The ‘Covid baby bust,’ immigration, and America’s demographic decline

One of the more consequential impacts of the coronavirus pandemic has been a sharp decline in births in the United States and other Western countries. A recent story in The Wall Street Journal warns that “The Covid Baby Bust Could Reverberate for Decades,” dragging down our nation’s potential for innovation and economic growth. The story sites a Brookings Institution study that estimates there will be 300,000 fewer births in the United States in 2021 than were predicted before the pandemic.

In a December policy brief for the Mercatus Center, I analyzed the impact of Covid-19 on US demographics. I found that all three components of population change—the birth rate, death rate, and net migration—all took a sharp negative turn in 2020. The result has been the slowest population growth rate in a century. (See the nearby chart for the trend line.)

This downward demographic trend will have serious consequences for our national prospects in the decades ahead. As I noted in the paper:

A slowing growth in population is normal for an advanced economy, but the sharp and largely unanticipated downturn in America’s demographic momentum in recent years raises worrisome implications for the nation’s future prosperity and influence in the world. An aging and potentially declining population may prove to be less economically dynamic and innovative than a younger, growing population. A slower-growing or shrinking workforce will be less able to support the faster-growing cohort of retirees. A shrinking population will also mean a smaller economy and tax base relative to other economic powers, including geopolitical rivals such as China. Modifying a nation’s birth rate or death rate is a difficult challenge for public policy, and immigration policy is the most obvious tool for policymakers who want to reverse what may prove to be a downward demographic spiral.

As I explain in the paper, government policies are generally ineffective in changing a nation’s birth rate and death rate over time, but the government does exercise direct control over immigration policy. As I conclude, “A more open policy toward immigration would be the single most effective step the US government could take to avoid the problems .. of a declining population and workforce.” 

You can read the full policy brief here, and you can listen to David Beckworth and I discuss the demographic future of America and its broader consequences on this recent episode of his popular podcast “Macro Musings.”