Introduction: The Post-War Baby Boom and Today’s Challenges
So, picture this: the end of the Second World War rolls around, and BAM! You see a huge jump in folks having babies all over the world. This created the biggest generation ever, fittingly called the Baby Boomers.
Think about it: soldiers came back home, young, full of energy, and feeling super patriotic. Especially here in America, this focus on family growth happened at the same time as what many folks call the Golden Age of Capitalism.
Back then, homes were cheap, the free market was pumping out all sorts of newfangled stuff to buy, and jobs were steady and paid enough for a comfortable life. The only thing left to do was, well, start a family.
Now, yeah, that sounds a bit like looking at history through rose-tinted glasses, maybe even a little inaccurate. But honestly, that doesn’t really matter for what we’re talking about today.
Fast forward to now: we’ve got homes that cost an arm and a leg, we’re buying mountains of cheap, disposable junk, and jobs feel really shaky and insecure. Naturally, the big question on the minds of governments everywhere is: how do we get people to make babies again?
The High Cost of Childcare
Here’s a major hurdle right off the bat: childcare costs have gotten crazy. For working families, it’s now often more expensive than rent. This isn’t just tough on parents; it’s hitting the economy hard too, costing over $122 billion a year.
Quick side note: You can’t even deduct those huge childcare costs from your income taxes most of the time. That’s kind of wild.
Policies and Concerns About Population Decline
Governments are trying things. Starting next year, South Korea, for instance, is planning to give parents with newborns a childcare allowance of around $530. It’s an attempt to make having kids more appealing, especially for women.
Looking ahead, many folks think the biggest issue in the next 20 years won’t be a population boom, but a population collapse – an uncontrolled decline.
Now, an uncontrolled drop in population is definitely something to be concerned about, and it’ll affect anyone planning to stick around for the next couple of decades. But it’s important to understand that there are two kinds of concern here:
- People worried about what a population decline means in general (like societal changes, aging population issues, etc.).
- People worried about not having a steady stream of available labor ready for them to hire.
They might sound similar, but depending on how you look at the problem (or if you even see it as one), the solutions you think up will be very different.
Looking Back: Why Birth Rates Change
To really get why things are the way they are today, we need to clear up some history.
The idea that the Baby Boom in the 1950s was simply because soldiers came home and started families isn’t the whole story. The easiest way to see this? There was no baby boom after the First World War.
In fact, after 1918, and a brief dip during the Spanish Flu pandemic, birth rates actually dropped to levels quite similar to what we see today. That kind of messes with the simple story, doesn’t it?
If you’ve followed the news about population decline, you’ve probably been told it’s a purely modern thing, caused by whatever current problem you want to blame the world for. But that’s not totally accurate either. The fertility rate way back then was actually worse than it might seem on the surface.
Understanding Fertility & Replacement Rates
To understand this, you need to know two numbers:
- The Fertility Rate: This is usually measured as the number of births per woman.
- The Replacement Rate: This is the average number of children a woman needs to have for the population to stay the same size.
Today, in places like America and most other high-income countries, the replacement rate is about 2.1 children per woman.
- Why 2? Because the population is naturally split roughly 50/50 men and women. So, on average, a woman needs to have two children to replace herself and a man.
- Why .1? Sadly, some children don’t make it to adulthood where they could potentially have their own children. The extra 0.1 accounts for this loss.
Pretty much everyone, from politicians across the board to your slightly odd uncle at Thanksgiving, seems to be really focused on national and global fertility rates these days.
But something that gets a lot less attention is that the replacement rate isn’t fixed; it changes! And guess what? It’s been declining too.
Back in the 1920s, people needed to have more than three children on average just for the population to stay level. Why? Because the infant mortality rate (babies dying) was much higher than it is now.
This means that the population back then was actually shrinking faster than it is today! And this was happening before modern birth control, before lots of women were in the workforce, before people moved to cities in huge numbers, before traditional “family values” supposedly broke down, or whatever else people blame for our current population trends.
Challenging the “Good Economy” Idea
Another common explanation for the Baby Boom was that the economy after WWII was just so good that starting a family was easy. But let’s look again:
- The Roaring 20s were also a very prosperous time after a war, yet people were having fewer babies, not more.
- In fact, the birth rate only really started going back up after 1929, when the Great Depression hit and plunged a huge number of American families back into pretty tough times.
If you actually look at the data, the Baby Boom trend really kicked off in the 1930s, a time when the American economy was arguably in its worst shape in the last century. There was a pause during the war years, but the post-war boom we all know was really just a continuation of a trend that had already started in the Depression.
So, if it wasn’t modern contraceptives, women working, economic booms, moving to cities, or changing family values that caused the low birth rates back then… what was it?
Income Inequality: A Major Factor
It turns out the reason for the birth rate slump back then is the same thing that caused the Baby Boom. And (spoiler alert!) this same thing could also help solve a lot of our population problems today, though you might not like the answer.
One of the most consistent things that seems to stop people from having babies is income inequality.
