Introduction: Demographic Headwinds: The Economic Consequences of Lower Birth Rates and Longer Lives

The United States is in the midst of a consequential demographic transition, marked by the dual trends of a sustained decline in the country’s birth rate and a rise in life expectancy. Following the mid-twentieth-century Baby Boom and its subsequent reversal, the US general fertility rate held roughly steady for several decades at around 65 to 71 births per 1,000 women of childbearing age. But that stability abruptly came to an end around 2007, and births have been on a downward trend since, falling to a historic low of 54.6 in 2023. The associated US total fertility rate, which approximates the average number of children a woman will have over her lifetime given the current age profile of childbearing, declined from 2.12 in 2007 to 1.63 in 2024, well below 2.1—the level at which a population replaces itself across generations. At the same time, average lifespan in the US has consistently risen. A person born in the US in 1960 was expected to live to 70 years old, on average. By 2023, the average life expectancy had risen to 78.4 years. Amid low birth rates and rising life expectancies, the share of the US population 65 or older has grown substantially, especially in recent decades.

An immediate demographic consequence of an inverted population pyramid—that is, one where there are fewer young people and more old people—means that the share of the population of traditional working age (20 to 64 years old) is declining. This decline puts more pressure on a smaller share of the population to contribute to economic activity and to care for an aging population. These developments raise important questions about the prospects of US labor market and business dynamism; about national, state, and local public finances; and about the environmental impact of population decline. In what ways does this demographic transition represent a challenge to maintaining current living standards—and in what ways does it not? This volume considers four aspects of these questions.