Population decline and worldwide falling birth rates are at the forefront of many social conservatives’ minds. We’ve covered this issue, and its various interpersonal, political, demographic, and spiritual implications, in our pages here at Public Discourse. But what many on both sides of the ideological spectrum fail to recognize is that the West’s declining population has significant economic implications.
In this month’s Q&A, contributing editor Kelly Hanlon speaks with Jesús Fernández-Villaverde, professor of economics at the University of Pennsylvania, about the economic impact of low birth rates and how they will threaten human flourishing.
Kelly Hanlon: Thanks for joining us, Professor Fernandez-Villaverde. This interview grew out of a talk that you delivered over the summer at a conference hosted by the Foundation for Excellence in Higher Education. The topic of your lecture was “An Economic Policy for a Flourishing Society” and you began by saying that you’re an economist and reminding the audience that America needs both sound fiscal policy and a rules-based approach to monetary policy. Following that, you spent most of your time talking about the fertility crisis, but by applying economic principles and numerically articulating what the fertility crisis might really look like in terms of GDP over time.
For Public Discourse readers who haven’t heard your talk, can you give us an overview of the fertility crisis? How, as an economist, do you think about reduced birth rates and their relationship to GDP?
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Sign up and get our daily essays sent straight to your inbox.Jesús Fernández-Villaverde: I started my talk by highlighting that ten years ago, I would have talked about things of which everyone can see the point, such as “let’s balance the budget” or “let’s keep inflation under control.” Those are important themes, but right now we face an incredible fertility crisis. And if I may make a metaphor comparing it to medicine: is it always a good idea to keep your cholesterol low? Yes. But imagine you go to the doctor and your doctor says, “Look, you have a really serious health problem.” The doctor would say, “Let’s address the health problem first and worry about the cholesterol down the road.” That’s how I want people to understand this.
What is the fertility crisis? First we will focus on the United States and then put it in the context of the planet. Right now, the average American woman is having around 1.6 children. The replacement level, which is how many children we will need to keep the population constant over time, is 2.1. On average, we are missing 0.5 children. That’s a lot. And it means that if there were an absence of migration into the US, our population would start declining very quickly. I will come back to migration later.
Why is this important? An economy where there are fewer people working is an economy that produces fewer goods and services. It means that we have fewer resources to pay for things we like: roads, schools, hospitals, museums. And it’s not that we like to, but we must pay for national defense and public debt. A smaller economy means that we are not going to have the resources, for instance, to keep a military that is sufficiently large and efficient to maintain peace in the world.
What I tried to argue during the presentation, using some numbers but trying not to overwhelm the audience with too many, is that we are talking about astronomical figures, in the range of quadrillions of dollars. It surprises me to an incredible degree how little this is discussed in political discourse in the US, when it seems to me to be the absolute priority. The number one question for any administration, regardless of the party, is what we can do about the fertility crisis. How can we get US fertility back into numbers that are more sustainable in the long run, like 1.8 or 1.9? Even if they are still below the replacement rate, at least we avoid falling off a demographic cliff.
KH: You mentioned the global fertility rates. One of the questions that always comes up in these conversations is the question of immigration. In the US right now, immigration is at the front of everyone’s minds, in a slightly different way than the fertility crisis. But what’s going on globally with fertility rates? How does immigration affect the American fertility rate in the future?
JFV: The amazing thing is that this very big fall in fertility that happened in the US has happened to an even larger degree in other countries. I always tell people: I’m going to give you four countries, and you need to rank them from the lowest fertility rates to the highest. The countries are: US, Mexico, Brazil, and Argentina. These are four of the largest countries in the Americas. The answer that I always get is that the US has the lowest fertility rate. No, the US actually has the highest fertility rate. Believe it or not, Mexico, as of the end of 2024, already has lower fertility than the US. And Brazil, Argentina, and Colombia have had much lower fertility rates than the US for many years now.
That tells you that many countries are about to fall off the demographic cliff. That is going to make even the survival of those societies very difficult. In the US, can we bring in immigrants to fix the problem? Yes, and no. Yes, from a pure accounting perspective, you can bring enough immigrants to keep the population constant. But also, no, because this will probably create other problems.
