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Listen to the latest economic insights from CFC experts John Suter, Sam Kem, and Antony Davies.
Hello, and welcome to the Economic and Market Watch podcast for the week of April 20, 2026. This is Sam Kem of CFC.
Sam Kem:Today, we're stepping back from current market events to look at a longer term force that is quietly reshaping the global economy -- declining fertility -- and why the usual economic explanations don't fully capture what's going on.
Sam Kem:Fertility decline is often framed as an economic problem. You hear the argument all the time. People are not having kids because it's too expensive. Housing costs are high. Childcare is unaffordable, and wages have not kept up.
Sam Kem:At the surface level, that explanation makes a lot of sense. But if you zoom out, the story is both bigger and more complicated.
Sam Kem:Falling birth rates are not just a social curiosity. They have real macroeconomic consequences.
Sam Kem:When fewer children are born, you don't feel the economic effects immediately, but over time, it reshapes the entire economy. You end up with fewer workers entering the labor force, more retirees depending on them, and a rising strain on pension systems and health care. Economic growth slows, not necessarily because productivity collapses, but simply because the workforce is shrinking.
Sam Kem:At the same time, family formation changes. People marry later, have children later, or not at all. That shifts housing demand -- fewer large family homes and more single-person households.
Sam Kem:Labor markets also adjust. In the short run, you often see higher participation, especially among women. But in the long run, the pipeline of workers shrinks.
Sam Kem:So, yes, fertility decline is an economic issue. It affects growth, housing, labor supply, and public finances. But that raises a deeper question. Why is fertility declining in the first place?
Sam Kem:The common answer is straightforward: It's too expensive to have kids. And this is often framed as a developed-world problem. Rich countries have high costs of living, so people delay or avoid having children. But that explanation starts to break down when you look globally. Because fertility isn't just falling in rich countries, it is falling almost everywhere.
Sam Kem:In Europe and East Asia, fertility is already very low, often far below replacement. The U.S. sits somewhere in the middle, still below replacement, but not as extreme. But then you look at Latin America. Countries that had very high birth rates just a few decades ago are now at or below the placement. Then you look at India, now roughly at replacement. Even in Sub Saharan Africa, where fertility is very high, the trend is clearly downward. Countries that once averaged six or seven children per woman are now closer to four and falling.
Sam Kem:That isn't just a rich country affordability problem. It's a global transition. Every region is moving in the same direction, just at different speeds.
Sam Kem:And when you layer in marriage trends, the story gets even more interesting because across much of the world, marriage is also declining.
Sam Kem:In the U.S. and Europe, people are marrying later or not at all. Cohabitation has become more common, and in many places, a lot of children are born outside of marriage.
Sam Kem:In East Asia, marriage rates are falling even faster, but with a crucial difference. Births outside of marriage remain rare. So fewer marriages directly translate into fewer children.
Sam Kem:In Latin America, formal marriage is declining, but informal unions are replacing it. Family formation continues just in a different form.
Sam Kem:And in Africa, marriage is still common, but even there, the age of marriage is rising and norms are beginning to shift. So now we have a puzzle.
Sam Kem:If this were purely about the cost of raising children -- if it were just an economic constraint -- then why are marriage rates also declining? Why are people not just having fewer kids, but also delaying or avoiding partnership altogether?
Sam Kem:Governments have tried to answer this question with policy.
Sam Kem:France built one of the most comprehensive family support systems in the world. Child allowances, subsidized childcare, parental leave. It has one of the highest fertility rates in Europe, but it's still below replacement and now declining again.
Sam Kem:The Nordic countries did something similar. Strong welfare states, generous leave, universal childcare. Fertility there rises and falls, but never sustainably returns to replacement.
Sam Kem:Hungary went further, offering tax exemptions, housing subsidies, even loan forgiveness tied to having children. Fertility increased for a while, but has started declining again, and the policies are extremely expensive.
Sam Kem:And then there are cases like South Korea and Japan, where governments have spent enormous sums on incentives -- cash bonuses, child care support, housing assistance -- with very little effect. Fertility remains among the lowest in the world.
Sam Kem:The pattern is consistent. Economic incentives can help with the margins. They can shift timing, reduce barriers, and maybe nudge fertility slightly higher, but they haven't solved the problem anywhere, which suggests something important.
Sam Kem:Maybe we're trying to solve this as an economic issue when it's not just an economic issue. Because alongside the economic pressures, there are powerful social forces at work.
Sam Kem:People are marrying later or not at all. The expectations around relationships have changed. Gender roles are evolving, sometimes unevenly, creating mismatches in what people want from partnership.
Sam Kem:There's also a shift in how we think about children themselves. Parenting has become more intensive and more time consuming. The perceived cost of raising a child is not just financial. It's emotional, professional, and lifestyle related.
Sam Kem:And then there's another issue that we tend to avoid talking about. That is the people who do want to have children and have the means to, but are unable to because there is not a partner to have the children with. And that is a social issue that society is struggling to understand in recent years.
Sam Kem:So, when you put it all together, you get a different picture. On the surface, fertility decline may look like an economic story about cost, wages, and housing. But on a deeper level, it is the lack of a social equilibrium. Marriage becomes less common. Family formation is delayed. Norms shift. And once the system settles into place, that becomes very difficult to reverse no matter how much money governments spend trying.
Sam Kem:And that is really the core insight. It's more than just about affordability. Because one thing that I learned from consumer spending behavior is that if people want something and there's a way to get it, they will pay a high price for it, even if it means getting in debt.
Sam Kem:Until deeper social forces are understood, policies aimed purely at the economics of childbearing are likely to keep falling short, and the impact will continue to shape the economic landscapes in the years ahead, especially when it comes to retirement.
Sam Kem:Thank you for listening, and be sure to download the Economic and Market Watch intelligence brief and dashboard.
Sam Kem:Talk to you soon!