No Easy Fix for Low U.S. Birth Rate, Economics Professor Says
June 9, 2025
- Author
- Jay Pfeifer
The United States needs more babies. Recent data shows the birth rate in the U.S. sits at 1.6 babies per woman over their lifetime, significantly less than the 2.1 births needed to maintain a country’s population.
Economics Professor Siobhan O’Keefe says a low birth rate will eventually starve the economy of labor and wages. An aging population strains programs like Social Security, which depend on younger workers’ wages to pay into the system in order for it to work.
“Today's babies are tomorrow's labor force,” she said. “If people aren't choosing to have children and those children aren't then growing up to be healthy, economically self-sufficient individuals, then the whole economy kind of crumbles.”
A low birth rate can also be seen as a sign that young parents don’t see better times ahead.
“If people don't feel like they can provide a good life for their children and therefore are not having children,” O’Keefe said, “that tells us something about consumer confidence.”
But turning declining birth rates around is harder than it sounds. Attempts to incentivize increased births have fallen flat in countries around the world.
O’Keefe shares her thoughts below.
Why is the U.S. birth rate so low?
It’s hard – if not impossible – to say conclusively why we are having so few babies in the United States.
But there are a couple of ways to look at it.
One possible contributing factor is the cost of having and raising kids in the United States.
Even birth itself isn't cheap, right? The average out-of-pocket cost of a birth for someone with insurance is approximately $3,000. When you combine that with the cost of child care and education, babies can be prohibitively expensive.
The low birth rate also is a consequence of the plummeting teen birth rate in the United States. In 1960, the teen birth rate was almost one in 100. In 1990, it was approximately 60 out of 1,000. In 2022, it was 13.5 per 1,000. That’s an extraordinary drop that has definitely brought down the birth rate.
Some countries have tried providing financial incentives to families when they have children. Has that increased the birth rate?
Things like “baby bonuses” don’t seem to change the number of babies. It does, however, seem to shift the timing of when people have babies.
That is, people aren’t having new babies because of a payout. But they do seem to have them faster. They might have a second kid six months earlier because they don’t need to save as much for the cost of the kid. But they aren’t necessarily having a third.
Are there other policies that have shown promise?
The Nordic countries have been leaders in quality-of-life policies like extensive parental leave and easy access to health care. These are all good things to do but they don’t necessarily solve the birth rate.
Is solving this problem particularly urgent?
When Social Security was started in the late 1930s, there were about 40 workers per retiree.
Now, there are approximately two-and-a-half to three workers per retiree.
In our lifetimes, we're going to reach the point where we do not have enough people to support our current funding obligations. Without program or demographic changes, this could occur in the next 10-20 years.
So, what should we do?
There are three things we should think about in particular.
The first: We could structure our tax and pay systems differently for old age support. Social Security made a huge difference in people's lives when it was introduced in 1937. The economy looks really different than it did then. Maybe it’s time to update the whole system.
The other thing we can do is not necessarily an option in all developed countries.
Broadly speaking, we could rethink our attitudes toward immigration. There are a lot of prime, working-age adults who would love to come and work and pay taxes in the United States. And adding adults is a lot quicker than trying to get people to have a baby now and waiting for 25 years for that baby to contribute to our tax base.
Last, we should think broadly about why fewer people want to have children in the United States. Policies that make life easier and better for children and families often have long-run benefits.
