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Massive demographic changes create challenges, elevate economic role of next generations
This study finds two trends are converging to make investing in the health and well-being of children more important than ever:
- Retiring seniors’ demand for social programs including Medicare and Social Security is increasing
- Today’s population of children – the future tax-paying workforce – is not only shrinking but is under duress
The report is a wake-up call to policymakers weighing funding priorities at local, state and federal levels.
CHA and the Lucile Packard Foundation for Children's Health provided support for the report written by Dowell Myers, a demographer and professor in the Sol Price School of Public Policy at the University of Southern California.
Children, and how they are raised, educated and cared for, have assumed urgent, new importance in the 21st century, yet this fact is poorly recognized. The aging of the massive Baby Boom generation is well known and starting to reverberate within our country, and some are aware that birth rates are low. But what does their intersection mean for kids and for the country? Bluntly, the fact is that we have a shortage of children, and that will lead to a shortage of workers and taxpayers in the not too distant future.
Meanwhile there are way too many older people—that’s most of us—who will be relying on this undersized group of working age people when we reach our retirement years. Having more children is not a viable solution. Fertility is depressed all across the developed world and no workable strategies have been found to increase baby-making when social and economic pressures work against it. In any event, any extra children added by 2020 won’t come of age to help us much until after 2040 or 2050, but our crisis will be most intense long before that.
Our best hope is to cultivate the future abilities of the children already living with us so society can accomplish more with fewer young people. This means greater investing in our existing children to maximize their capabilities and future earning power. We should start with the earliest ages possible, but also include those who are preteens and adolescents because they can help us a decade sooner. And, because the least advantaged children have the most upside growth potential, we especially need to target them so they can flourish to their fullest abilities. Helping every child to lead a well-nurtured, healthy and educated life is good for the child, but it also returns tremendous benefits to society and to the older voters and taxpayers. It is the right thing to do for children and it is good for us all.
Skeptics might ask, “If this is such an obvious, good thing, isn’t it already reflected in policy?” Or they might question why they, rather than the children’s parents, should assume responsibility, or why, since budgets are tight, should we spend more on children rather than something else. The point should be clear. We have entered a new era. We need to invest more in children now to strengthen their capacities because the number of children is growing so little, and older people so much. Only by this empowerment can so many rely successfully on so few.
History is leaving us behind. Both America’s assumptions about children and their futures and also our country’s policies about children and family needs are inherited from the 20th century.
They are all calibrated to a time of high employment, liberal immigration policies and ample growth in the number of children relative to the number of retirees. The recent demographic shift in the U.S. has been so sudden, and our attention was so distracted by the Great Recession, that our perspectives and policies have not yet adjusted to the 21st century demographic reality. This report is intended as a wake-up call: this generation of children needs our full attention now.
Ratio of seniors to working people will swell dramatically in the coming decades
Back in 1970 we had 21 million children ages 10 to 14 but only 7 million people in ages 65 to 69. Our pipeline of children, representing our stock of future workers, was triple the size of the recent retirees. By 2030 we will still have 21 million children in ages 10 to 14 but also 21 million in ages 65-69. The former ratio of three children to one senior will have disappeared.
Advances in life expectancy mean that once people cross age 65 they are likely to live many years longer, creating an ever growing numbers of seniors. The total of all these seniors compared to the total of all the cohorts who are ages 25 to 64, the 40-year span that marks prime working age, is changing drastically and many more seniors must be supported by the economic productivity of those of working age. Whereas in 1970 there were 23 seniors for every 100 people of working age, by 2030 there are expected to be 42 seniors instead of 23, and this trend is going to continue to rise. The ratio of seniors to those of working age will be twice as great as in the 20th century.
Fertility rates have fallen across U.S. and globally
In the next 10 to 20 years, today’s children will grow into adulthood but their undersized numbers will struggle to support the U.S. economy as workers, consumers, and taxpayers, as well as providing crucial support to the large number of seniors. This scenario is assured for coming decades in large part because fertility rates have been falling among all race-ethnic groups; no one is having very many children.1
Immigrant birth rates affect U.S. workforce numbers
The flow of immigrants to the United States has eased this problem somewhat, but even with the help of immigrant parents, our total fertility rate remains low. Today, among children under age 6, fully one-quarter (25.2 percent) have immigrant parents. Without these babies, the total number of children born in the U.S. would have been depressed from the 2015 total of 3.98 million to 2.98 million, a reduction of one million children each birth year from the already diminished number. Such a hypothetical reduction would be a severe economic blow in the next two decades when labor force growth is driven to historic lows by the massive retirements of the baby boom generation. As it is, the grown children from these immigrant parents are expected to account for roughly 40 percent of the working age growth from 2010 to 2020 and three-fourths of the growth projected from 2020 to 2030. (See exhibit 8 in full report.)
