The Demographic Dilemma and Your Dollars w/ Melissa Kearney #1046

Summary

How to Money: "The Demographic Dilemma and Your Dollars" w/ Melissa Kearney (#1046)

Episode Overview

In this episode, Joel from How to Money interviews economist and Notre Dame professor Melissa Kearney about the economic realities and personal finance implications of major American demographic trends: declining birth rates, the rise of single-parent households, and increasing inequality. The conversation focuses on understanding demographic shifts not as cultural disputes but as forces shaping economic security, household stability, and financial strategies—both for individuals and for society.

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Key Discussion Points & Insights

1. Why Study Demographics Through an Economic Lens?

• The Two-Parent Privilege: Kearney explains her motivation for writing about the economic consequences of the decline in marriage, emphasizing she’s not issuing moral judgments, but highlighting evidence showing how family structure impacts poverty and inequality.

  • "Despite mounds of academic rigorous evidence showing how predictive family structure was at both an individual and community level… it was somewhat easier... to talk about the problems of schools or holes in the government safety net." —Melissa Kearney [05:24]

• Academic Landmine: Kearney notes that discussing family structure is often avoided due to political sensitivity, but the reception to her work has been positive and necessary.

  • "I was hopeful enough that there was a way to talk about the issue with empathy... For the most part, I've been really pleased." —Melissa Kearney [06:09]

2. Good News in Economics That's Often Overlooked

• Overall Prosperity: Americans are much wealthier than previous generations; real incomes, even at lower ends, have increased compared to decades past.
  • "Americans are sort of crazy rich compared to previous generations and to countries around the world... Median household income in the US is so much higher than in Europe..." —Melissa Kearney [07:47]
• Why So Pessimistic?: Loss aversion, social media amplification of bad news, and the disconnect between personal well-being and national mood.

3. The Transformation of Family Structures

• The Numbers: Since 1980, the percentage of children living with married parents fell from 80% to about 63%. The change is much more significant outside the college-educated population.
  • "Now, only about 63% of kids live with married parents... We have about one in five kids in the US living with an unpartnered mother... a very economically vulnerable situation." —Melissa Kearney [12:50]
• Class Divide: Among college graduates, stable marriage rates; among those without degrees, sustained decline.
  • “Outside the college-educated class, kids... born to moms with a high school degree or less... We're getting below 60% of them living in married parent homes.” —Melissa Kearney [12:50]

4. Marriage: Love vs Economics

• Marriage as an Economic Unit: Discussed as both emotional and deeply economic—resource pooling, risk-sharing, and economies of scale.
  • “You have two people... to share their resources... jointly contribute... to raising children... There’s economies of scale, of course.” —Melissa Kearney [17:11]

5. Decline in Marriage: Economic or Preference?

• Interplay of Social Norms and Economics: Both contribute. Evidence shows that even with economic shocks boosting men’s earnings (e.g., fracking boom), marriage rates didn’t rebound as norms had shifted.
  • “In the early 2000s... the fracking boom... What happened... was not an increase in marriage... This contrast... had different effects on family formation based on... new prevailing social paradigms.” —Melissa Kearney [20:37]

6. Impact on Children's Outcomes

• More than Income: Two-parent households confer broad advantages: greater supervision, stability, extracurricular opportunities, and "emotional bandwidth."
  • “Even comparing families with the same income... kids with two parents... are more likely to stay on track in school, more likely to get a degree...” —Melissa Kearney [24:45]
  • “As a married mom, it’s really hard to feel like I have time... it’s that much harder if you don’t have another parent contributing reliably on a daily basis...” —Melissa Kearney [24:45]

7. How Family Trends Drive Inequality

• 'Obvious, Once You See It': College-educated couples both see incomes rise and marry each other—multiplying household wealth. Non-college grads see stagnant incomes and more single-parent households, compounding insecurity.
  • “You just made the economic insecurity of the middle class that much worse because even if your earnings held constant, you just lost the second person...” —Melissa Kearney [33:07]

8. The Birth Rate Problem: US vs the World

• Sharply Declining Fertility: The US fertility rate is at 1.6, well below the replacement rate (2.1). This suggests eventual population decline, bringing economic challenges.
  • “In the US, our total fertility rate is 1.6... This is substantially below the fertility rate we would need for our population to naturally reproduce itself...” —Melissa Kearney [40:29]
• Global Lessons: Countries like South Korea and Japan are already experiencing steep demographic and economic consequences of low birth rates.

9. Personal Finance Consequences of Demographic Shifts

• Sectoral Impacts: Industries focused on children (schools, baby products) will contract, while eldercare sectors will grow; stark regional disparities will emerge.
  • “If I were to give financial advice, I would probably say don’t invest in Pampers... [there are] more and more elderly and fewer and fewer children.” —Melissa Kearney [43:07]
• Real Estate: Declining populations in some areas will lead to housing oversupply. Example: cheap homes in depopulated regions of Japan.
• Social Security Crisis: Fewer workers per retiree will create funding shortfalls, potentially leading to benefit cuts.
  • "When Social Security started, we had more than 4 workers per beneficiary... Now we're looking at 2... The scheme just financially doesn't work anymore." —Melissa Kearney [46:42]

10. Potential Solutions

• Immigration as Partial Fix: The US could offset demographic decline with immigration—but globally, birth rates are falling everywhere, so even that’s a temporary solution.

  • “Immigration is only a partial solution because birth rates are falling essentially everywhere... Going forward, there’s likely to be a smaller supply of potential immigrants...” —Melissa Kearney [49:02]

• Promoting Innovation: Older societies tend to be less innovative—new approaches (like AI, technology, and educational investment) are crucial to counteract these headwinds.

