America's Declining Birthrate Could Be Good For The Economy

declining birth rateIn another sign of the recession's deep impact, the federal government released a report last week showing that the national birth rate declined for the third year in a row.

More than 100,000 fewer babies took their first breath in 2010 than the year before. The fertility rate -- the number of children a woman is expected to have in her life given the current rate -- is now 1.9. That's under the 2.1 rate demographers say is necessary for a generation to replace itself.

A fertility rate below replacement level is usually bad news for a country's economy. The social cost of retirees risks overwhelming a dwindling workforce, unless offset by a large enough flood of fresh-faced immigrants. This year, the first wave of baby boomers (those born between 1946 and 1964) hit retirement age, and are leaving the workforce at a rate of 10,000 a day, according to the Pew Research Center.

Fewer Babies Could Be An Economic Boost

But the decline in the U.S. birthrate could actually be great news for the economy.

The women who are not having children this year will probably have them a few years from now. "It's important not to think of these as births that have been foregone, but as births that have been postponed," says Brady E. Hamilton, a statistician for the National Center for Health Statistics and co-author of the report.

The birthrate drop between 2009 and 2010 shrinks steadily by age group, almost like a geometric pattern: 10- to 14-year-olds, 20 percent drop; 15- to 17-year-olds, 12 percent; 18- and 19-year-olds, 9 percent; 20- to 24-year-olds, 6 percent; 25- to 29-year-olds: 3 percent; 30- to 34-year-olds, 1 percent.

"If you're 22 and want to have two kids, you have plenty of time to still have those kids," says Sheela Kennedy, a research associate at the Minnesota Population Center at the University of Minnesota.

"They're just holding out until the economy gets better," notes Gretchen Livingston, a senior researcher at the Pew Hispanic Center. "But women 39 and over, you don't see that decline, because they don't have the option of postponing."

Women in their early 40s in fact gave birth to more children in 2010 than the year before. But the teen birthrate is now the lowest since record-keeping began in the 1940s.

The younger the person, the less economically prepared they are on average to start a family, and this has never been more true than now. Twenty-four percent of older teens and 14 percent of early 20-somethings are unemployed. Over half of 18- to 24-year-olds live with their parents.

Ten years ago, two economists controversially concluded that the falling U.S. crime rates in the 1990s were largely the consequence of the legalization of abortion in 1973. Those unwanted children, who were statistically more likely to commit crimes, didn't exist to come-of-age.

The high rate of unemployment today, in a similarly counterintuitive twist of logic, could have a positive effect on the U.S. economy. Teen mothers are less likely to graduate high school than women who have children at an older age, and are more likely to end up in a low-wage job, no job at all, or in prison. This is also true for their children.

If all the teen mothers in 2008 had given birth at the age of 20 or 21 instead, U.S. taxpayers would have saved $10.9 billion, according to an analysis by The National Campaign to Prevent Teen and Unplanned Pregnancy. This is primarily because teenage pregnancies cost the public more for health care, foster care and incarceration, as well as lost tax revenue. One quarter of teen mothers go on welfare within three years of their child's birth, according to a 2006 study by the U.S. Department of Health and Human Services.

Does Age Really Matter?

It's a matter of dispute, however, whether the social costs of teenage pregnancy are the consequence of the age that women give birth, or various other factors that made those teenage pregnancies more likely in the first place.

"Is it the fact that teenage moms are having children early, or is it just that they're poor so they're not going to have good jobs anyway?" asks Kennedy. "It's not clear which is which."

It's also unclear whether the drop in the teenage birthrate is a rational response to economics at all. Eight in 10 teens report that their pregnancy is unplanned, according to a study by The National Campaign to Prevent Teen and Unplanned Pregnancy. If only 20 percent of teens decide to get pregnant, it's unlikely that the dramatic drop in the teen birthrate is entirely a reaction to material circumstances.

But "unwanted pregnancy" isn't such a clear-cut term. "They may think 'getting pregnant isn't my first choice, but it isn't so bad,' " explains Sarah Hayford, an assistant professor at the School of Social and Family Dynamics at Arizona State University. "And depending on how bad they think it would be, they'll use protection."

The current economic situation has made the costs of pregnancy a lot more dire for many teens. So more may be taking precautions, like using contraceptives, or avoiding sex altogether.

The Bad Economy A Turn-Off For Teens

"You can imagine that there are fewer kids getting involved in relationships," says Kennedy. "There's no money to do anything, everyone's depressed, and they're living at home."

There is no national data on teenage sexual activity after 2009. But the percentage of high schoolers who had never had sex increased between 2007 and 2009: 52.2 to 54 percent, according to the biennial Youth Risk Behavior Survey, conducted by the Centers for Disease Control and Prevention. The data for 2011 will be published next June.

Teen sexual activity and teen birthrates haven't just declined in the last few years. The sexual activity of high schoolers and the teen birthrate have been steadily dropping since the early 1990s. The teen birthrate fell a total of 34 percent between 1991 and 2005, before an uptick in births in 2006 and 2007.

No one is entirely sure why the teen birthrate is dropping. "Everyone's kind of mystified," says Hayford. "The larger trend is towards everything being at later ages. The decline in teen pregnancy is part of that shift."

The dramatic drop in teen births over the last few years is a continuation of a longterm trend, but "exacerbated or sped-up by the current economic conditions," adds Hayford.

An Adorable Stimulus Package

In the short term, this could slow our economy's recovery. Babies are expensive. There's a new mouth to feed. A new body to clothe. Childcare, vaccinations, diapers. Delaying childbirth may be a smart financial decision on the individual level, but it withholds a significant chunk of change from the economy at large.

As The New York Times reported this week, 350,000 fewer households were created last year than in 2007, because of all the young people biding their time in their childhood bedrooms. Creating a new household involves spending some money -- and the expense increases exponentially. Every new household that isn't created deprives the economy of an estimated $145,000.

By not having a child because of financial insecurity, potential parents are denying the economy a very dynamic and adorable stimulus package.

But in the long-term, the economic conditions that are discouraging young motherhood may end up improving the economic conditions of those women down the line, as well as saving the public money as a whole. With fewer teen mothers today, there may be fewer Americans 16 years from now joining the droves of the jobless.

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