Social Security Predicts a Pandemic Birth Problem, Not a Birth Shortage
The COVID-19 pandemic has dramatically reduced fertility rates to their lowest point in U.S. history. Still, experts from the Social Security Administration, who are deeply interested in the issue, say that the decline is just a passage and women are simply putting children off for later years.
The total fertility rate, a measure of the births a woman is expected to give throughout her life, will drop to 1.54 this year and remain low at 1.64 next year. But Social Security trustees said in a report last week that they expect the rate to “be fully offset by higher rates” in subsequent years.
“In other words, the pandemic will cause several women to postpone motherhood from 2021-22 to 2024-26,” the trustees concluded.
Birth rates are among the closely watched markers of the pandemic. Combined with morbidity rates, they are among the most important in the long term. A lasting birth shortage means fewer workers to support retirees in the second half of the century.
Social Security trustees have an optimistic view. In fact, they predict that rates will roar back even beyond the lows and highs of the pandemic and its immediate aftermath. The fertility rate should reach 2 per woman by the mid-2050s, the trustees said. That rate hasn’t been reached since 2009, when the United States was mired in the Great Recession.
Stephen C. Goss, chief actuary for Social Security, said the rate for the past decade was probably an aberration, and women on average say they want to have at least two children.
Others are more pessimistic.
The Congressional Budget Office sees a lasting birth shortage, with 130,000 fewer births each year this decade and 160,000 fewer births each year in the next two decades.
That means hundreds of thousands fewer people in the workforce to support retirees by the end of the century.
In its long-term budget outlook released in March, the CBO said that the total fertility rate will rise for the rest of this decade, once the pandemic is over, to 1.85 births per woman in 2029 and will remain there for the next few months. next decades.
If the CBO is right, the big social safety net programs will be in trouble.
Chuck Blahous, a former Social Security public trustee, said there is reason to be skeptical that birth rates will roar back as the trustees project.
“We haven’t had it at that level for the last decade,” he said in an online briefing about the trustees’ report at George Mason University’s Mercatus Center. “I was a bit surprised, and if I had to bet on whether things were going to be better or worse than projected in this report, I would probably bet they would be worse.”
He said the trustees’ report was bad even with optimistic birth rates.
The trustees projected that Social Security trust funds will be depleted in 2034. Under the law, the program will only be able to pay what it generates from taxes. It’s projected to be just 78 cents for every dollar in promised benefits and a few cents less in later decades.
Birth rates are at the center of the calculations.
“Our big change in the cost of Social Security in the long run is due to the change associated with birth rates,” he said at the Mercatus Center briefing.
It unfolds in a big way.
From 1990 to 2008, Social Security benefits amounted to approximately 4.2% of gross domestic product. Given current benefits and the expected workforce, the number will increase to around 6% and then stabilize towards the end of this century.
Goss said it boils down to simple math: Do Americans want to pay taxes to fund that higher rate, cut benefits to bring the rate back to 4%, or combine tax increases and benefit cuts to find a middle ground?
The 2021 trustees’ report is the first to take into account the COVID-19 pandemic. Mr. Goss said the Social Security Administration will watch fertility rates closely to see if they rebound as he projects.
He said the pandemic has also hit the other end of the demographic curve, with increased death rates.
Among those over 15 years of age, the rate for 2020 increased by 16.4%. By 2021, it will be 15% higher than previously thought. Projections improve after that, with death rates only 4% higher next year and 1% higher in 2023.
Among those under 14 years of age, death rates are falling. Social Security predicts a decrease of 14% in 2020, 10% this year and 2% next.
That translates into an overall increase. Mortality rates have been stable at just over 800 per 100,000 people over the past decade. The number reached 925 last year and was expected to be 900 per 100,000 residents this year.
Projections improve for 2023, with a rate falling below 800 deaths per 100,000 people.
That’s good news and bad news.
“As good as it is for everyone to live longer, it is bad for Social Security finances or any pension,” Goss said.