2:54am

Fri December 7, 2012
Planet Money

Why The Falling Birthrate Is Bad News For My 2-Year-Old Son

Originally published on Fri December 7, 2012 7:26 am

The U.S. birthrate just fell to its lowest point since we've been keeping track. Here's why that may be a problem for my 2-year-old son.

Right now, I, my colleagues and everybody else with a job is paying to support our parents, our grandparents and all the other elderly people in the U.S. who currently receive Medicare and Social Security. Relatively speaking, there are still plenty of us working people, compared to the number of retirees.

But the fall in the birthrate means that, by the time my son gets to be my age, there will be fewer working people for each retiree. So he'll have to pay a bigger share of my retirement costs — which he may not want to do.

So maybe we should start paying more now, or agree that retirees should accept a bit less, or do both.

Or maybe we shouldn't worry about it.

Hand-wringing about declining birthrates is totally unnecessary because workers become more productive over time, says Dean Baker of the Center for Economic and Policy Research.

"You know, a lot of these people run around going, 'In 1960, we had five workers for every retiree, and today we have three, and in 20, 25 years we'll have two,' " Baker says. "Guess what? Both workers and retirees have considerably higher living standards, at least on average, than they did in 1960."

In other words, my son and the other workers of his generation will have a higher standard of living than we have today, so they'll be able to support those of us working today.

Not everyone is convinced by this argument.

"When they laid out the long-term financing of Social Security, they assumed a world that didn't happen," says Phillip Longman, author of the book The Empty Cradle: How Falling Birthrates Threaten World Prosperity and What To Do About It.

"They assumed a world in which GDP growth would be 5 percent a year, in which poverty would wither away, in which we would be beset by the miseries of affluence," he says. "And guess what? We didn't grow up to be the affluent society. We grew up in a world in which kids are more likely to be poor now than they were 20 years ago."

Social Security and Medicare are sticking points in the negotiations over the fiscal cliff. Recommendations range from raising the retirement age to getting the wealthy to pay more payroll taxes and to any number of policy proposals in between. The one thing that's certain about this debate: Because of our declining birthrate, its almost certain to continue for decades to come.

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Transcript

DAVID GREENE, HOST:

And let's turn, now, to another recent report - this one, from the Pew Research Center. It shows the birthrate in the United States has fallen to the lowest point since the number has been tracked. Some experts believe the declining birthrate could cause more economic mayhem than - say, a fiscal cliff. Here's NPR's Alex Blumberg, from our Planet Money team.

ALEX BLUMBERG, BYLINE: Here's the problem with declining birthrates: Right now, I - and my colleagues, and all of you out there, currently working - we are all paying to support our grandparents, and other elderly people in the United States who currently receive Medicare or Social Security. And relatively speaking, there are still plenty of us working people around, compared to the number of retirees. But by the time my 2-year-old son gets to be my age...

RICHARD JOHNSON: The problem, for him, is that he's going to have fewer co-workers.

BLUMBERG: Richard Johnson is a retirement policy expert at the Urban Institute.

JOHNSON: And that means that he's going to have to pay a bigger share of the cost of supporting you - and your parents - than he expected, and than we expected. And it's not just a problem for him, but it's also a problem for the retired people.

BLUMBERG: 'Cause what if he says, hell no. I'm not paying more. (LAUGHTER)

JOHNSON: Right, and then that's possible...

BLUMBERG: You guys created this mess.

JOHNSON: (LAUGHTER) And then, what we're going to see is, retirement benefits are going to fall.

BLUMBERG: Johnson says for him, it's clear: In order to keep the entire burden of supporting future retirees, from falling on my son and his tiny cohort of co-workers, we should start sharing the pain now; either by paying a bit more when we're working, or accepting a bit less when we retire, or a little of both. But Dean Baker, an economist at the Center for Economic and Policy Research, says cut the hand-wringing about declining birthrates. Workers of the future, he says, will be so much more productive than we are today; just as workers today are more productive than our parents were.

DEAN BAKER: Yeah. We went from having five workers to retiree in 1960, to three today. And guess what? Both workers and retirees have considerably higher living standards - at least, on average - today, than they did in 1960.

BLUMBERG: Baker says sure, my son and his generation will have to pay a bit more, to support me and other retirees. But his standard of living will be so much higher in 30 or 40 years, he won't care. Not everyone is convinced by this argument.

PHILLIP LONGMAN: We can assume that our kids will live in some kind of Buck Rogers future, but that doesn't make it happen.

BLUMBERG: For example, Phillip Longman, author of a book titled, "Empty Cradle: How Falling Birthrates Threaten World Prosperity, and What To Do About It." Longman says it's not fair to assume that my son and his cohort will be so much wealthier, they'll be happy to pay for my retirement.

LONGMAN: I speak from the perspective of a baby boomer. The previous generation did that to us. They assumed a world that didn't happen. They assumed a world in which GDP growth would be 5 percent a year; in which poverty would wither away. And guess what? We didn't grow up to be the affluent society, right? We grew up in a world in which kids are more likely to be poor now, than they were 20 years ago.

BLUMBERG: Social Security and Medicare are sticking points in the negotiations over the so-called fiscal cliff. Recommendations range from raising the retirement age, to getting the wealthy to pay more; to any number of policy proposals in between. The one thing that's certain about this debate? Because of our declining birthrate, it's almost certain to continue for decades to come.

Alex Blumberg, NPR News. Transcript provided by NPR, Copyright NPR.