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Whenever there’s a blizzard or power blackout, there’s often a baby boom nine months later. You’d think that with the coronavirus forcing millions of couples to work from home since February and March that there would be a similar boom in, oh, November, December and beyond.
In fact, the opposite is likely to be true. And that could have an impact on your Social Security down the road.
Why are the two connected? Because unlike a blizzard or blackout, which are temporary events (and can lead to uh, fun), the coronavirus pandemic has sparked a deep recession and economic uncertainty on practically everyone. It is stressful, it has upended and destroyed lives, and has taken on an air of permanence. Pain and uncertainty are not exactly conditions which are conducive to starting or expanding a family.
This is why the nonprofit March of Dimes and the Brookings Institution, a Washington, D.C.-based think tank, say—in separate studies that reached the same conclusion—that there could be anywhere from 300,000 to 500,000 fewer births over the next year at least. Which in turn means that 20 years from now there will be 300,000 to 500,000 fewer workers paying Social Security taxes. Perhaps many more.
The prediction that births will decline carries weight because the both Brookings and the March of Dimes say that’s exactly what happened during other difficult periods they examined. For example, Brookings says that during the last bad downturn a dozen years ago, births dropped about 9% between 2007 and 2012—a decline of some 400,000.
Brookings also looked at the so-called “Spanish Flu” (which may have started in Kansas, not Spain) pandemic of a century ago. Data was not as voluminous as now, but nevertheless showed a decline in births of about 12.5%.
That pandemic came in waves, and if COVID-19 does, it could depress birthrates over a multiyear period. “The United States will have 379,000 fewer births each year until 2022,” Dr. Rahul Gupta, chief medical and health officer for the March of Dimes, recently predicted in the Washington Post.
Remember, Social Security is based on younger workers and their employers supporting retirees through payroll taxes. This ratio—workers to beneficiaries—has been falling for decades. In 1950, says the Social Security Administration, the ratio was 5.1 workers for every beneficiary. In 2000, 3.4 to one. Now? About 2.6. And by 2040, when babies born today will probably be entering the workforce, the ratio is projected to be 2.1 per retiree. Just two workers for every senior citizen. Thus, the future strain on Social Security could be significant.
Even if you took the pandemic out of the equation, the pressure on Social Security has been growing for years. With one exception, the U.S. birthrate has fallen every year since 2007, and now stands, the government says, at its lowest level in 35 years.
Meantime, the number of seniors is growing as 10,000 baby boomers retire daily—a trend that is expected to continue into 2029. They’re living longer too, as life expectancy gradually rises. By 2040, says the Census Bureau, one in 25 Americans will be over the age of 85—double the percentage now. Who’s going to support them when the birthrate is so low?
The writing is on the wall. Since Social Security is taking in less this year than it is paying out, it has had to dip into its Trust Fund to pay retirees. That Trust Fund is projected to run out in 2034. What happens then? The Social Security Trustees are blunt: “continuing tax income will be sufficient to pay 76 percent of scheduled benefits.”
A 24% cut.
The pandemic will eventually go away. But the long-term damage—in the form of fewer taxpayers to prop the system—will not.
