The Birth Dearth: What No One's Talking About

The economic consequences of fewer births

Ric Edelman: It's Monday, July 29th. On today's show, the birth dearth. I've been talking about this with you for years on this podcast and even my prior radio show. But you know what? It's now reaching a very serious point. And I need to share the data with you because there are big implications, not just for society at large, but for you individually. 2064 is going to be the first year in centuries when more people die than are born.  

The problem is actually going to start occurring much sooner than that. By 2036, around the world, twice as many South Koreans will be over the age of 65 as under 18. That hits China in 2040. By 2050, China is going to have 100 million people taking pensions. But their Social Security system runs out by 2035, similar to ours running out in 2033. Last year in Germany, they produced almost 700,000 babies. That was the lowest number since 2013, and 6% less than the year before, 2022. And the situation is probably not going to get any better, because in Germany last year, they had an 8% drop in the number of marriages. That was the lowest level since 1950.  

The problem in China, they produced 16% fewer babies last year than the United Nations had predicted. China's not alone. Egypt produced 17% fewer babies. Kenya, 18% fewer babies. Just to put the US in context, we produced 4% fewer babies than the United Nations predicted. Even in Sub Saharan Africa, 23% of women of reproductive age are using modern contraception. In other words, women all over the world are now choosing when and whether to have children, how many children to have, and too often, they are choosing none or one. 

We need 2.1 babies per woman in order to sustain the population, but the world's fertility rate is only 1.7. Globally, we are not producing enough babies to sustain the population. There are huge implications for that that I'll get into, but let me first give you the list of where this is an acute problem. 

You see, when you don't have enough babies being born, the country's overall population ages. The average age of the residents rises. Where's that happening fastest? Here are the top 31 countries where the people are aging fastest. Number 31 is the United States. That, in fact, is why I'm giving you the top 31, which is a weird number. I wanted to include the US, and we come in at number 31. Italy is number 30, then Barbados, Bulgaria, Greece, Cuba, France, Latvia, Lithuania, Slovak Republic, Malta, Denmark, Croatia, Bosnia, Poland, Portugal, Trinidad and Tobago, Slovenia, China's number 13, Mauritius, Canada, Netherlands, Chechya, Albania, Finland, Singapore, Thailand is the 5th fastest growing population in the world. Followed by Liechtenstein at number four, South Korea at number three, Japan is number two, and the country with the fastest aging population, Monaco. When you have this broad array of countries, some of them major economic powers, like US, China, Japan, and so on, versus African nations, and Middle Eastern nations, and Far Eastern nations – you can clearly see this is a global challenge.  

I have occasionally, when I've talked about this, gotten emails from listeners saying, well, Ric, if we're not producing enough babies every year to sustain our population, isn't immigration solving the problem? I mean, we all know of the immigration crisis at our Southern border with millions of people crossing into the US both legally and illegally on an annual basis. We're talking combined four, five, six million people. Isn't that going to solve the problem? I mean, who cares if we don't have babies as long as we have people? Immigration counts. If you're a brand new baby or a brand new immigrant, right? Well, not really because there aren't going to be very many migrants to attract. In other words, we're counting on Mexico to continue producing babies in order to send them in the future into the US. But if they're having a birth dearth the way we are, then it's not really going to work. And on top of that, everybody is going to be competing for those migrants. So, you think we're the only ones who want to attract immigration? So does all of Europe, and Canada, and South America, and Asia, and Africa, and the Far East. I mean, this is, this is an issue, right? In fact, there are only two Pacific islands and four African countries that are going to continue making enough babies to sustain their populations. Everybody else, out of 150 nations in the world, are going to be challenged with keeping their populations intact. This is a demographic wall, and sooner or later, every country in the world is going to slam right into it.  

And here's what the challenge really means. When you have fewer babies being born, and we simultaneously have old people getting older because of improvements in healthcare, medical innovation, and technology, we're extending longevity to areas we've never had in human history. Back in 1900, life expectancy in the US was 47. Today, it's 87. And by the time you are 87, you'll be well expected to live to 100 or beyond. Well, people are living longer than ever, so we have a dramatic increase in old people, but we have a reduction in the number of new people, young folks, because of the lack of births. When you have a lot of old people and fewer young people, well, it means, as a society, we're not going to need to spend as much on education. We're not going to need kindergartens or elementary schools because of fewer students. But we are going to need to spend a lot more on hospitals. In fact, we might find ourselves converting schools into nursing homes as we shift the demographics of who needs those buildings.  

We're going to spend more on health care, on pensions, and on social security. And older people cost a lot more than younger people. But with fewer workers, it's going to be harder to pay those bills. We're going to be spending, by 2050, 21% of our GDP on old people. 30% more than we do right now. Unless our government officials take action. In Europe, they have generous pensions and in America, we have growing social provision, but it's a challenge. Since 2006, for example, in South Korea, they have spent $270 billion to give women incentives to have babies. They're giving them $70,000 in cash. They're giving them two years of paid maternity leave. They're giving them free daycare. They're actually giving every taxicab in the country a backseat baby carriage for free. All in an effort to say to women, we're gonna help reduce the economic burden on you of having a child. 