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Notable Quotes & Memorable Moments

• “We are accustomed in this country to things just sort of getting better... so things that set us off that course have sort of outsized impact on our psyche.” —Melissa Kearney [09:36]
• “The lasting intellectual legacy or narrative legacy of the population bomb... is really phenomenal. I grew up learning about too many people... In fact, now we’re faced with a decline.” —Melissa Kearney [40:45]
• “I don’t think [young people] should at all be sanguine about Social Security being around for them... It would be silly to think... the government will be there to take care of you in your old age.” —Melissa Kearney [55:45]
• On marriage: "It’s a modern concept that people are getting married out of, you know, primarily for love... If you just strip marriage down to its economic elements... it is in large part an economic decision.” —Melissa Kearney [17:11]

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Timestamps for Key Segments

• Introduction & Guest Background: [01:42–04:00]
• Motivation Behind Kearney’s Work: [04:00–07:18]
• Good News in Economics: [07:47]
• Why So Much Pessimism?: [09:03–12:08]
• Changing Family Structures: [12:50]
• Marriage: Economics vs Romance: [16:37–18:10]
• Marriage Trends and Cultural Norms: [20:10–24:09]
• Two-Parent Households and Child Outcomes: [24:45–26:48]
• Single Parents and Emotional Bandwidth: [27:07]
• Inequality's Connection to Family: [31:45]
• Is Inequality Inherently Bad?: [34:14–36:54]
• Demographics and Your Money: [37:37]
• Falling Birth Rates & Impacts: [39:15–43:07]
• Real Estate & Regional Shifts: [45:03]
• Social Security Sustainability: [46:28]
• Immigration as a Solution: [48:32]
• Innovation Headwinds: [49:02]
• Advice for the Next Generation: [55:45]
• Personal Choices & Public Policy: [57:12–60:20]
• Is More College the Answer?: [61:09]
• Wrap-up & Finding Kearney’s Work: [62:27]

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Conclusion

This episode offers a thorough and accessible primer on how American demographic changes—particularly declining birth rates and the shift away from two-parent households—are shaping not just society but also day-to-day personal finance decisions. Kearney encourages individuals to be "clear-eyed" about marriage and family formation, consider the looming fiscal challenges (especially Social Security), and recognize the headwinds against economic dynamism posed by an aging population. The conversation balances data-rich insights with practical reflections for listeners—with a call to adapt, save, and avoid complacency about longstanding economic safety nets.

For more, see Melissa Kearney’s book, "The Two-Parent Privilege," and visit melissakcarney.com.

Transcript

[Melissa Carney]

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[Joel]

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[Matt]

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[Joel]

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[Matt]

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[Joel]

For sweat welcome to how to money i'm joel and today i'm talking the demographic dilemma and your dollars with with melissa carney yeah demographics for destiny we've all heard that phrase right looking at current trends can offer insight into what the future might hold declining birth rates rising inequality and the uptick uptick of single parent households it's having a profound impact on our society and it's impacting the economy as a whole we're sidestepping the culture war battles on these topics today but i do want to discuss how current trends and demographic realities are going to affect our society are going to affect our economic vibrancy and the money choices that we should be making now as individuals so melissa carney is an economist known for her extensive work on social policy poverty inequality and the economics of families and fertility so a lot to dive into here she's a professor of economics at notre dame melissa thank you so much for joining me.

[Melissa Carney]

Today on the show thanks so much.

[Joel]

For having me okay first question that i ask everybody who comes on is what's your craft beer equivalent that just means that i like to splurge on fancy craft beer from time to time but i'm not doing it at the expense of my financial future to do you have something like that in your life that people might think is a little offbeat but you're spending quite a bit of money on in the here.

[Melissa Carney]

And now okay maybe not offbeat but definitely indulgent and probably a little embarrassing and when my husband looks at our family app he's always a little horrified how much i spend at the hair salon so i'm just gonna admit it okay costs a lot of money to keep my hair from getting gray i wanna be the person who's okay with it but i spend a lot of money at the hair salon no shame.

[Joel]

In that game you know a little bit ashamed i'm not judging i'm not judging okay that's fascinating and you know it's amazing some people the grays come in and they they look incredible women and men and you're just like how how does how do you pull off the gray like that and i want.

[Melissa Carney]

To be that person but but i'm not it doesn't look sometimes right okay.

[Joel]

Let'S let's get to the meat of the topic like you you're avoiding the culture war stuff in your book that came out a couple years ago and i appreciate that you're really not trying to castigate anyone you're not trying to throw anybody under the bus here but what drove you specifically into touching on some of these really tough economic topics that maybe send people into a tailspin when they start kind of thinking about.

[Melissa Carney]

Them yeah so i've so the book you're referring to the two parent privilege i wrote a couple years ago really to call attention to what's happened to families and marriage in the us over the past forty years as an economic matter right so you're right there's plenty of culture wars about marriage and as an economist i have nothing to say about whether somebody should or should not get married but what i have a lot to say about and what the data has a lot to say about is how the decline in marriage in the us over the past forty years has impacted economic security and inequality and so as somebody who's spent my career studying poverty and inequality it got to the point where i wrote this book because this is such how we choose to form our families and whether or not we choose to get marriage has really profound implications for our economic security and that of children so it basically.

[Joel]

Became like an unavoidable topic like the elephant in the room one hundred percent.

[Melissa Carney]

It was always the elephant in the room in academic and policy conversations about inequality in particular and social mobility which obviously there's been a lot of attention to in recent years for good reason but it was despite mounds of academic rigorous evidence showing how predictive family structure was at both an individual and community level these conversations it was somewhat easier and more tractable to talk about the problems of schools or holes in the government safety net and so as you said it was the elephant in the room and so that's why that's why.

[Joel]

I wrote the book and most people were saying i'm not gonna touch it with a ten foot pole and you were like let me at it i'm gonna get in there i'm gonna write the book on it and i'm gonna take all the flack for it too.

[Melissa Carney]

I don't know i wasn't naive going in i knew it would be i mean i knew a little bit that i was you know walking on landmines but i was hopeful enough that there was a way to talk about the issue with empathy talk about the issue that was not sort of tinged with the judgmental really ugly ways that sort of the conversation has sometimes happened in the past and felt like okay we can do this we can have a you know a civil evidence based conversation and i will say for the most part i've been really pleased with how that went like like sure there were plenty of people who didn't like the book before they read it or will never read it but wrote some scathing essay based on the title of premise alone but for the most part i felt like the reception i got made me think gosh really this was a conversation america wanted to have people were having this around their dinner tables a lot of teachers and pediatricians wrote to me saying yeah this is what we're seeing thanks for like sort of launching the national conversation so i actually was.

[Joel]

Pretty pleased yeah it was a conversation that needed to be had and i feel like you you sparked it in so many ways and i want to dig into that that topic in particular but i want to get into some other stuff with you as well but one thing i'm curious about based on the research that you're doing i feel like the world is inundated with bad news we're going to cover some bad news and some bad trends right now but before we go too far down that path are there any good trends that you've been researching lately that are worth highlighting that you're seeing on the economic front where you're like d and that kind of surprised me in a.

