Can Basic Income Reverse Falling Birthrates?

America faces a slow-moving demographic crisis because of falling birthrates. That’s the conclusion of economist Lyman Stone, an adjunct fellow at the American Enterprise Institute (AEI).

“Birth rates in America are declining, leading to one of the lowest rates of population growth on record, soon to become the lowest ever,” Stone writes in Declining Fertility in America. To clarify, Declining Fertility in America is a report Stone wrote for the AEI.

For instance, the birthrate in West Virginia in 2018 was one third what it was in 1947, Stone calculates. In detail, there were 55,000 births in West Virginia in 1947 at the height of the post-World War II Baby Boom. However, Stone estimates there were around 18,000 births in West Virginia in 2018.

Every US State has a Falling Birth Rate

Moreover, West Virginia’s birthrate is less than half of what it was in the first half of the 20th Century. To explain, Stone estimates that the birthrate in West Virginia was around 40,000 a year between 1900 and 1940.

On the other hand, West Virginia has the highest birthrate decline in the nation. However, Stone calculates that every state has experienced a birthrate decline since the mid-20th Century.

In fact, Stone estimates that 24 states have experienced a birthrate decline of over 30% since World War II. Notably, 12 states have experienced a birthrate decline of 30% to 39%. Plus nine states saw a birthrate decline of 40% to 49%, and three states experienced a birth rate decline of over 50%.

Falling Birthrates will lead to an American Demographic Crisis

The specter of low fertility, and ultimately of declining population, has come to America,” Stone concludes.

Interestingly, Stone believes the falling birthrates will affect public policy and the economy. For instance, he thinks falling birthrates will hurt stock market performance.

“Without as many young workers to pay into Social Security and Medicare or buy the hot dogs and iPhone apps that make corporate shares worth holding, the retirement prospects for American workers will dim,” Stone writes.

Falling Birthrates will lead to Higher Taxes

Conversely, Congress could get more money for Social Security and Medicare by taxing the wealthy. For instance, an easy solution is to eliminate the base limit for Social Security tax.

Currently, only the first $128,400 in income is subject to Social Security taxes. Thus, most wealthy and upper-class Americans do not pay Social Security taxes on most of their income.

For instance, the world’s richest man; Amazon CEO Jeff Bezos, could pay $14.03 billion – if Uncle Sam collected Social Security taxes on his entire $112.2 billion fortune. To clarify I base this figure on a tax rate of 12.4%, the maximum Social Security tax rate for the self-employed.

Hence, eliminating the base limit could raise vast amounts of money for Social Security. Interestingly, killing the base limit will transform Social Security from an intergenerational to an inter-class wealth transfer program.

Therefore, the wealthy have a strong incentive to increase fertility. They will pay higher taxes if the birthrate keeps falling.

Why you should be afraid of Falling Birthrates

The many reasons to fear falling birthrates include increased income inequality, declining economic activity, a smaller tax base, and limited job growth.

Frighteningly, Stone thinks a combination of falling birthrates and technological unemployment will make income inequality worse. Specifically Stone believes a growing population fuels economic growth. Hence, a shrinking population leads to a shrinking economy.

Moreover, Stone predicts things could get much worse in coming decades. Specifically, he writes: “American women today are unlikely to have anywhere close to replacement rate fertility.”

Instead, Stone believes birthrates will fall well below their historic low soon. Thus, the entire nation could end up like West Virginia with a birthrate collapse and economic stagnation.

What is causing Falling Birthrates?

Unfortunately, Stone refuses to discuss one of the biggest causes of falling birthrates; migration.

To explain, women of child-bearing age are the most likely to move to another state for better economic opportunities. For instance, it is the 20-year-old-woman; faced with career choices of dealing meth or cashiering at the dollar store, who is most likely to move out of West Virginia.

On the other hand, migration only explains falling birthrates in the Northeast, the Great Plains, and the Rustbelt. Stone’s data indicates that every state in the union is experiencing falling birthrates.

Is Income Inequality to blame for Falling Birthrates?

Thus, states with high rates of growth are experiencing falling birthrates. Interestingly, Stone blames income stagnation and income inequality for falling birthrates.

Specifically, Stone blames student loan debt, falling rates of homeownership, rising housing costs, and rising childcare costs for falling birthrates. A simpler explanation is that younger people do not have enough money to raise kids.

Simply put, kids are expensive. For instance, a young mother faces health-insurance, babysitting, housing, automobile, transportation, daycare, healthcare, food, diapers, clothes, toys, college, and other expenses. Plus, she will have fewer opportunities to work to make money to pay all those bills.

Not surprisingly, a lot of women (and men) make the economically rational decision of not having kids. Birthrates are declining because many people view children as a fast-track to the poorhouse.

Can Basic Income Reserve Falling Birthrates?

Hence, a logical means of increasing birthrates is to increase the economic resources available to families with children. Thus basic income could ease falling birthrates.

The cheapest, easiest, and most effective way of increasing resources is to distribute cash to families. In other words, a basic income targeted to families with children.

My suggestion is to distribute a $500 a month basic income to every citizen with an individual income of less than $60,000 a year. We could help families by having no age limit on the basic income.

Hence, parents or guardians will receive $500 a month for every child under 18 in their households. For example, a couple with two kids could receive $2,000 a month or $24,000 a year in basic income.

An added benefit to basic income is that many parents could afford to stay home with their kids. Others could use the basic income to pay for daycare. Plus, more parents could tell the boss to go to hell, if he refuses to give them time off for childcare.

Moreover, the government could distribute basic income as a tax credit, financed by higher taxes on the rich. Interestingly, U.S. Senator Kamala Harris’s (D-California) LIFT the Middle Class Act proposes a similar plan.

Basic Income is not necessarily a Solution for Falling Birthrates

However, basic income by itself will not reverse falling birthrates. To explain, falling birthrates are a complex phenomenon.

Basic income will have little effect on some causes of falling birthrates. Basic income will not reverse an aging population, a lack of educational opportunities, and a shortage of desirable men; whom women will accept as partners or husbands.

Importantly, there are other policies that could have a greater effect on falling birthrates. Single-payer healthcare (Medicare for All) could encourage more children by eliminating high healthcare insurance and healthcare costs. However, some countries with single-payer systems like Canada and Germany face falling birthrates.

Making college free by eliminating tuition could eliminate most student loan debt and relieve parents of the burden of saving for college. Conversely, Congress can easily defuse the “student loan crisis” by allowing people to write student loans off in bankruptcy. To explain, debtors cannot discharge student loans in bankruptcy under present laws.

Falling birthrates are a problem that America will have to face and deal with sooner or later. If we do not address falling birthrates America could face economic stagnation and a decline in the 21st Century.