In the past fifty years, the United States has seen an overall decline in fertility rates. Women have stopped having large families or delayed child birth for various reasons such as advanced degrees, success in the workplace or delayed marriage. However, this decline has created an imbalance in the American social structure. Baby Boomers, those born between 1946-1964, will soon be retiring and creating a financial shift. These millions of Americans will begin collecting Social Security and using advanced medical treatments, both of which will cost a lot of money. Our aging population is growing and with our fertility rate is decreasing. Therefore, there are now fewer Americans to pay for retirees costs. It is because of the declining birth rate over the past fifty years and the increased cost of caring for the elderly that our financial system will become further unbalanced as there are fewer working Americans to pay for the retiring Baby Boomer generation.
Although the United States has one of the highest birthrates in the industrialized world, it is still barely over the replacement level of 2.1 births per woman. Since we have not maintained the fertility rate of the Baby Boomer generation, there are fewer working Americans paying into the current system and even fewer Americans paying into the future system. A recent cause for a decline in fertility is the US recession that began in 2007. Money is a significant factor when planning to have a child. Without jobs, steady income or economic certainty, families wait to have children because they want to adequately provide for them. This delay to have children was also seen during the Great Depression. Furthermore, with female advancements in education and the workplace in the past half century, more women are waiting until their thirties to have their first child. Currently, the age group with the highest fertility rate is between 25-30. While this is still a healthy age, women who wait until later to have their first child are more likely to have smaller families than if they had started at a younger age. With fewer babies being born in the last fifty years, there are fewer workers now, and even less in the future, which can result in fewer dollars to support the retired population.
Social Security is a pay-go system which depends on working Americans to pay for current retirees rather than a prepaid system where workers fund their own retirement. This system has a major flaw that is making the current system unsustainable. In the 1930’s, the government never imagined people would live well into their 80’s, needing the extensive financial support they receive. When Social Security was established, the average life expectancy for an American male was 58 years and 62 years for a female. When retirement was set at 65, most Americans were predicted to never receive Social Security benefits. Only 55% of the population, when Social Security was created, would receive benefits compared to the 78% of the population today. Likewise, when Social Security was established, there were only 6.7 million Americans 65 and older. In 2009, there were 39.6 million. That number is predicted to steadily increase to around 55 million in 2020 as the Baby Boomer generation retires and begins collecting benefits.
Needless to say, a constant decline in fertility will play a major role in the financial future of this country. Even though our country’s population keeps increasing and the world’s population is predicted to reach 9 billion people by 2050, low fertility rates create problems many governments are not ready to handle. There have been a few proposed solutions such as taking larger portions from each worker’s salary or raising the retirement age. As for now, the United States sits on the edge of replacement level fertility. If we continue, and fall below it, we might run into problems faced by other countries with low fertility. For example, China is struggling with what is called the “4:2:1 problem”; four grandparents and two parents are being supported by one working child. This model cannot be sustained for long. The United States birth rate is still above replacement level but slowly declining every decade. The current working generation will find a way to take care of the retiring Baby Boomers but we all need to be conscious about the future so we do not develop a greater crisis.