[Melissa Carney]

Positive way yes there's actually a lot of good news and it gets buried i mean we should always be looking for ways to improve society and make life better for people so i think as researchers or people who focus on policy problems there's a tendency to focus on the bad news there's lots of good news i mean americans are sort of crazy rich compared to previous generations and to countries around the world i mean median household income in the us is so much higher than in europe it's so much higher than it was twenty years ago even at the bottom of the distribution workers are making higher wages than in the past i think that gets lost a lot but fundamentally americans are in very good position when it comes to income wages household wealth you know living standards of course medical advances in technologies are incredible again there's always i can't help myself i am a you know a scholar so i put a footnote on everything there are class divides in all of this people without college degrees are falling behind people with college degrees but in general across the distribution americans are in quite good.

[Joel]

Shape why do you think there's so much pessimism individual pessimism like cultural pessimism it does seem like when you look at some of the i think inflation was one of those things it just got people riled up right and they were like my eggs cost more and i get it like i was at the grocery store just this past weekend and beef prices were insane i was like i need to just cut steak out of my diet completely it's too expensive so but why do you think there is so much pessimism given kind of the data reflecting overall solid trends.

[Melissa Carney]

I mean this is now we can all conjecture as well as the next person as to why there's so much pessimism i think in part because we are accustomed in this country to things just sort of getting better and people get used to things being good right so there are things like what behavioral economists would call loss aversion we get very upset when beef might have been more expensive in the past but when we were used to paying lower prices for it and all of a sudden it becomes more expensive now we're particularly upset so there is some of that that we just have grown accustomed to things constantly getting better and so things that set us off that course have sort of outsized impact on our psyche i can't help but speculate and this is not my area of expertise but we are inundated with social media and messages that just bombard us with the bad news that it's easy to lose sight of the good news and one sort of survey finding that i think always emphasizes that is when you see surveys of how happy people are with their own lives versus how they think things are going in the country people generally tend to be happier with their own lives and so it's almost like well things are pretty well you know going pretty well for me but i see all these stories that make me think it's not going well for other people in the country yeah it's kind.

[Joel]

Of like oh i love my congressperson but the rest of them are terrible and should all be thrown out yeah and i agree those are fascinating things to see it's like i think i'm actually doing okay but everyone else out there is having a tough time and it makes you feel like just there's doom and gloom around you when maybe it's not nearly to the extent that you might think but can i say.

[Melissa Carney]

One thing on this because one of the demographic issues that i've been thinking and writing and studying a lot about in the past few years aside from the decline in marriage and the rise in single parent families is just the decline in fertility and i am always amazed when i'm talking to young people college age people about what's going on with the birth rates and how low they are inevitably they tell me how worried they are about the future and then i'm like the old lady being like you guys have it so good but it is sort of remarkable in a worrying sense why this generation of young adults in particular seems to be pessimistic when really their future is quite.

[Joel]

Bright right yeah i think we need a reminder every now and again i was talking to an immigrant from cuba recently and and just to hear his experience growing up and living in cuba and then what it's been like these past four years since his family has been in the united states and it hasn't been like easy right but just the access he has to be able to start a business or live life in the way he wants is completely different and i think maybe hearing more of those stories would benefit all of us okay let's talk about families for a little bit i'm curious based on your research and just kind of the trends you've seen how much have family structures changed over the last couple of generations and do you have an idea of why the family structure has changed.

[Melissa Carney]

So significantly overall so let me focus on kids and their living arrangements so since nineteen eighty there's been a decline in the share of kids living in married parent homes falling from about eighty percent to about sixty three percent so now at a point in time only about sixty three percent of kids live with married parents it's not that so many of them are living instead in sort of cohabiting parents only about eight percent of kids live with one of their biological parents and their parents partner often that's not actually their second biological parent but rather we have about one in five kids in the us lives with an unpartnered mother meaning a mom with no other spouse or significant other in the home that's often a very economically vulnerable situation which is why this is relevant to issues of poverty and inequality this is a sea change in the way kids are being raised in the us right the fact that just over sixty percent of kids are living in married parent homes is really most of the change happened in the eighties nineties early two thousands but that's where we are now which is very different than where we were forty fifty years ago the other really important facet of this trend is that this has happened almost entirely outside the college educated class so the decline in the share of kids living with married parents for those who are born to moms with a four year college degree has only fallen from ninety percent to eighty six percent like a tiny decrease even as more and more moms are getting college so that's like a less selective group but outside the college educated class kids born to moms with a high school degree or less or maybe some college but not a four year degree we're getting below sixty percent of them are living in married parent homes so there's this real college gap now in the way kids are living being raised and that mirrors a college gap in marriage rates so if you think back to the sixties and seventies when we had the cultural revolution and a lot of institutional legal cultural change changes marriage sort of fell for everybody regardless of education level but then going into the eighties nineties early two thousands it didn't it stabilized among college educated adults and continued to plummet for people without college degrees that starts to give us a hint as to what caused this so so in very broad strokes my read of all the evidence and literature is that we had these really dramatic changes in the sixties and seventies that set us up with new social norms it was more acceptable to not be married or to have kids outside of marriage and then you go into the eighties and nineties when there's a whole bunch of economic shocks that are pretty bad for relatively bad for men without college degrees so if you take an economic view of marriage a very non romantic view but essentially we're making a contract with you know a long term contract with someone to pool our resources at the same time as women now have more economic opportunities and autonomy and again among those without college degrees the men are sort of their employment rates are falling their earnings both you know relative to women is falling they become less desirable as economic partners some of them might feel less ready or inclined to be an economic provider for a family and we just see a decoupling of marriage and having kids in those affected populations i.

[Joel]

Know it's not a sexy topic to talk about marriage as an economic reality.

[Melissa Carney]

But it is right it has always been like from the beginning of time marriage has always been an economic arrangement.

[Joel]

And i feel like we primarily view it through the lens of love companionship and those are wonderful things but there's an economic reality for the rest of your life present to tying your life to the fate of someone else too why do you think that doesn't get talked about enough and like yeah i don't know can you put it maybe into perspective for us how big of an economic commitment it is it's really.