Many Public Discourse readers may appreciate that I quote Aristotle; Aristotle highlights that virtue is usually found in the mean. For a country like the US, having zero immigration doesn’t make sense. You want to bring in some of the best minds out there, some of the brightest scientists, people who want to come to the country and contribute to the national wealth. But you don’t want to bring three million people a year either. It makes it very difficult for people to assimilate. It makes it very difficult for social services, and it has a very large fiscal cost.
The US has a reasonable amount of space to bring, say, 500,000 immigrants a year, even a million. Some people tell me, “No, it’s one million and a half.” Others say, “No, it should be 200,000.” Three million is just not sustainable; it’s going to create problems. The number of people that we would need to admit if we relied on immigration to keep the population constant doesn’t make any sense.
Also, where are these immigrants going to come from, when the whole world’s population starts declining, and they are not around? You mentioned the southern border. What I think a lot of people do not realize is that most of the illegal immigrants crossing into the US right now do not come from Mexico. They come from other countries. The reason they don’t come from Mexico anymore is because fertility has fallen so much in Mexico that most Mexicans do not feel the need to migrate. We may well be in a situation in 2050 where people aren’t coming to the US because, well, they were never born.
Recently, I was talking with someone at a relatively well-known university that has relied a lot on Chinese undergraduate students. With the big drop in fertility in China eighteen years ago, there are not that many Chinese students wanting to come to the US anymore, so the university’s business model is in serious trouble. We want to keep in mind that the very low fertility rates across the world also have direct consequences for the US as well.
I was just talking this morning about this with a couple of the people who work with me at UPenn. One of the local universities here in Philadelphia has 15 percent less enrollment this year than they expected. Many universities are already facing the fact that they will need to shut down a lot of programs, especially those with fewer students, because there are no students around.
We have seen a lot of small liberal arts colleges closing over the last few years. Cabrini University here in Philadelphia just closed last year. What I tell people—and I hate to be the prophet of doom—is this is just the first of many closings over the next two to three decades. Your average small liberal arts college is toast. I’m sorry to say it in that way. The super fancy Bowdoins of the world will still have a market, but if you are not a very competitive, top-of-the-line small liberal arts college, you are going to disappear. There are just no applicants.
KH: Going back to some of the alternative suggestions to address the fertility crisis, there has been a lot of talk lately about in vitro fertilization (IVF) and other treatments to help address the fertility crisis. Can you speak on those numerically, or even on a social basis? Are fertility treatments the way of the future? Are they going to help reverse the demographic decline?
JFV: So, the answer is no. The drop in fertility is due to the enormous increase in the number of childless women.
At one time, only around 8 to 10 percent of women would never have a child. Now we are talking about 30 to 35 percent. That’s what really drives the numbers. Why? When we go to these women, and we try to figure out what is happening, a few of them are having fertility problems. For most of them, however, and even for some of those having fertility problems, the main issue is that they are not building families. They are not getting married, setting up an independent life as a new household, or even wanting to have children at all.
This is not about failures to get pregnant. It’s difficulty in finding a husband, or unwillingness to, and it’s an unwillingness to start an independent household. What is also happening is that a lot of people who are getting married are getting married very late; and it is true that for those people, getting pregnant is harder. We know that after age thirty, it’s more difficult to get pregnant for the first time. Fertility treatments can move the needle a bit, but I have come to the conclusion that we are barking up the wrong tree. The main issue is why people in their twenties are not getting married and starting a family.
If a future president of the United States makes me the czar of fertility, that’s what I would focus 99 percent of my attention on. We need to get those twenty-seven-year-olds to get married, and then maybe a few of them will have fertility problems and then we can think about how to address that. But thinking we need more IVF is missing the point. This is not about that.
Everyone can have their own beliefs about the ethical principles of human fertility. From a pure accounting perspective, however, the problem is people are not getting married. So, making IVF cheaper, for example, is not solving that issue.
KH: That’s exactly where I wanted to go next. There’s a lot of discussion, particularly on the Right (and a little bit on the Left too), about family-friendly policies. The darlings of the Right seem to be following Viktor Orbán’s model in Hungary of paying people to have more babies and offering child tax credits. Is there anything that can be done from a policy standpoint to encourage young people to get married and/or have children? Or are we talking about social and cultural norms, in which case there aren’t policy prescriptions that can help us?