It's simply not working. It hasn't worked in South Korea, where the number of babies being born is at an all-time low. And they're not the only ones, it hasn't worked in Europe, Norway, France, Denmark, Sweden, China, Russia, Hungary, Poland, Japan. All of these countries have tried to create economic incentives to get women to have babies, and it's not working. All of this is going to bring about profound social change.  

In 1965, a little quiz here for you. What was the most common age that a person died? In 1965, the most common age of death was the first year of life. Infant mortality in other words, if you made it past age one, you were probably going to live a long time. But in 1965, a whole lot of kids never made it to age two. Today, what's the most common age of death? 87. In 1841, 35% of children died by age 20. But today in Japan, a newborn has a 96% chance of making it to age 60, and half of them are going to make it to age 88. You see, we've defeated early death. We now have clean food and water. We have better health care. We have vaccinations and antibiotics. We've got safer working conditions, better housing, you name it. We've eradicated polio, smallpox, diphtheria, erysipelas, pyaemia. You've never even heard of erysipelas or pyaemia, have you? They were the leading causes of death in 1850. We've never even heard of them. Diarrhea used to be a leading cause of death in America. Not anymore.  

It used to be that you had to marry and have kids in your teens, because you're going to be dead by 40. 30 was old age. In the American Revolution, the average colonist was 23 years old. Half the signers of the Declaration of Independence were under the age of 44, and a dozen of them were teenagers. In 1990, there were 95,000 people in the world who were 100 years of age. The White House used to send birthday cards when you turned 100. My grandmother got one of those. Al Roker used to wish you a happy birthday on the Today Show if you turned 100. He doesn't do that anymore because today there are a half a million people over the age of 100.  

And one big problem of so many old people? Yeah, we got rid of erysipelas or pyaemia, and we got rid of smallpox and diphtheria, but you know what we've got now? Alzheimer's and dementia. We've got 6 million people in the United States with Alzheimer's disease, China has 10 million of them, and another 53 million with cognitive impairment. This is going to be the medical challenge of the next couple of decades.  

And here in the US, it's not just that our population is falling. In certain towns and cities and states, our population is collapsing. In the last decade, our population grew 7%. That was, by the way, the slowest growth rate since the Great Depression. It was also a big drop from the 1990s, when we grew 13%. But in the past decade, only two of our states shrank in overall population, Mississippi and West Virginia. But in 2021, 17 states saw their populations shrink. Now, the pandemic might have started that, but it hasn't stopped since. Once people leave a state, it's hard to get them to come back. Businesses close, real estate prices fall, tax revenues drop, services decline, and crime rises. And in the middle of all that, who'd want to move back in? It's a death spiral for towns and cities all across the country.  

Does it really matter, though? I mean, there are some benefits. The environment in those places goes back to nature. But if everybody is now smushed together in a few big cities, the demand for housing and services in those cities will rise, and that causes prices to go up and quality to go down.  

And what about heirs? With fewer babies, there are fewer heirs. I mean, the average net worth of Americans who are in their 60s and 70s is $2 million. We know that older Americans have most of the money in this country. The average net worth, $2 million. Now that's average. The median is a lot less $400,000, but still that's an awful lot of money. Half of everybody, age 65 and older, has a net worth of $400,000 or more. This is going to represent a huge transference of wealth. It's projected that $84 trillion is going to pass to younger generations over the next 20 years. $16 trillion just in the next 10 years. That means that wealth is going to be concentrated even more in the future than it is today because of fewer babies being born.  

So we have some big social policies that we're going to have to be dealing with as we shift from a huge number of babies to a huge number of retirees. That's for our policymakers to deal with. For you, you need to recognize that costs for elder services, everything from housing to healthcare, to leisure activities, you name it – if it's something you're going to want to have or do or be in the future, you're going to need to have ample assets to be able to afford it, because the massive amount of demand is going to create an equal increase in cost. Keep all that in mind. And if you're a financial advisor, make sure you're having these conversations with your clients today, because the birth dearth is going to change everything. 

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Ric Edelman: Hey, if you're trying to understand the new spot Ethereum ETFs, join me on Tuesday, September 10th, at 1:00pm ET for an exclusive webinar: “Bitcoin, Ethereum - or Both? How to Make an Informed Crypto Allocation Decision.” Christopher Jensen, Director of Research at Franklin Templeton, and I will guide you through essential topics like: How do bitcoin and Ethereum fit into today’s investment portfolio? And what are the risks and rewards of investing in these digital assets? Don’t just speculate - understand what makes each unique. Register now for free at DACFP.com. The link is in the show notes, and yes, you’ll earn one CE credit!    

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Ric Edelman: On tomorrow's show, we're going to shift from people living long to medically assisted suicide. 

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Bitcoin, Ethereum – or Both? How to Make an Informed Crypto Allocation Decision (FREE Webinar on 9/10 – Register Now!): https://dacfp.com/webinar-bitcoin-ethereum-or-both-how-to-make-an-informed-crypto-allocation-decision/  

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