[Melissa Carney]

A modern concept that people are getting married out of you know primarily for love and their own adult human flourishing again i don't write about this in the book because i just write about marriages through an economic lens but that really is a modern conception of marriage and so if you just strip marriage down to its economic elements and there's really no denying that it is in large part an economic decision and commitment you have two people who are making a commitment to share their resources to pool their resources and to jointly contribute i'll use my boring economic language but to like producing a household or if there's children to raising children and then jointly consuming things and so you know there's a lot of benefits to this because now if you're two people forming one household there's economies of scale of course right we just need one household and all the things we share in a household so it's very beneficial from.

[Joel]

That i remember being so excited when we got married to go from having two apartments we were renting to living under one roof and being like wow think about how much more money we're going to have to spend on other.

[Melissa Carney]

Stuff we care about there's totally economies of scale there's also when we think about this again from a very economic position and when kids are involved there's specialization so you can also it's not even just that you're pooling the resources of two people but you're specializing okay like what does that mean it used to be that men would specialize in working outside the home and women would specialize in household production and childcare today you know the majority of women the majority of married women the majority of mothers work and so it's less about specialization let's say in and out of the home but even within the home you can imagine that i mean i'll be you know terribly heteronormative about this but like my husband you know he will take care of mowing the yard or bringing out the garbage or he also deals with dealing with all the health insurance and car insurance and car repairs and that kind of thing and i will deal more with like meal planning or grocery shopping i mean every time you go to the grocery store again like am i allowed to stereotype how many times do you see a guy on the aisle calling someone back home being like wait they don't have that kind what kind should i buy instead and i think that's me i'm.

[Joel]

The one who shops at the grocery store but i'm calling because i've got.

[Melissa Carney]

Questions because you've specialized and so when you have household specialization you also can do more things than two people separately just combined but there's also a wonderful insurance component of a married unit as an economic unit if one person loses their job or is injured or sick there's another person in the household who can pick up some work or pick up some hours or do some more of the resources so there's also a resource insurance component there when two people have pooled their resources in marriage do.

[Joel]

You think the decline in marriage and the subsequent impact on kids is is this and families as a whole is this like a preferences issue or is this like a response to more economic constraints because you talked about maybe some younger men not feeling like they could provide for a family like are the economic hurdles more significant and so people are saying i'm just going to punt on marriage for a while until i feel like i'm economically ready to commit.

[Melissa Carney]

To that this is a very thorny complicated question but a really important one again my read of the evidence is that what we're seeing in terms of the reduction in marriage and the decoupling of you know having kids in inside marriage again this is almost entirely outside the college educated class it reflects both changed social norms and changed economic realities and and those two things accentuate and amplify each other so you see in places where like non marital childbearing or having kids you know raising kids outside a married parent home where that's more common even when there's an economic a positive economic shock right you don't get the increase in marriage so i'll be very specific here so you know for a long time i was of the view that it was primarily an economic challenge and if we could only improve the economic position of men without college degrees we would see a return to a higher level of marriage and a reduction in the share of kids born outside marriage then one thing happened actually in the early two thousands that was actually good for the economic position of non college educated men in both an absolute level and relative to women and that was the fracking boom in a lot of communities where fracking was accessible because of the geology and all of that so what happened in these places let's say texas you get an increase in fracking and it's not just good for fracking workers but it leads to local economic booms there's just more jobs and in particular we see more jobs for men without college degrees so we can confirm that that's great and then it looks like people did have more kids and we actually have lots of evidence that kids are what economists call normal goods and you get a positive income shock one of the things people spend money on is having kids okay but to my surprise there was not an increase in marriage and there wasn't a reduction in the share of kids born outside marriage and so that surprised me and so then we looked back my co author riley wilson and i we looked back at what happened during the cold boom of the nineteen seventies and eighties when similar communities in like rural appalachia were affected and you saw the earnings of men went up what you saw then was an increase in marriage and a reduction in the share of children born outside marriage okay this contrast is super interesting because it suggests that a very similar economic shock had different effects on family formation based on like the new prevailing social paradigms yeah and even in the modern context when you saw like you know in the fracking communities where non marital childbearing was less common then you did get more of an increase in marital births than non marital births so i think it's both i think we've sort of normalized as a society and in some sense for good reason because in the past single moms and their kids were ostracized from the communities and nobody wants to go back to that we should definitely not want to go back to that but in some sense we've so normalized this idea of people raising kids not together or not sharing you know having the commitment of a shared household that even now if the economic situation of these men were to improve and the incentives for marriage were greater without a changing recognition or changing social norms i'm less confident that we would see a.

[Joel]

Reversal of trends i would think a basic response to maybe some of your work would be well yeah i mean part of the reason that two parent households afford better opportunities for kids is because especially in today's day and age both mom and dad are both partners are working right and so there's more money coming in so of course those kids are going to be better off but you would say it's not all about the income right it goes beyond just the amount of money coming into the household there's something about two parent.

[Melissa Carney]

Stability right yeah that's right so it's again i'm basing this on a lot of statistical evidence so we can see that a big part of the benefit for kids of growing up in a household with two adults is just that there's more income coming in and so you know if you have more income coming in you're more likely to live in a good neighborhood with good schools and have lots of these extra you know great opportunities to advance to obtain higher levels of education but even comparing families with the same level of income in one versus two parents in that household kids who have two parents especially for all of their childhood just have better outcomes in the sense of being more likely to stay on track in school being more likely to get a four year degree being more likely to have higher earnings as an adult what are some of the mechanisms driving that well anyone who has kids knows that what parents do is more than just provide for them provide shelter pay for things you supervise them you help them with their homework you try to teach them lessons there's all sorts of things that parents do that are helpful chauffeur regularly chauffeur regularly but that also really contributes to the activities so you see kids now who are growing up in single parent homes or lower resourced homes they don't even have access to the same extracurricular activities and here's where to your point you know it's tricky to talk about these things but it's foolish to try and deny that a parent trying to do all of this by themselves is not at a disadvantage and i say that with full empathy like even as a married mom it's really hard to feel like i have time to drive my kids to all their practices or get dinner on the table after work it's that much harder if you don't have another parent contributing reliably on a daily basis to picking up some of the slack running to the grocery store driving the kids around helping one do the homework while you're trying to make dinner all the while having to bring in enough money to pay.

[Joel]

All the bills if my wife is gone for four or five days on a trip with friends like my level of patience declines my level of mental insanity increases and i'm just i it gives me a lot of empathy and respect for people who are single parenting out there because it's really tough what.

