What the world will look like when the population rapidly declines

CAMBRIDGE, Massachusetts — If you live until 2055, you may witness something the world’s never seen before: the world population will peak and then start declining, and it’s likely to happen at a rapid rate, according to Jesús Fernández-Villaverde, an economist and professor at the University of Pennsylvania.
“You’re going to be the first generation in human history that is going to see the population of the planet fall in a systematic way,” Fernández-Villaverde said Tuesday at Harvard University at an event hosted by the Abigail Adams Institute.
Fernández-Villaverde, a native of Spain, specializes in monetary policy, business cycles and the intersection of economics with technological advancements, but more recently he’s been focused on studying the declining number of births across the globe and the economic implications of this shift. “Once you start thinking about these issues, it’s hard to think about anything else,” said Fernández-Villaverde, who is director of the Penn Initiative for the Study of the Markets and co-director of the The Business, Economic, and Financial History Project.
Fernández-Villaverde laid out the economic implications of the fertility crisis: collapse of Social Security systems, rising national debt, a lack of state funds, and closed schools. “It’s going to be really, really costly for a lot of reasons,” he said. Among his proposed solutions are pro-family government policies and “making better men.”
“We’re going to start losing a lot of population, and it’s going to be very fast, much faster than anyone can think,” he said.
The year 2023 saw record-low birth rates in many countries, sparking a growing awareness of the long-term demographic, economic and societal consequences. The phenomenon is not unique to the United States or even the Western world — it’s observed across both developed and developing countries.
Taiwan, South Korea and Japan have some of the lowest fertility rates in the world, with the total fertility rate dropping to around 1.1 to 1.4 children per woman. (Total fertility rates measure the average number of children born to a woman over her lifetime.) In 2023, South Korea hit its lowest fertility rate of 0.7. These record-low fertility rates raise concerns about future population decline, aging populations and potential economic and social challenges as fewer young people are available to support an aging society. South Korea is bound to lose between 65-70% of its population, Fernández-Villaverde said. And this year, China, which has a fertility rate of 1.4, hit the lowest rate of weddings since 2013, according to recent data.
The global replacement fertility rate is 2.2, and the United Nations estimates the current fertility rate for the world is at 2.25. Fernández-Villaverde believes the United Nations is overcounting the births, and the more accurate global fertility rate is 2.18. But the main take-away remains that that fertility rates around the world are rapidly dropping, he said.
While historically, richer countries used to have fewer kids, the trend has been reversing, according to Fernández-Villaverde. The U.S., for example, has seen its fertility rate rise above that of several Latin American countries, which traditionally had higher birth rates. The reduction of a gender wage gap across Latin America has contributed to dropping marriage rates, allowing women to gain financial independence and make choices about marriage and motherhood that differ from traditional norms.
Currently, the United States has a higher fertility rate than Mexico, Argentina and Brazil, as well as Turkey and Iran.
Among the places that are still above replacement rate are Africa, as well as a group of countries in the Middle East — Oman, Syria, Yemen, Jordan, Israel, Iraq, Gaza Strip and West Bank.
But even in Africa, the fertility rate is falling quickly, Fernández-Villaverde said, and the births there will drastically decline in 2050 (Fernández-Villaverde believes that some of the projections by the United Nations are overly optimistic, overcounting births across the globe and says that the ultimate peak and decline in population will happen much earlier than in the 2080s as the United Nations projects).
“For the first time in our history as a species, we are not having enough children to replace ourselves,” he said. “I’m not talking about rich countries or Western countries — it’s the whole planet.”
Economic growth depends on both productivity and the size of the workforce. With lower population growth, the U.S. is expected to experience much slower economic expansion. Fernández-Villaverde estimates that this demographic shift could lead to a potential loss of $1.8 quadrillion in economic output over the long term. This decline in growth will strain the country’s ability to fund critical programs like Social Security, service the national debt, and maintain infrastructure like railroads and highways.
