Unexpected Effect of the Great Recession: Record Low Birthrates - Personal Finance | Financial Buzz

Unexpected Effect of the Great Recession: Record Low Birthrates

Americans, U.S, Birthrate, Concerns, Produce, EconomyMillions of Americans felt the effects of the great recession, in the form of job losses, tighter budgets and depleted savings, yet one of the most significant effects of the recession is just beginning to come into focus. In a disturbing trend, due to a number of factors coinciding with one another, the U.S. birth rate reached a record low in the year 2013.

Cultural shifts, such as couples opting to marry later in life, a growing premium placed on higher education for women and subsequently an increasing number of women in the workforce have intersected with the economic concerns bred during the great recession to produce the record low statistic of a meager 62.5 births for every 1,000 women of childbearing age. To simply maintain the nation’s current population level, each woman in the country would need to have 2.1 children, while 2013 saw the average number of children per woman fall to 1.86, posing long-term concerns.

Birthrate Decline to be felt in the Short and the Long-Term

The recession made couples think twice before burdening themselves with the massive cost of raising a child until his or her 18th birthday, conservatively estimated to be around $250,000. The figure of $250,000 is arrived at by aggregating higher and lower ends of the spectrum variant across regions. For upper-class families in the Northeast, the figure can range closer to $500,000 when education costs are accounted for.

The immediate effect of a shrinking national fertility rate is that consumer spending, which constitutes roughly 66% of all economic activity, is sure to suffer as a consequence of reduced family sizes. The lack of population growth affects every sector of the economy as, everything from grocery store sales and diapers, to larger purchases, like new homes to accommodate larger families suffer from a lack of demand.

Who Will Fund Benefits for the Elderly?

The U.S. workforce is aging and larger increments of baby boomers are headed for retirement, which comes as a surprise to no one. The true cause for concern is that barring a massive overhaul in immigration policy, which is not likely, the fledgling fertility rate will fail to meet the rising number of workers that will be needed for taxation purposes in order to fund benefits for the elderly, such as Medicare and social security.

Dips in the fertility rate typically occur during the peak of a recession and can last anywhere from 2-5 years, so we may have seen the nadir of the post-recession birth-decline. Be it some factor of improved economic conditions, a loosened immigration policy that allows for an influx of working-age immigrants, or financially stable women opting to experience motherhood, the economy and aging seniors desperately need the trend to reverse itself in coming years in order to ensure precious benefits have the funding base they require.