[Melissa Carney]

You just mentioned is what i refer to in the book as emotional bandwidth and there's lots of evidence on that too less from economics but more from psychology and sociology people showing that just the level of cognitive bandwidth emotional bandwidth the absence of measures of stress those are all much higher if there are two parents in the household you know we can't get this far in the conversation without acknowledging the fact that there are some couples that are toxic and of course when there's violence or abuse nobody benefits from the preservation or the formation of that kind of relationship so i want to be exceptionally clear that i am not talking about those situations.

[Joel]

All right we got so much more to talk about with you melissa including inequality it's a hot topic these days but how's that impacting our society and how's that going to impact our personal finances we'll talk about that right after this my how time flies twenty twenty five it's going to be gone before we know it but before it's gone there's a lot of life to live right including a lot of kid activities the holiday get togethers and a whole lot more all this activity though it can cause us to put off tasks on our to do list but juggling a million plans shouldn't mean your future doesn't make your to do list trust and will turns estate planning from a when i have time task into a quick straightforward process ensuring you're protecting your family's future today go to trustandwill dot com howtomoney to get twenty percent off their simple secure and expert backed estate planning services that's right it makes me.

[Matt]

Think you mentioned kids joel i might be done having kids at this point but my friends my neighbors they aren't i've got family members who have a a fresh baby at home as well and it is such an amazing season of life but those changes should also bring about a reassessment of whether or not you've got your estate planning ducks all in a row trust and will makes it simple and straightforward their easy to use website is simple to navigate and plus all your information all your documents they are securely stored with bank.

[Joel]

Level encryption add some peace of mind to your future with trust and will go to trustandwill dot com howtomoney for twenty percent off that's twenty percent off at trustandwill dot com howtomoney you probably.

[Matt]

Think it's too soon to join aarp right well let's take a minute to talk about it where do you see yourself in fifteen years more specifically your career your health your social life what are you doing now to help you to get there well there are tons of ways for you to start preparing today for your future with aarp what.

[Joel]

About that dream job you've dreamt about sign up for aarp reskilling courses to help make it a reality how about that active lifestyle you've only spoken about from the couch aarp has health tips and wellness tools to keep you moving for years to come but none of these experiences are without making friends along the way connect with your community through aarp volunteer events so it's safe to.

[Matt]

Say it's never too soon to join aarp they're here to help your money your health and happiness live as long as you do that's why the younger you are the more you need aarp learn more at aarp dot org wisefriend hey y' all it's joel and matt from how to money joel you were just out in seattle recently weren't you.

[Joel]

Yeah man it was amazing i went for one of the most glorious runs of my life along the waterfront it had everything you could ask for crisp air mountain views fairies gliding across the.

[Matt]

Water beautiful i love it man yeah.

[Joel]

For us our road trip through charlottesville.

[Matt]

Was a highlight we actually splurged on a custom built airbnb and it was well worth it the house had these unique touches like a poured concrete counter there in the kitchen with a built in drying rack super functional it even inspired some ideas for our house plus.

[Joel]

With a kitchen like that you save money eating out yes exactly that's what.

[Matt]

Struck me what seems normal to a homeowner it can be the thing that makes a guest trip really special which.

[Joel]

Is why hosting makes sense right travelers are looking for those authentic memorable spaces and if you don't have time to manage all that well airbnb's co host feature makes it easy a local co host can help with everything from creating the listing to keeping your place running.

[Matt]

Smooth yeah so while you are off making your travel memories your home could be helping someone else make theirs find a co host at airbnb dot com.

[Joel]

Host all right we're back from the break still talking about demographics and your money with melissa carney melissa inequality is an issue that gets a ton of press these days i feel like it gets talked about all the time and rightly so in so many ways how are maybe like these family trends impacting a rise in inequality i mean it's.

[Melissa Carney]

Very very mechanical and obvious once once you see it so let me put it this way over the past forty years two things have happened to people with college degrees their earnings have gone up right beautifully we know this earnings have gone up about sixty percent for workers with a college degree and you have college educated workers marrying each other and raising kids in a household together so their household earnings have gone up by like sixty percent and they're really high right because you have two high earners pooling resources pouring them into kids and then outside the college educated class if you just look at people with high school degrees depending on how you want to measure things their earnings have sort of stagnated or increased by a little bit but they're much more likely now to only have one adult in the household i mean to be specific they're twenty three percentage points more likely to only have one adult in the household so if you take basically stagnant or just small increases in earnings and you combine that with an increase in the likelihood that you only have one adult rather than two in the household now you just made the economic insecurity of the middle class that much worse because even if your earnings held constant you just lost the second person as compared to thirty years ago when there would have been two of you the.

[Joel]

Economies of scale got worse you just.

[Melissa Carney]

Lost like fifty sixty seventy thousand dollars because you're the only person there and so yeah so i don't know why that doesn't get more attention when we talk about sort of the economic insecurity of people without college degrees a lot of that is just reflective of the fact that now they're trying to make ends meet without the benefit of a second adult bringing resources into the household and so it's very mechanical people often will talk about assortative mating meaning people marry people like themselves in an economic sense so college educated workers are likely college educated adults are likely to marry other college educated adults people without college degrees are likely to marry other people without college degrees there's a lot of reasons for that in part because of the circles people run in but what people have shown is it's almost less about the like marrying each other that has contributed to widening inequality and more about the highly educated marrying each other and the less highly educated not even getting married anymore talk to me just.

[Joel]

About inequality from an overall standpoint because when it's written about oftentimes it's made out to be a terrible thing right any inequality is bad equality in and of itself is a good thing but zero inequality doesn't seem like a great goal either like what leads to inequality how much is okay and how much is actually maybe a good thing from an economic perspective okay that is a.

