Oregon Office of Economic Analysis

Yesterday our office was back in front of the House Committee on Revenue covering two topics (you can watch here if you would like). First, while the prime directive of our office is the General and Lottery Fund revenue forecasts, our office also compiles the Other Funds Revenue Report twice a year. Michael dove into the highlights there of these other major revenue streams for the state. Our office does forecast a few of these Other Fund revenues that do not go into the General Fund, such as the Corporate Activity Tax, marijuana, tobacco, etc but most of these forecasts are done in-house for the various agencies.

Second, Kanhaiya, the state demographer, gave an overview of the population and demographic forecast. At a base level, it’s that population forecast that forms the foundation of every other forecast we do. It really drives underlying views on the amount of potential workers, demand for housing, how much income, and what types of income is being earned and the like. And with the slowdown in population growth during the pandemic, to the extent migration and population growth rebounds modestly as our forecast expects, or not matters considerably when we take a 10 year forecast view.

All of that said, there was one chart, or rather one slide of Kanhaiya’s that really stood out to me. It looks at Oregon’s fertility rate in recent decades, both at the overall level and on an age-specific basis. I’m pulling it out and making it the latest edition of the Graph of the Week.

We’ve talked a lot in recent years about how deaths in Oregon now outnumber births and will continue to do so for decades to come. Pre-pandemic we even did a three part series on these trends. And while the unfortunate increase in deaths during the pandemic is the immediate cause of these demographic shifts, it’s really Oregon’s low birth rate that is driving the long-run trend. In the chart below you can see how Oregon’s fertility rate has both declined, particularly among younger Oregonians, and also shifted outward a bit, where birthrates are now higher among 30- and 40-somethings than a few decades ago.

These trends are nationwide, and even global in nature. Kanhaiya mentioned that in recent years every single state now has a fertility rate below the replacement rate. So it’s more a matter of degree where Oregon’s declines are more pronounced. In the years leading up to the pandemic, Oregon’s total fertility rate was the fifth lowest among all states, and in 2020 it was tied for the second lowest.

Some of the implications here vary. At the individual and household level, these long-running trends are not necessarily worrisome. As a society we should hope to see women making the choices they want to make in their lives! And we know historically as societies get richer and increase educational attainment, the birth rate tends to decline. It’s more of a problem if women and families want to have more children and do not because they do not feel like they can due to finances, or housing, or health insurance, or child care, or whatever other challenges there are.

Even so, it’s more at the macro level where the implications of low fertility rates really come into play. Already we are seeing the demographic impacts in the labor force where we know retirements have increased as the Baby Boomers are now mostly in their 60s and increasingly their 70s, and the younger generations are smaller in places like Oregon where we have been below the replacement rate for decades. For businesses it will be hard to find workers for the foreseeable future given the labor market is structurally tight for demographic reasons. Additionally, we are also seeing K-12 school enrollment declines, which given births have taken another step down even in the preliminary 2022 data, will certainly continue for years and possibly decades to come. Now, these are not necessarily problems per se, but rather certainly will require a rethink on how we approach growth, our expectations for the future, and the need to adjust public policies and the like.