The economist Thomas Piketty, while working on his book “Capital in the 21st Century”, gathered tons of data on income inequality over the last century. (Just a quick word on that book: it’s probably one of the best economics books out there, and it’s surprisingly easy to read even if you’re not an economist. Like I always do, I’ll drop a link to it in the description below. Using my link helps the channel a little, and honestly, a good book will give you way more value than anything I could offer through something like Patreon).
Anyway, back to the data. If you take the information Piketty collected on income inequality and essentially flip it upside down, it matches up almost perfectly with the fertility rate trends.
The takeaway? If people feel like they aren’t falling behind, if they believe they have a chance to move up in the world (social mobility), and if they feel they can realistically provide what’s considered a good life for kids, they will have more children.
Think about history again: The New Deal programs put in place to help the country recover from the Great Depression, and the GI Bill after World War II, did a lot to massively reduce income inequality. And with that reduction, the babies flowed.
But here’s the big problem today: Yes, people in power want to avoid a population crunch, but they don’t want to do it by significantly reducing income inequality. They want more babies, but not like that.
So, the question becomes: how can you get people to have babies without, you know, giving them “too much” or sharing the wealth more evenly?
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(Transitioning from the main topic for a moment…)
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Population, Cities, and Modern Trends
For most of human history, our population was pretty much flat. Looking at old records, the average population growth rate for the 10,000 years between the start of human civilization and the Industrial Revolution was only about .04% per generation. It barely grew at all.
And even then, there were huge setbacks, like the Black Plague, which wiped out somewhere between a quarter and half of everyone in Europe.
People actually had a lot more children on average back then, but far fewer of them survived. So, the population didn’t really change much over long periods.
The Industrial Revolution Changes Everything
Then came the Industrial Revolution, and things took off. It created a kind of loop:
- Machines in factories and on farms could feed and support more people.
- More people meant more work could be done and more new things could be invented to support even more people.
- Improvements in medicine and how we eat meant people lived much longer, which gave them more time to use their skills and knowledge to make the world wealthier overall.
Today, it’s estimated that around 7% of all the humans who have ever lived are alive right now!
Cities Emerge - And Create New Problems
This population growth was great for business. Having more people naturally boosted industries because there were more potential customers to sell things to, and population growth provided a ready group of people to work in the new factories.
Early industrial cities, like London, became incredibly wealthy. But even back then, some familiar problems showed up. Cities during the Industrial Revolution were just awful places to live. People figured out how to build factories way faster than how to build plumbing and sanitation systems. Because of this, infectious diseases, not getting enough food, and sickness from bad food were much more common in these crowded places.
So many people died in London that up until the 20th century, it relied almost entirely on people moving in from the countryside looking for work just to keep its population from shrinking.
Modern Cities: Still Population Black Holes
Now, thankfully, most cities in high-income countries (maybe with the weird exception of San Francisco) eventually figured out that leaving human waste in the streets wasn’t a good idea. So, cities aren’t actively killing their residents with disease anymore.
But, they are still places where birth rates are very low, essentially making them population black holes that depend on people moving into them to keep their numbers up.
Why? Simply put, cities are expensive. Unless you’re really, really rich, you probably can’t afford a home big enough for a family close to a major city center. And depending on your job, you might not be able to move further away without losing your job altogether.
Today, you see a trend where having lots of children is usually a sign of being either extremely wealthy or extremely poor. There’s very little room in the middle for large families in the middle class because it’s just become too expensive in most cities around the world.
Running Out of People & The Role of Immigration
Over the last 300 years, we’ve also run out of that big pool of people from the high-birth-rate countryside to pull into the cities. So, this trend of low urban birth rates relying on migration has gone global.
Today, most advanced economies bring in people from countries with higher birth rates to fill jobs. This increase in immigration has hidden the low domestic birth rate issue for a while, but it’s also created other problems, like making housing even less affordable, pushing wages down, and increasing income inequality.
And let’s be real, there’s also the not-so-subtle truth that a lot of the people who want a steady supply of young workers would, let’s just say, strongly prefer if those workers were “homegrown.”
Remote Work: A Simple Solution?
In the midst of all this, there’s one other simple idea: let people work jobs outside of the city.
The COVID-19 pandemic was the most recent big global event to really shake up birth rates. At first, there was a sharp dip as people lost their jobs and hospitals were struggling to cope. But as more households where both parents worked shifted to working from home, births actually increased. They not only made up for the initial drop but went beyond what was expected.
It’s not surprising, is it? It’s just easier to handle a pregnancy and raise children when parents don’t have to commute into an office every day. This allows people to live in places that are cheaper and more family-friendly, further away from those expensive city centers.
Now, this reality is definitely annoying some folks because companies want people back in the office for all sorts of reasons.
But the good news is, we actually have some say in this! Even with extreme measures, it’s very hard to force people to have children. So, if businesses aren’t willing to adopt policies that promote equality or let people work from home, they just won’t get the future workers and customers they need.
If you want more proof of how good it is to move away from the traditional office setup, just look at the CEOs themselves. They’re the ones demanding workers come back to the office while they’re often not showing up to work at all.
You should totally go and watch this video (https://www.youtube.com/watch?v=Or8Z7mbfgfU) on how they manage that. It’s something that’s even more relevant now than it was when that video was made last year.
And hey, don’t forget to like and subscribe to keep learning how money works!