The decline in birth rates will also impact public services, including health care, education, unemployment benefits and pensions, funded largely through taxes. These consequences will especially impact the countries with aging populations. This system is designed to redistribute wealth and provide a social safety net, particularly for those with lower incomes. Fernández-Villaverde argues that individuals earning below a certain threshold — typically 70% of the median income — may receive more in government benefits and services than they contribute in taxes. And that often includes immigrants, he said.
In Europe, the welfare state is half-collapsed already, Fernández-Villaverde said.
“What happened is fertility has gone down so much, that all the increases in government expenditures in all major European countries over the last 20 years have gone more than 100% to retirement benefits,” he said. The pattern has already started happening in California, he said, where a substantial portion of California’s budget is being directed toward covering the rising costs of public pensions, which primarily serve retired state employees, teachers and other government workers.
Solving the fertility crisis with immigration may not be so easy, Fernández-Villaverde said. Immigration from Mexico, the top country of birth for U.S. immigrants, to the United States has declined in recent years, partly due to improvements in the Mexican economy, a declining birth rate in Mexico, and stricter U.S. immigration enforcement. And the U.S. has higher fertility rate than Mexico, Brazil and China.
“The number of immigrants that the U.S. will need to bring is phenomenal,” Fernández-Villaverde said, noting that the U.S. would need to have about 4 million immigrants a year to keep its population stable.
In South Korea, to keep the population constant, the country’s population would have to transform from being over 99% ethnically Korean to less than 30% Korean with the influx of immigrants that the country would need: “What society can handle that demographic change?”
When one person in the audience asked whether low birth rates may actually be good for the planet, Fernández-Villaverde offered his perspective. Many economists, he said, view environmental protection as a “luxury good,” meaning that wealthier societies tend to prioritize environmental issues more than those facing economic instability.
Fernández-Villaverde pointed out that by 2050, when many social security systems and national health programs could face bankruptcy due to declining birth rates, it will be much harder to persuade voters to support climate change policies.
To effectively combat climate change, he argues, the focus should be on rapidly reducing the cost of electricity production and CO2 emissions in the coming decade.
The priority for the United States, according to Fernández-Villaverde, should be increasing the fertility rate — at this point, even bringing it up to 1.8-1.9 (which is still below the 2.1 replacement rate) would be sufficient.
“How do we do that? We need to get people married,” he said. And the key to improving marriage rates? “Make better husbands,” Fernández-Villaverde said.
Shifting societal expectations, technology, economic pressures and mental health struggles, among other issues, have contributed to insecurity and isolation among men. Young women are increasingly hesitant about starting families, believing that marriage offers more advantages to men than to women. Only 45% of women aged 18 to 34 without children plan to have kids in the future, according to a Pew study. In contrast, nearly 6 in 10 young men (57%) expressed a desire to become fathers.
“There’s something fundamental that we need to change about the education of our boys so they become good husbands,” he said.
For starters, “All federal and state legislation should have an explicitly pro-marriage design,” Fernández-Villaverde said. More affordable, and more convenient, housing would make it easier for people to make a decision to get married. Cities should invest in family friendly city design and transportation, too. “Modern city planning is deeply anti-family and anti-kids,” said Fernández-Villaverde.
Scaling down on intense parenting expectations would help too. Changing college admissions policies to elite universities to alleviate the pressure many families feel when it comes to raising children and preparing them for adulthood would help in shift away from the view of parenting as a stressful enterprise for those considering having a child.
Finally, Fernández-Villaverde advocates for a generous parental leave — 12 months, fully paid, compulsory for mother and father, as well as more affordable child care.
Among Harvard students who gather each week at the Abigail Adams Institute, a recurring conversation is the difficulty of forming relationships, said Danilo Petranovich, a social scientist and director of the institute. “There is not a lot of dating at Harvard — I don’t think that’s news to anyone,” Petranovich said. “It’s not a part of their lived experience in some sense.” He hopes the work of Fernández-Villaverde can put the declining fertility trajectory into broader context.
“For the first time in the U.S. history, women are having fewer kids than they wish,” said Fernández-Villaverde. “So my goal is not to force anyone into having more kids than they want. My goal is to allow everyone who wants to have kids to have those kids.”