Published on Jul 14, 2026
This article was written by Adem Tumerkan
Content Editor, Dunham | 2025 ThinkAdvisor Luminary Award Winner | 2026 Wealthies Finalist — Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
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There’s an old saying in economics: “Demographics are destiny.”
Why?
Because population structure shapes almost everything: the labor force, consumer spending, productivity, housing demand, tax revenue, healthcare costs, and the long-term sustainability of retirement programs.
A young and growing population can support economic expansion. More workers means more production, more income, more spending, and more people paying into systems like Social Security and Medicare.
But when birth rates fall and the population ages, the math gets harder.
The U.S. needs enough working-age people to support a growing number of retirees. If there are too few workers relative to dependents, the burden on the working population rises. That can strain government budgets, pressure entitlement programs, and weaken long-term economic growth.
This is the core demographic problem: fewer births today mean fewer workers tomorrow.
And unlike a recession or a rate cycle, demographics are not easy to reverse. The Federal Reserve can cut interest rates, but it cannot magically create more babies.
The U.S. birth rate has been on a steady decline for more than 60 years.
And while this downtrend has been a multi-decade one – after the Second World War’s “baby boom” - things have gotten much worse since 2008 (no surprise after the housing market imploded).
For perspective, the general fertility rate has fallen by roughly 23% since 2007, leaving the U.S. well below the replacement rate of about 2.1 children per woman.
The average American woman now only bears around 1.6 children2, a notable decrease from the three births recorded in 1950.
And while this is not a good number, it’s better than other major economies.
Falling birth rates affect the economy through several channels.
First, they reduce future workforce growth. Fewer births today mean fewer young workers entering the labor force 20 years from now.
Second, they increase the old-age dependency burden. As more people retire, a smaller pool of workers must support a larger pool of retirees through taxes, payroll contributions, caregiving, and public spending.
Third, they can slow consumption growth. Younger households tend to form families, buy homes, spend on children, and drive demand for many goods and services. Fewer young families can eventually reshape housing, education, retail, and local economies.
Fourth, falling birth rates can pressure government finances. Programs like Social Security and Medicare depend on a balance between workers paying in and retirees receiving benefits. As the population ages, that balance becomes harder to maintain.
This is why demographics matter so much.
Keep in mind that an economy isn't just numbers on a spreadsheet. It's a social system. When the age structure changes, the entire system feels it.
This is becoming a serious problem for the U.S. (and the world) as policymakers are banging their heads trying to reverse these trends – especially when there is a tidal wave of people hitting retirement age in the coming decades.
This is becoming very unbalanced as there are simply too many older people compared to younger ones.
In fact, according to Bloomberg4, the native-born US population ages 16 through 64 has been flat since 2016 and now declining - coinciding with the overall declining birth rates.
Actually, according to the same data, it’s immigration that’s carrying the working-age population. . .
Just take a look at the immigrant working-age population in the same 17-year period – it’s risen sharply.
As shown above, the major advantage the U.S. has over many other developed countries is immigration.
Immigration helps offset low fertility by adding workers, taxpayers, consumers, entrepreneurs, and future families. It can support labor-force growth even when the native-born working-age population stagnates or declines.
This is important because the U.S. working-age population would look much weaker without immigrants.
That said, immigration is not a free lunch.
More people can also increase demand for housing, infrastructure, schools, healthcare, and public services. If housing supply is already tight, immigration can add pressure to rents and home prices. If local governments are underfunded, fast population growth can strain services.
Thus, the point is that in a low-birth-rate world, immigration becomes much more important to economic growth.
Countries that can attract and integrate workers have a demographic advantage. Countries that cannot may face sharper labor shortages and slower growth.
Now, you may be wondering, “Why is the fertility rate sinking all over?”
There are various theories on this. But one I find the most compelling was from reading economist Robert J. Gordon’s book – “The Rise and Fall of American Growth (2016)” - which was an exhaustive 800-page tome on the history of the U.S. economy since the first industrial revolution (late-1700s).
The gist was that there were four major drivers for this change:
Another factor to consider is the change in the family dynamic – specifically with women entering the workforce in droves post World War Two.
Take a look at the following chart showing the labor force participation rate for women since the 1950s – rising from 33.4% to 57.6% as of March 2024.
As women began focusing more on careers, it essentially meant less time to focus on children (an opportunity cost).
Every individual and family may have their reasons for reducing the number of children they have. But the main points here worth highlighting are the structural issues – and these are not something that can be reversed easily (believe me, governments around the world have tried7 – from patriotic calls to duty and doling out cash to love cruises and investment into public daycare).
Demographics are a problem plaguing the developed world – and while the U.S. isn’t in as bad a position as other major economies, it’s still suffering.
Lawmakers and commentators are alarmed by the decline, as headlines caution about an impending "demographic crisis" or "Great People Shortage” – because economies are facing a shortage of young workers to fill jobs and contribute taxes and social programs that subsidize the old.
And unfortunately, history suggests that regardless of governmental efforts to reverse this, global fertility rates continue to decline.
This will have big implications for global growth, immigration policies, government balance sheets, and the structure of the world economy.
Because if demographics are in fact destiny, things look pretty bleak. . .
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