JFV: You raised tons of complex issues, and I could talk about this for hours. So, I’m going to try to summarize, and I ask for the forgiveness of your readers if they feel that I am missing some important aspect.
The first thing I want to mention is that I think that every pro-family and pro-fertility policy should be based on the concept of human dignity and freedom. I don’t want to force anyone to get married. This is very important to mention, because those who claim there is no such thing as a fertility crisis portray those of us concerned about this as authoritarian people who want to get people to do things they don’t want to do. No. I am a very deep believer in both human freedom and human dignity. What I think is happening right now in the US is not that people don’t want to get married, or at least for many, it’s not that, but rather, it’s difficult for them. What type of things can we do to make this easier? Well, many, but let me focus on two that I’m convinced could really make a difference.
The first is affordable housing. A couple of weeks ago, I was spending the weekend in upstate New York and there was this very nice lady, who I was talking to about this issue of fertility. She said: “Well I understand that because here in our small town, even small houses now are $350,000. Who can afford a $350,000 house when you are 27?” And I said, “Yes, you got that 100 percent right.” By speaking personally to the people in her community, she got to the heart of the issue in a unique way. There’s plenty of space in the US to build more affordable housing. The US is a very big country.
Everyone can have their own beliefs about the ethical principles of human fertility. From a pure accounting perspective, however, the problem is people are not getting married.
KH: On the topic of affordable housing, of course there are all kinds of policy questions. One of the ones that I keep coming back to is, so much of housing policy is developed at the local level that it’s hard to do anything from the state or the national level. How do you then address affordable housing issues? In the recent presidential election, Kamala Harris promised to give out $25,000 to first-time home buyers. As we’ve seen with other federal subsidies, this type of policy would simply drive up home prices even more.
JFV: Exactly. Let me tell you an anecdote. My brother and his wife back in Spain own an apartment. And, the government a few years ago announced that they were going to give €500, which is roughly a little bit less than a $600 subsidy to young people renting apartments. And my brother said, “The first thing I did was increase the rent of my apartment by €600.” My brother is not an economist, but even he could get this point.
So, if we are to give people $25,000 to buy their first house, what you’re going to have is houses that are $25,000 more expensive. So, we need to build. There is the old slogan, “drill, baby, drill.” I want to substitute “build, baby, build.” We need ten to fifteen million new dwellings in the United States. And you put your finger absolutely on a fundamental issue, which is that local authorities do not want to do it.
I’m not a lawyer. I’m not an expert on real estate law, so I cannot really tell you how we can do this. To the best of my understanding, the fact that a lot of these regulations are local is something that the states can change. So, New Jersey can decide to have different zoning. Whether the federal government can do this is a different issue. So perhaps the policy will not depend as much on the federal government, but on convincing the state to take away a lot of the restrictions on building.
For instance, there are countries in Europe where these zoning regulations are much more centralized. I’m also a bit suspicious of centralizing, so we need to do it in a careful way. The types of outrageous limitations on construction that I’ve seen in many states, particularly in California, are not acceptable. In fact, I have friends who are lawyers who argue that the Takings Clause should be used to eliminate some of these restrictions because you’re really limiting people’s ability to use their own land in sensible ways.
We have also passed too many regulations on housing quality and materials. Of course, it’s great to have a house that has the absolute best materials and the best standards. But then again, we used to live in houses that didn’t have those requirements and those standards, and we survived. When the undergrads here at UPenn come to the first day of economics class, I tell them life is about tradeoffs. It would be wonderful to live in the best house possible, but it may be too expensive, and we need to make choices. So maybe a lot of the regulations we have on houses are difficult. We don’t need to have them anymore.
The second area in which the government can play a role is thinking carefully about every aspect of society that makes having children more difficult. At the end of the day, I think the evidence is clear that even a $5,000 tax credit doesn’t make much of a difference. Having a child is at least an eighteen-year-long project. $5,000 is not changing your mind at the margin. One of the things that we need is more school choice, because there is evidence that when schools need to respond to parents, a school picks start times and end times that are better for families. So, school choice, believe it or not, has a nice implication for fertility.
We also need safer streets. We need to be able to go back to a society where kids can roam alone for a few hours during the day and nothing happens to them. We need to think about what we can do to make it easier for families to live with kids on a day-to-day basis. Some of them need to be done by the federal government, some by state government, some by local governments, and some by private organizations. Part of civil society should also play a role in helping with this.