Widespread shortage of children raises their societal importance in every state
The relative shortage of children is widespread across the nation. Nationally, the number of children under age 18 increased by only 1.9 percent from 2000 to 2015, while the rest of the population grew by 18.5 percent, nine times faster. A similar imbalance occurred in most states. As a share of each state’s population, the presence of school-age children, 5-14 years, has declined from 14.6 to 12.8 percent of the U.S. population, with somewhat greater reductions in presence experienced in Northeastern and Midwestern states. (See exhibit 6 in full report.)
Looking forward, based on the anticipated growth of the senior population, the societal importance of children in every state begins to soar for children coming of age after 2015. Compared to the “normal” societal importance (represented by those born in 1975 and coming of age in 2000), children take on more than twice their previous importance as a social and economic resource in five states of the Northeast, four in the South, six in the Midwest, and five in the West. Only three states have less than a 50 percent increase in the societal importance of children: Alaska, Nevada, and Utah.
Children's index of societal importance for the nation and largest states
|Year age 25
| United States
| New York
Child poverty a continuing challenge
How well are we caring for and preparing our children who have assumed so much greater importance than was the case in the 20th century? Not well. Over 22 percent of children under age 12 live in poverty compared to a poverty rate of less than 11 percent for each age group above age 45 (9 percent in poverty above age 65). The incidence of child poverty has increased markedly since 2000. (See exhibit 13 in full report.) Even after recovery from the Great Recession the poverty rate in 2015 is 4.8 percentage points higher than it was in 2000. Child poverty increased in all but two states in the first 15 years of this century. It is substantially higher in the South than elsewhere in the U.S. The social consequences of poverty are especially damaging to the developing brains and future capabilities of young children, and thus bode badly for the contributions of our future workforce.
Spending on children varies by state; spending lowest in states gaining the most children
High quality education is key to children’s later achievement, yet spending per pupil in K-12 public education varies greatly across the country. In general, the Northeast states spend substantially more on their children. (See exhibit 15 in full report.)
Health and health care during childhood not only affects children’s ability to benefit from educational opportunities, but is predictive of their health as adults. Relative to health care for adults, health care for children is inexpensive. We don’t spend much money on children’s health. Nearly half of U.S. children receive at least part of their childhood health care through the Medicaid program. Spending on health care is less widely divergent across the states than education spending because of the incentives provided by strong federal subsidies.
Nonetheless, spending is generally higher across the Northeastern states and lower in most of the West and half the South. (See exhibit 16 in full report.)
Income support, and education and health care spending strongly reflect state policies. Are states investing in these services commensurate with the proportion of children residing within them? Unfortunately not. A growing number of children are residing in states with lower levels of resources devoted to them. The states that are gaining a larger share of the nation’s children provide lower levels of both health and education spending. Texas is especially important because it is capturing so much of the nation’s growth in children; yet it offers among the lowest levels of K-12 spending per pupil. Fortunately, Texas rises closer to average on its Medicaid spending.
Low investment in children in one state affects the nation
These disparities among states’ support for their children are not just a local problem but also have national implications. States are not isolated from one another in the consequences of how they care for the nation’s children.
Forty percent of adults who are U.S.-born currently reside in a different state than where they were born and received health care and education. So the levels of skills and health of many working Arizonans, Coloradans or North Carolinians, as examples, were determined by other states where they spent at least part or all of their childhood. This transfer of human capital is greatest for those with potentially the most to contribute.
Among adults whose education stopped in high school, only 32.8 percent have left their birth state. However, among college graduates the dispersion across state lines increased to 46.6 percent, and among those with advanced training, 54.0 percent. As a result, the workforce in other states benefits from and depends on the upbringing and care received in children’s home states. The investments of states are linked by migration among them.
Children's increased importance requires greater investment in their health and well-being
In the era we have now entered, the doubled importance of children should be recognized and factored into civic goals and public policy. Our social and economic progress and leadership require that we invest more, and more uniformly, in our children and their families. Assuring that children, our future, develop their capabilities to the fullest extent possible surely must be a nationwide priority.
1 The highest total fertility rate in 2014 was among Hispanic mothers, Latinas, averaging 2.13 babies per woman, which is just at the replacement level. Black women averaged 1.87 babies per woman, white women 1.76 babies, and Asian/Pacific Islanders 1.72. The total for the U.S. in 2014 was 1.86 babies per woman but preliminary data for 2015 shows that falling to 1.84. The U.S. is not alone in this challenge of depressed fertility, and birth rates are even lower in most of Europe or Japan and Korea.