[Melissa Carney]

Very big question okay the short answer unless we're going to have a society where people can't keep the result of their efforts and earnings you're going to have some inequality and so this is the age old debate of marxism versus capitalism okay so let's set a fund at a very basic level say that you need to have some inequality to incentivize people to put in the effort to work and to earn a lot now do we have to have so much inequality as we have in the us to incentivize people to work probably not but i am an economist through and through and you know as a labor economist when i look at the data and look at all of the studies that have been done on this it's pretty clear that when you have higher tax rates at the top and more income transfers at the bottom there is a productivity loss people will work less on both sides now the normative question or value question or political question becomes how much productivity gain are we willing to give up to contribute to a more equal society so you're absolutely right zero inequality should not be our goal just like frankly zero pollution should not be our goal right you take some of the negative consequences so that there's some production in the economy i am more concerned with bringing up the lower part of the distribution than i am with taking away income or wealth from the very top not everybody shares that view obviously some people some prominent people just find it morally repugnant that some you know a few individuals have such a high concentration of wealth when there are other people who are living in poverty again i'm just more concerned with making sure that we take care of and we do a better job in society of meeting the material needs of everybody than necessarily offended by high levels of concentration at the top yeah.

[Joel]

So i initially reached out to you because i had a listener email me his name is john he was like i would love for you to dig deeper into demographic impacts on personal finances and he's basically saying well how how should people be reacting given the fact that birth rates are declining and the economic consequences that that's going to create and we can already see like what's happening in a place like south korea or japan and you can kind of like predict the some of our own future and what we're going to encounter so what are you seeing there and how are we going to be impacted as individual economic units which obviously we're human beings but we're also individual economic units like how are we going to be impacted by some of those trends.

[Melissa Carney]

Great let's let's talk about declining birth rates but just for the listeners i want to be very explicit in our segue here to note that what we were talking about before in terms of the decline in marriage and the reduction in the share of kids living in two parent households the share of kids living outside married parent households has happened despite the fact that birth rates have been falling a lot okay and the reason i wanna make that segue explicit is because twenty years ago we were really worried about the high number of teenage births in this country and teenage births are almost always outside marriage what's been shocking from the perspective of family structure is that teenage births have plummeted which is a good thing and yet there hasn't been a decrease in the share of kids living with their moms only because that previous trend we were talking about is really reflective of the fact that the decline in marriage and the sort of rise in single mother households that sort of spread across the distribution away from just the very disadvantaged groups okay so then when we look at the birth rate it is true that birth rates in the us and around the world in particular in high and middle income countries have been falling quite steeply in recent decades in a way that a handful of demographers were noticing but really i think sort of just was not was really not widely noticed until now in many places like south korea they're almost at like an existential point of population decline more strollers.

[Joel]

Being sold for dogs than for kids for them for babies that's right so.

[Melissa Carney]

In the us where are we well in the us our total fertility rate and let me define that but right now our total fertility rate is one point six this is the lowest it's ever been in the us the reason why this low level is gaining attention is because this is substantially substantially below the fertility rate we would need for our population to naturally reproduce itself meaning without immigration okay so the total fertility rate you can think of it as an approximation of the number of children a woman in a particular country will have over her lifetime based on current age profile of childbearing okay so it's not a perfect prediction of what's going to happen but we are on track for women on average to have one point six children you need people to have about two point one children in order for the population to naturally reproduce so that's why this is so concerning is because it really portends a decline in population growth and ultimately a shrinking.

[Joel]

Population which is the opposite problem of what a lot of people were predicting fifty years ago we were talking about overpopulation and now we're talking about not having enough kids right to make our economy as vibrant as it's been the.

[Melissa Carney]

Lasting intellectual legacy or narrative legacy of the population bomb warning of ehrlich in the late nineteen sixties is really phenomenal i mean i grew up too learning about the population bomb and there's too many people you know i think ex post it's accurate to say that was never an accurate prediction because what ehrlich missed in those predictions is what malthus missed you know back in the eighteenth century which is that people innovate people are really amazing people come up with great ideas and they make advances in agricultural and technology in medicine so that we have you know growing population actually has always been associated with an improvement in living standards and you know life expectancy has increased we've managed to come up with ways to fight disease we've managed to come up with ways to organize our societies democratically so more people benefit so the predictions that having too many people was going to lead to widespread suffering i think was never accurate but what it did do was sort of leave this very lasting view that too many people is bad and a decline in the birth rate would be good and in fact now we're faced with a decline in the birth rate and the way population grows and shrinks is exponential and so we are on track for global population to decline declining population for both the country and for the world actually portends a lot of economic social challenges okay talking about those.

[Joel]

I'M thinking of individuals i'm an investor right and i'm investing in the s and p five hundred or total stock market fund because man that's done really well in the united states over the past one hundred plus years investing in a diversified manner like that how does declining birth rates impact my investing strategy how is it going to impact social security and my ability to get what's been promised to me by the government there are all sorts of ways that an individual could say they could extrapolate a declining birth rate and say this doesn't look good for my future no.

[Melissa Carney]

It doesn't let me preface this with the necessary caveat i am not giving financial advice yes okay but here's let's start with the almost the most narrow and let me let me focus on declining us fertility as opposed to global for a moment so declining global immediately what you're going to see is impacts on sectors that are child centric right so if i were to give financial advice i would probably say don't invest in pampers or maybe adult depends right but like we literally are we have fewer babies and where are we seeing this we're seeing this in school enrollment declining college enrollment is about to decline because in the us births started falling and they've continued to decline since two thousand seven and so now how old you know we've had just we have fewer kids so industries focused on kids goods those are shrinking and we see this in the education sector the sectors that are growing are often those associated with an aging population the share of our population over age sixty five has grown from eleven percent in nineteen eighty to about eighteen percent now right so you've got this inverted population pyramid where the aging you know we have more and more elderly and fewer and fewer children okay so that just affects certain sectors and industries and by the way certain parts of the country differently so in places with low birth rates think california think new england their local economies are affected in ways that we're just going to see shrinking tax bases et cetera okay and then there's other parts of the country where fertility has not declined by as much those are going to be more dynamic communities so there's regional differences here too and that's going.

[Joel]

To impact even stuff like housing right i'm thinking about oh totally in japan there are places where i think you can get a house now for a song because the communities have been decimated that's right and is that is that going to be the case here too as like real estate investors you've got to pay much closer attention to what's happening in regards to these sorts of trends for when you're thinking about buying a property that you're going to own.

[Melissa Carney]

For a long time yeah i think that's i think that's right and we certainly see that in you know the population decline is quite uneven across counties in the country okay then let's think about the fiscal implications of this you mentioned social security this is a really huge deal i know people have been sort of trying to raise the alarm on the fiscal unsustainability of social security for a long time but it is upon us and it is worse than the official projections suggest because the the official projections of the social security administration they actually for years they were just assuming that women were going to go back to having on average two kids per person and when you read the footnotes of that report as to like where are they getting that from they basically said because us women just have historically had historically meaning in the past twenty years have historically had that many kids and so we just sort of assume they'll go back to it and.

