? Fertility treatments are prohibitively expensive. For most people who don’t have employers that cover IVF or rich parents, one singular cycle of IVF is around $25,000 on average, and it usually takes more than one.

So that is potentially millions of women who want to have children but are facing medical obstacles. So if you want to increase birth rates, don’t try to pay a 22-year-old a baby bonus to try to coerce them into a life-changing decision that they are not ready to make because again, that is creepy and weird. Spend that money on making fertility treatments free for all people who want to have children and need fertility care. Invest in creating more fertility treatment centers. Add incentives for healthcare providers to go into fertility care, make it easier for people in their thirties and forties who want to have children, but are having difficulties to have those children. As it stands, 80% of the fertility clinics in the US are in New York City, 80%.

It’s estimated that 300,000 IVF cycles were completed in the US in 2021, and the demand is estimated to be about 10 times as high. The ballpark of new babies born each year as of 2021 was 3.6 million. And imagine how many more you could add to that total, crucially, in loving stable families that badly want to have children, if we invest in more robust and accessible fertility care.

At the end of the day, I have been thinking a lot about how people make this decision to have children and what makes someone decide to go through with it. It is an irreversible life-changing decision, and I think this might be an example of the limits of treating humans like perfectly rational economic actors. There is no amount of money that the government could pay me to have a kid if I didn’t already want one. And I don’t think most people who choose to have children are doing so with replacement rates in mind. And that’s why it’s so darkly funny to me that the government would theoretically entertain interfering in people’s decision to have kids when it comes to floating the idea of paying out cash advances for babies or blocking access to abortion, but the government intervention that involves improving childcare or introducing paid family leave is socialism, and therefore off the table, it’s like, oh, okay. So it’s only acceptable when it ultimately serves to control and coerce women. Got it. Got it.

I kid, I’m being a little bit spicier than usual today just because I think this topic often, you know what? This is what it is. I’ve spent too much time in Wall Street Journal comment sections reading these arguments, and so now I feel duty bound to plant my flag against them. Anyway, that is how I’m thinking about this. This is what I think every time I see these headlines about how they’re going to increase birth rates. And thank you for joining me on this hybrid policy birth rate/women in the media snorkel.

I will see you next week on the Money with Katie Show to talk about boomers and Gen Z and what they do or don’t have in common financially. Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin with our audio engineering and sound design from Nick Torres. Devin Emery is our chief content officer, and additional fact checking comes from Scott Wilson.