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Puerto Rico's Population Decline: The baby bust era


1.      Introduction


The decreasing population in Puerto Rico poses significant challenges and has far-reaching economic implications for the island. A declining population can result in a potential decrease in consumer spending and tax revenues, impacting the overall economic output and vitality. Moreover, a population that does not grow often results in an aging demographic, putting pressure on healthcare and pension systems as the proportion of elderly residents increases. Additionally, a smaller population may discourage businesses from investing in the region, as they might anticipate reduced market demand. The cycle of economic challenges created by a declining population can contribute to economic stagnation, making it more difficult for Puerto Rico to recover and grow economically.


The following sections explore further the drivers for demographic change and strategies to stimulate population and economic growth.


2.      Demographic overview


Population Natural Growth

Puerto Rico’s Department of Health statistics estimated that for the natural year 2023, Puerto Rico suffered a population natural growth of negative 15,677 (refer to graph). Population natural growth refers to the change in the size of a population over time due to the interplay of birth and death rates. A positive natural growth rate indicates the population is increasing, while a negative rate suggests a decline, such as in Puerto Rico. The negative population natural growth trend in Puerto Rico started in 2015 and has increased ever since. This phenomenon is estimated to continue in the future years as birth rates continue to decline at an average rate of 1% per year and deaths continue to increase at a 2% rate per year. Even though deaths are increasing at a higher rate than births are declining, the decline in births can be mitigated so that in the future this driver is not as significant in Puerto Rico’s declining population.


In 2023 there were 41% fewer births than in 2015. This birth decrease was due to many factors such as low marriage rates, fertility issues, and high migration of young families. The migration of young families has had a double effect on population growth as it has an immediate effect and a long-term effect as the family grows. This type of migration has become more common in Puerto Rico as young families are looking for more affordable and better living conditions for their new families.


Migration

As per the Bureau of Transportation Statistics (BTS), air passenger travel data demonstrated that the average net migration over the past three years has averaged a negative 10,000 people. Net migration represents the number of emigrants (people leaving) from the number of immigrants (people entering). A positive net migration indicates that more people are moving into Puerto Rico than leaving, leading to population growth. On the other hand, a negative net migration suggests that more people are leaving than arriving, resulting in a decline in the population, which is the case for Puerto Rico.



The profile of people emigrating from Puerto Rico has been increasingly getting younger. Approximately 50% of the people migrating are below 30 years of age and increasing year over year. The large representation of people over 17 years of age is an indicator that the profile of the Puerto Rican emigrants are young families looking for better living conditions such as housing, schools, safety, and a lower cost of living. Even though migration decreased over the 2021-2022 period, the age range between 18 to 29 years of age increased, which explains the decrease in the median emigrant age from 32 to 30. The young profile of Puerto Rico’s emigrant only fuels the unproportioned distribution of elderly people on the island.


Population Forecast

The total population in Puerto Rico has been decreasing for the past two decades. The biggest decrease in population of 4.4% was in 2018 due to the migration after Hurricane Maria. In 2019 the population grew by 0.6% due to people returning, but in the sequential years (2020 to 2022), the population has significantly decreased due to the negative natural growth rate that Puerto Rico suffers each year.


In December 2023 the US Census Bureau revised their 2020 US Census estimates due to duplicate reports in their original survey. According to the 2020 Post-Enumeration Survey (PES), the 2020 Census overcounted the population of Puerto Rico by 5.7%, which was not statistically different from the 4.5% overcount in the 2010 Census. As per the new US Census population estimates[1], the population of Puerto Rico in the year 2023 was 3,281,557, continuing the trend of population decline for the U.S. territory. However, the rate of population decline has slowed, with a loss of 0.4%, or 14,422 people, in 2023 compared to a loss of 1.3%, or 42,580 people, in 2022. Puerto Rico had its first year of positive net migration since the onset of the COVID-19 pandemic, adding 1,255 people via migration in 2023.



For discussion purposes, Puerto Rico’s population is projected for the next five years using the trend from previous years. The population forecast considers the trend of the last three years and applies a moving average which results in a population contraction of 0.8% to 0.9% each year. This future trend is reasonable considering that the linear annual contraction of the population of Puerto Rico from 2010 to 2020 was 1.2% each year. If this projection holds, it means that Puerto Rico’s population will decrease by 136,471 in the next five years, and probably at the same rate in the years thereafter.


It is established that in future years Puerto Rico’s population will decrease, but not all age segments will decrease the same. It is estimated that the age segment between 0-17 will be the most affected with reductions of 3% each year, while the age segment of 56 and over is the only segment estimated to keep growing (refer to the table in the next page). These estimates foresee a future where Puerto Rico’s population gets older every year, which is also a global phenomenon.



The aging population is a global phenomenon, and it is not exclusive to Puerto Rico. Some of the places with high elderly shares today include high-income countries like Japan (30%), Italy (24%), and Finland (23%). The lowest shares are concentrated in the Middle East and Africa. But over time, almost all countries are expected to see their older population segments grow.


As for Puerto Rico, the concentration of population aged 65 and over ranks among the top five in the world for 2022, and it is expected to keep growing over time. Contrary to high-income countries, such as Japan, Finland, and Italy, Puerto Rico’s elderly population (65+) is expected to keep growing to a representation of almost half its population in 2100. This trend variation in high-income countries is primarily due to the measures that are currently being taken by these countries to deviate from this trend. For example, Japan is offering incentives of 1m yen ($7,500) per child to families who move out of greater Tokyo, Italy pays an allowance ranging from 80 to 160 euros per month for first children, and Finland offers a maternity grant that pays parents an allowance for, up to, 160 days of childbearing (payment is based on annual income from Finland). These measures, combined with other economic development strategies are projected to slow the age distribution of the population of these high-income countries. Puerto Rico needs to mimic these strategies to slow down the future distribution of elderly people on the island.