[Joel]

The reason the reason that's important right is because then those kids grow up get jobs and they're paying into the social security system as their parents get older and need to take social security you have more workers putting into the system to kind of keep it afloat.

[Melissa Carney]

In the nineteen sixties when social security started we had more than four workers per beneficiary that then fell to about three and now we're looking at we're coming up on two workers per recipient so the way as you said the way social security works is current even though people think of it as i contributed to the system and then it pays me out really the way it works is current workers are taxed and that gives the revenue that pays out current benefits and so as you have fewer people contributing and more people taking it the scheme just financially doesn't work anymore what happens when social security does not have enough money to pay out all the benefits is not entirely clear some reading of the statute suggests that it's just going to imply a twenty four percent cut in everyone's benefits so how policymakers eventually respond to this crisis will determine what happens to the system but we see this in europe for example because in europe birth rates fell below replacement level a couple decades before they did in the us we're actually sort of lagging europe in terms of these demographic challenges and you see that europe is struggling with their social insurance systems trying to figure out how to raise money that also heightens the conflict around immigration because bringing in prime age workers now is an immediate way to shore up your workforce and your contributions to these systems but if with the population aging with native births falling and with political backlash to immigration countries like ours and those in europe you know have a real tough time dealing with.

[Joel]

These issues it does seem like a country like ours is has a particular ability unlike most other nations to allow certain types of immigration to to actually counteract some of these negative birth rate trends but it's something we're not taking advantage of in fact we're going the opposite path but we could tell me if i'm wrong in an economic sense kind of make some hay on the immigration front in order to counterbalance some of the decline in birth rates yeah.

[Melissa Carney]

One hundred percent i mean that is in some sense the easiest way to deal with this challenge in the immediate future i do want to note though immigration is only a partial solution because birth rates are falling essentially everywhere the fertility rate in mexico is actually now lower than in the us which surprises a lot of people so even a lot of these sending countries are experiencing decline in birth rates that just means going forward there's likely to be a smaller supply of potential immigrants than there is right now but that's a difference between the long term and now the other thing okay so we talked about like immediate challenges to certain sectors or communities from declining birth rates we talked about the fiscal challenges a shrinking population and an aging population poses demographic headwinds and we've seen this in south korea too now here i want to acknowledge destination demographics doesn't have to be destiny and we could take efforts to counteract these trends but let me just articulate what the headwinds are we have evidence again from really nice academic studies showing that older firms tend to be less innovative older workforces tend to be less dynamic what does that mean it means you could think of it as people create ideas and so the more people is how we get more good ideas that are non rival so like you just needed one person to come up with a vaccine and millions of people don't get sick right you just need one person to come up with some fabulous managerial breakthrough and all firms can be more productive but beyond that the evidence suggests that younger workers tend to be more dynamic they start more businesses and so as you're we're facing not just a shrinking workforce but also an aging workforce and that potentially means less innovation which is not good for living standards so this is the opposite of the prediction that more people is bad for living standards this is fewer people and fewer young people in particular threatens living standards or it threatens to have slower rates of innovation now that doesn't have to be the case we could invest in making sure that every person has higher human capital like we can make a lot of educational investments we can invest in technology we can figure out how to leverage ai but we should be clear eyed about the fact that the demographic trends we're experiencing do pose headwinds and we should take them.

[Joel]

Head on okay got a few more questions i want to get to with you melissa and specifically i want to talk about you have three kids well how are you these trends how's that impacting the advice you give them we'll talk about that and more right after this.

[Matt]

You probably think it's too soon to join aarp right well let's take a minute to talk about it where do you see yourself in fifteen years more specifically your career your health your social life what are you doing now to help you to get there well there are tons of ways for you to start preparing today for your future.

[Joel]

With aarp what about that dream job you've dreamt about sign up for aarp reskilling courses to help make it a reality how about that active lifestyle you've only spoken about from the couch aarp has health tips and wellness tools to keep you moving for years to come but none of these experiences are without making friends along the way connect with your community through aarp volunteer events so.

[Matt]

It'S safe to say it's never too soon to join aarp they're here to help your money your health and happiness live as long as you do that's why the younger you are the more you need aarp learn more at aarp dot org wisefriend hey y' all it's joel and matt from how to money joel you were just out in seattle.

[Joel]

Recently weren't you yeah man it was amazing i went for one of the most glorious runs of my life along the waterfront it had everything you could ask for crisp air mountain views fairies gliding across the water beautiful i love.

[Matt]

It man yeah for us our road.

[Joel]

Trip through charlottesville was a highlight we.

[Matt]

Actually splurged on a custom built airbnb and it was well worth it the house had these unique touches like a poured concrete counter there in the kitchen with a built in drying rack super functional it even inspired some ideas for.

[Joel]

Our house o plus with a kitchen like that you save money eating out.

[Matt]

Yes exactly that's what struck me what seems normal to a homeowner it can be the thing that makes a guest.

[Joel]

Trip really special which is why hosting makes sense right travelers are looking for those authentic memorable spaces and if you don't have time to manage all that well airbnb's co host feature makes it easy a local co host can help with everything from creating the listing to keeping your place running smooth yeah so.

[Matt]

While you are off making your travel memories your home could be helping someone else make theirs find a co host at airbnb dot com host.

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[Joel]

Okay we're back still talking about demographics in your dollars with professor melissa carney melissa i don't want to know what's in your portfolio i don't want to know exactly how you're investing but you have kids too you see these trends coming and you have an idea especially when you look to other countries that are already experiencing some of these things of what maybe some of the outcomes could look like how are you talking to your kids about the coming economic reality of some of these trends and maybe how they.

[Melissa Carney]

Should react to them i have two in college and one in high school so i think the thing that's most immediately on my mind to be honest is they're facing very uncertain job markets in the sense of we don't know what jobs are going to look like in ten years and so that's a different investment strategy that's what kind of skills do they invest in being mindful of the uncertainties of where the labor market is going but we certainly try to teach them the value of saving and compound interest and all that i don't think they should at all be sanguine about social security being around for them that's for sure so i think that would be silly to think okay you're just gonna work and you'll the government will be there to take care of you in your old age i mean this is another thing it's not even just the finances of social security with so many adults not having children and so many adults not getting married there is a very immediate question of who is going to take care of the elderly in this country and this we see in japan too i mean robots right apparently i guess i mean this is like one of those how do you say the word the raw shao test or whatever some people are like robots will take care of them and that makes them feel better that to me is like a terrifying dystopian.