You asked if social and cultural norms matter. The answer is yes. The problem with norms is that as an economist, it’s much harder for me to say how we can change norms. There are philosophers and sociologists, who are smarter than I am, who can work a little bit more on how we can highlight the importance of marriage and fertility. On the other hand, I will try to point out how economic policy can help a bit with norms.
One of my friends, who’s also an economist, puts it this way: twenty-eight-year-olds want to spend Saturday evenings with their buddies. They can spend their Saturday evenings with their buddies at the pub or at the soccer field with their kids. If no one is having kids because tax policies, housing policies, and school choices are limited, you don’t want to have a kid either because you want to be with your friends. In some sense, the norm is following the best economic decision. If all your friends get married and have kids and are taking their kids to a soccer game on Saturday at five o’clock, you say, “Well maybe I can do that, too.”
I also think a big part of the problem right now is the absence of good husbands. I haven’t become a wild-eyed feminist, but you go to the US and you see that at the bottom of income and education distribution, we are not doing very well with boys. There are many teen boys growing up without any social skills because they spent the first fourteen years of their lives playing video games. They have not been taught responsibility or the importance of being a good husband, or of providing for your family. I think that a lot of the reason why some women do not want to get married is because they say, “Look, I don’t want to get married to this person. I would be more than happy to get married to a good husband, but not to this type of husband.”
The way I put it the other day at a talk at Harvard is just reminding kids in high school what our grandmothers always told us: be serious, treat your wife well, show up on time, clean yourself in the morning, take a shower. Don’t waste your time playing video games. Those things can have an enormous impact, and we need to start telling kids that again. I think that boys are suffering from that culture of lack of responsibility much more than girls. I think there is something in the brains of girls that makes them a little more responsible even when there is no one teaching them those basic ideas.
KH: I think that is really helpful framing and consistent with what others are saying, both sociologists and commentators on the matter. I’m thinking of people like Brad Wilcox and Mark Regnerus, who have been writing on marriage and family for a long time. There is also Jonathan Haidt’s new book, The Anxious Generation, which deals with phones and screen time versus playing outside. Dealing again with the norm side of it, the book is encouraging parents to band together and say, “Yes, my child can walk three blocks to school at the age of nine or ten” and making that a societal norm again.
Are there any books that you would recommend along these sorts of broad lines, of the fertility crisis, or marriage? What are you reading and looking at besides some of the technical papers and economics?
JFV: Wilcox, who you mentioned before, wrote Get Married. I also recommend Melissa Kearney’s The Two-Parent Privilege. I think that the evidence that we have accumulated by now is that having a father and a mother at home makes a difference. And we have gone too far in the other direction. Decades ago, as a society, we were cruel to those who came from broken homes. But we have gone too far in the other direction by now saying that coming from a broken family is not a big deal. No, it’s not okay. It is a problem, and we need to understand that a child from a broken home will need help with that problem.
I think that’s one of the problems of our modern society. We often confuse the need for compassion with the idea that we can dismiss the underlying problem. We have gone from discriminating against someone because he was born out of wedlock to, “This doesn’t matter.” No, it does matter. You want to be raising families with two parents, with a husband and a wife. We have evidence of the enormous impact that this has.
KH: Do you have any concluding thoughts for us?
JFV: These days, in the US especially, there are many disputes about numerous issues. It has become very difficult to reach an agreement with people on the other side of the policy discussion. I really think that this is an area where, if we sit down and explain the issues carefully—dispassionately, emphasizing what I was mentioning before, that all the policies we want to build are based on the ideas of dignity and human freedom—I truly think that most Americans would support what I believe are common sense solutions.
I mean, who could be against affordable housing? Who could be against kids’ having more free time? Who could be against making it easier to have a family, where we can really make progress? I wish we could really build a consensus about why this is so important and not transform it into yet another game of political football.
KH: Yes, I think there is a sense in which we can be hopeful about the future, in terms of finding common ground and applying common sense principles to perhaps the most fundamental unit of society, which is the family. Thank you so much for joining us at Public Discourse.
Image by Studio Romantic and licensed via Adobe Stock.