Key Takeaways:
1. Birth rates in OECD countries dropped from 3.3 in 1960 to 1.5 in 2022.
2. Low fertility rates threaten economic growth and labor force stability.
3. Policies supporting gender equality and immigration may help counteract low birth rates.
What Happened?
Birth rates in the world’s wealthiest economies have plummeted, hitting a record low. According to the OECD, the average number of children per woman across 38 industrialized nations fell from 3.3 in 1960 to just 1.5 in 2022.
This rate now sits well below the “replacement level” of 2.1 children per woman, which is necessary to maintain a stable population without immigration. Only Israel exceeds this replacement level among OECD countries.
Why It Matters?
This dramatic decline in birth rates holds significant implications for economic growth and societal structures. The OECD warns that faltering population growth drags on economic expansion. In the EU, for example, the rising participation in the labor force will soon be insufficient to offset the decline in the working-age population, exacerbating labor shortages.
Additionally, low birth rates combined with increased life expectancy pressure public finances, as fewer people contribute the tax revenues needed for an aging population. “This decline will change the face of societies, communities, and families,” cautioned the OECD.
What’s Next?
As birth rates continue to fall, countries must explore strategies to address the impending challenges. Policies promoting gender equality and equitable sharing of work and parenting activities could support fertility rates. However, even family-friendly policies may not raise birth rates to replacement levels. Immigration policies, measures to help people stay healthy and work longer, and productivity improvements will become crucial.
The OECD study highlights a positive correlation between female employment rates and higher fertility rates but notes that housing costs are a significant barrier to having children. Observing countries like France and Ireland, which have higher fertility rates, might provide insights into effective policies. Monitoring the economic and social impact of these demographic shifts will be essential for investors and policymakers alike.
