The impact of millennials having fewer kids will likely be worse than the impact of aging boomers — and the most dire consequences could come 10-15 years from now

The impact of millennials having fewer kids will likely be worse than the impact of aging boomers — and the most dire consequences could come 10-15 years from nowm oer HSBC.


As interest rates and inflation continue to impact consumers' finances, economists warn that increased government spending alone may not be sufficient to counterbalance the economic challenges posed by a shrinking population, particularly considering the drastic decline in the US birthrate over the past 50 years.

In 2022, the birth rate stood at just 11.1 births per 1,000 people, a significant drop from the 23.7 births per 1,000 people recorded in 1960.

The COVID-19 pandemic has exacerbated the shortage of babies, with the national birth rate now decreasing by around 2% annually, according to James Pomeroy, HSBC's global economist. Contrary to initial expectations, the birth rate did not rebound in 2023.

This trend raises concerns about the US facing "extremely low" population levels in the long run, similar to countries like China, which are grappling with severe population decline and are offering incentives to encourage people to have more children.

The consequences of millennials having fewer children are predicted to be more severe than those of the aging baby boomer population. The most significant impacts could be felt in 10-15 years, as seen in Japan, which experienced negative GDP growth and workforce decline a decade after a similar birth rate drop in the 1990s.

The US's declining birthrate could potentially reduce GDP growth by 1-2 percentage points annually, according to Todd Buchholz, a former White House economist. Over time, this could lead to a one-third reduction in the US growth rate or eliminate the productivity gains expected from artificial intelligence. In the worst-case scenario, GDP growth could plummet by 3-4 percentage points, Pomeroy warned.

A lower birth rate means fewer workers in the economy, which could result in challenges such as difficulty finding service providers, healthcare workers, and other essential personnel.

Additionally, declining fertility rates could strain the ability to fund Social Security payments, particularly as the baby boomer generation reaches retirement age. This demographic is expected to peak in its economic impact on the US in 2029, when all boomers will be 65 or older.

Without an increase in the birth rate, Buchholz estimates that there will eventually be only two full-time workers for every retiree, a drastic decrease from the approximately 20 workers per retiree in the 1930s, which is not sustainable.

Once an advanced economy's birth rate starts declining, it tends to continue to do so, as observed in countries like China and Russia, which now face demographic challenges due to long-term low birth rates.

To address this issue, government policies that support child-rearing could help boost the birth rate or prevent further decline. Additionally, increasing the supply of affordable housing could alleviate some financial burdens on families, though this would require significant time to achieve.

Changing the cultural narrative around having children could also play a crucial role in encouraging people to have more kids. While many dual-income, no-kids (DINK) couples express no regrets about their lifestyle choices, Buchholz suggests that a shift in attitude toward viewing children as enriching life experiences rather than financial burdens could help change the birth rate trajectory.