[Joel]

Image it doesn't sound good to me but it does appear where we're headed you know yeah yeah okay if strengthening families kind of going back to the earliest parts of our conversation if that's crucial to general well being and economic progress how should individuals who are listening to this respond should people be like wasn't planning on getting married but now that i heard melissa talk about how important it is to our overall economic prosperity i'm gonna jump on i don't even know what website people use to meet people anymore or do they just go to the local bar and find somebody yeah what would you tell somebody who's listening like what can i do to participate in what's good for myself.

[Melissa Carney]

And for our society yes this i do get this question a lot especially from you know college age kids who i spend a lot of my time with it always makes me uncomfortable as an economist but i will i will take the bait with the caveat that now my answer in part reflects my own values i think we have become too agnostic about the way we talk about marriage in the sense of especially when there's kids involved and so you know again there are some couples that should not be together and it would be bad for everybody to the extent that there are couples who were sort of indifferent about being together i think it would be for everybody's benefit to just be a little bit more clear eyed about the benefits the documented benefits of marriage for both adult and child well being and just have that informed people's decisions about you know one of the most important decisions they will make for themselves and their and their kids there's also some really interesting evidence suggesting that when there are cool off periods for divorce you know this is an area that needs more studying but when there's cool off periods a bunch of people actually wind up not getting divorced and so that suggests too that like maybe being i don't know slower about that process could ultimately lead to greater both adult and child wellbeing related more to the fertility question i mentioned the reasons why i worry about a declining birth rate from an economic position one of the things i actually worry about if you look in the data many more people say they would like to have children people are still inclined to say a two child family is the ideal than are actually realizing those levels of childbearing so for you know fifty percent of thirty year old women in the us are now childless but if you look at surveys it's nothing like fifty percent of thirty year old women say they want to ultimately be childless that makes me more worried that we've created a society or a set of expectations where people are putting off or foregoing having children who ultimately will wish that they did have kids and i think that's something that we need to again be cognizant of and be attuned.

[Joel]

To yeah okay last question for you given the college degree gap that we've discussed too is part of the problem getting more young people to pursue a college degree because that's something else that's become fairly or far less affordable and we still see the income gap overall right over the many decades people that graduate with a college degree and then people that don't but there's because of the soaring cost of college and it does seem like more people are especially gen zers are saying yeah i don't know if that's the right move for me i don't want to graduate with one hundred fifty thousand dollars in debt and not have the job that's going to earn me that greater lifetime income at the end of the day so is i don't know it's a complicated question but to getting more college degrees is that an answer to this problem or at least part of the answer.

[Melissa Carney]

A college degree is still in general worth it right we just know that a college degree confers so many advantages in the labor market and leads to higher earnings a lot we i mean we have a very high share of high school graduates are going to college it's less about accessing college or starting college a lot of students don't finish college and those are the ones you really worry about because they like take on some debt and then don't even get the benefits of the degree but i also will say that you know as someone in the higher education sector i think the reckoning that's been brought upon the higher education sector is a good thing and given the costs universities and colleges need to make sure that they are delivering a valuable product and so while on average a college degree is still a very good investment not all colleges and not all degrees yield the same benefits and so there's room for improvement on the sector side too to convince the public that a degree is valuable but also to make sure that every college and degree that is charging students or charging the government on behalf of students is actually delivering a high quality education and degree melissa carney.

[Joel]

This has been an excellent conversation thank you so much for joining me where can how do money listeners find out more about you what you're up to and your wildly successful book oh thank.

[Melissa Carney]

You i guess the easiest place is my website melissacarney dot com youm can also find me on the economics department page at the university of notre dame.

[Joel]

Awesome thank you again thanks for having me all right that was such a fun conversation and a unique conversation here on how to money definitely a departure from the meat and potatoes personal finance content we so often talk about but when listener john sent me that email basically saying hey why don't you talk about demographics and how it's going to impact our personal finances i was like you know what he's got a point and i remember remembered melissa's book coming out a couple of years ago and i was like i don't know that that makes sense for a conversation on this show in particular and then the more i thought about john's email i was like actually she's probably the perfect person to talk to and i think she was i think this was this was a really enlightening conversation for me just to kind of cement home some of the trends that are happening around the world and specifically here in the united states and ways that we should be reacting to those trends so like does this mean you should stop investing because the economy is going to implode because the birth rate is declining no i don't think so i don't think that's what she was saying and i don't think that's where things are heading but even something like i don't know maybe my big takeaway is something like social security factoring it into your plans less than you previously were and we've talked about with other guests on the show the political will to keep social security as is and how the voting public is particularly skews older and those older people are going to vote for people to keep their social security around but at the same time you can't you have to find the money somewhere and if there aren't enough young people paying into the system what's going to happen to that system that's a good question and i don't think any of us is going to experience like zero social security payout because again i do think it's politically popular but i will think i can't imagine there not being adjustments to the system at some point moving forward and i think this is just a it's also just some fascinating stuff that melissa covered in depth in her book if you're into statistics and you're into kind of the economic realities of life and family and childbearing and rearing and even just touching on the economic realities of marriage was to me super fun because it's stuff that often doesn't get discussed so thank you as always for joining me in my endeavors and humoring me when we pivot a little bit and go in a different direction and we'll put links to melissa's work she's doing a lot of great work when it comes to the economic realities of strengthening families right now at the university of notre dame we'll put links to that and to her book up on our website at how to money but until next time best friend out.

[Melissa Carney]

Sami gente it's ana ortiz and.

[Joel]

I'M markin delicato you might know us.

[Melissa Carney]

As hilda and justin from ugly betty welcome to our new podcast be my betty yay we're rewatching the series from start to finish and getting into all the fashions the drama and the behind the scenes moments that you've never heard.

[Joel]

Before but you were still bartending i.

[Melissa Carney]

Didn'T know that the carpack is like is that you and i turn around.

[Joel]

And it's a commercial for betty and i was like i gotta go i.

[Melissa Carney]

Quit listen to viva betty on the iheartradio app apple podcasts or wherever you get your podcasts this is an iheart podcast.