Understanding and preparing for the implications of an aging population is crucial to ensure a sustainable and supportive environment for all age groups. Proactive planning and strategies are essential to help address the challenges associated with demographic aging.


3.      Strategies to stimulate growth


Establishing the problem is the first step toward developing a solution. As solutions are developed is recommended to take a holistic approach as there may be a correlation between population growth and economic growth. Long-term economic planning is an effective strategy that anticipates demographic changes and addresses potential future population stagnation. Below are seven (7) meaningful long-term strategies that should be considered to stimulate population, and, consequently, economic growth.


1. Improve living costs for new families In the United States, there are 17 other states, such as Illinois, Kentucky, and Louisiana, with a lower cost-of-living situation than Puerto Rico. This is problematic for Puerto Rico as it encourages further migration to these states, or similar cost-of-living states, such as Texas, North Carolina, and Florida.



Lowering the cost of living in Puerto Rico is not an easy task as it involves implementing a combination of policies and strategies that address various factors contributing to expenses for individuals and households. Solutions to start the process of lowering costs of living in Puerto Rico would involve improving public transportation, access to healthcare, affordable food programs, energy efficiency programs, support to small businesses, Tax credits to young families, and affordable housing initiatives.


2. Improve living situations for young families – This is a nationwide (across the U.S.) problem and does not apply only to Puerto Rico. Housing trends in Puerto Rico and the U.S. have behaved similarly as a shortage of homes for sale and rent is increasingly out of reach for a growing number of Americans and Puerto Ricans. To mediate this problem, there should be higher efforts to incentivize the production of affordable housing and help young families acquire their first homes. Currently, the Department of Housing in Puerto Rico has several “first home” programs for young families, but the problem is the current supply of affordable housing. Like the trend in the U.S., in 2023 the Home Price to Median Household Income Ratio was 7.6 in Puerto Rico[2]. This is as high as it has ever been, surpassing the “Housing Bubble” ratio of 6.8. A normal Home Price to Housing Income ratio is 4.5. The current (2024) ratio is extremely high, which is particularly attributed to the low housing inventory that exists.  


The long-term strategy should be around building new affordable housing as the inventory is extremely low. Incentives to developers should be provided to construct more affordable housing as this would also aid the population decline problem as people who stay in PR usually own and do not rent. Also, as the metropolitan area is overdeveloped in Puerto Rico, the development of rural areas should be considered and incentivized. The revitalization of low-population municipalities in Puerto Rico should be considered, and similar incentives to the ones provided in Japan should be studied and adjusted to meet Puerto Rico’s demands.


3. Family-friendly Policies Policies that support families, such as additional time for parental leave (both parents), affordable childcare, and tax incentives for having children should be implemented. These incentives can encourage people to have more children on the island. Tax incentives for young families could include subsidies for childcare, utilities, food, and shelter (like the ones already provided to the elderly). Additionally, fertility incentives could help jump-start the creation of young families in Puerto Rico. Incentives like the ones provided in countries such as Japan, Finland, and Italy could help mitigate the decline of the young population in Puerto Rico. Some of the creative incentives that should be considered are one-time payments per child, and providing access to affordable infertility treatments and reproductive technologies that can assist young couples struggling with fertility issues.


4. Immigration Policies - While Puerto Rico doesn’t control its immigration policies, it can create incentives for skilled workers to immigrate to boost population growth. Immigrants often contribute to the workforce and can offset declining birth rates. The foreign-born population in Puerto Rico is extremely low as only 2.7% of people in Puerto Rico are of foreign origin. This rate is the fourth lowest rate in the U.S. where the average is 14%.



Research performed by the National Foundation for American Policy[3] suggests that “Metro areas with a higher share of immigrants have more dynamic economies and experience faster growth in the number of jobs created and new business establishments,”. This research confirms that foreign-born, in the efforts of establishing new families, account for “up to three-quarters of the growth in business establishments in the 248 metro areas examined”. This is significant as allowing new immigrants into the island could create more economic demand and be one of the solutions for economic and population growth.


5. Education and Healthcare - Investing in quality education and healthcare systems can increase the overall well-being of citizens, which may encourage them to have more children. Currently, the Department of Education of Puerto Rico is undergoing many changes and the Public School system in Puerto Rico is below par in comparison with the United States. A long-term strategy would be to evaluate the decreasing demand for schools, consolidate, and provide better and more comprehensive services per public school. A better public school system would incentivize young families to stay on the island.

Another significant variable is accessible healthcare for young families. Currently, a public healthcare system exists (Reforma) in Puerto Rico but it is not as comprehensive as it should be for young families. Implementing better public health initiatives would improve reproductive health, including access to contraceptives and family planning services, and can empower individuals to make informed decisions about family size.


6. Safety, Cultural, and Social Campaigns Addressing social issues such as crime, inequality, and corruption can improve the overall quality of life and make Puerto Rico a more desirable place to live. Currently, Puerto Rico has the highest homicide rate per 100,000 people in the United States. Safety is a major factor that influences migration and the decision to start a family in Puerto Rico. Safety issues should be addressed with the highest priority and technology should be leveraged more to lower homicides on the island. As safety increases migration will decrease on the island and birth rates will increase as the profile of the emigrant are young families giving birth outside of Puerto Rico.


Puerto Rico should launch cultural change public awareness campaigns to promote the benefits of having children, which would challenge the current social norms that discourage childbearing. This cultural switch could help change attitudes towards family planning. To help aid family planning, Puerto Rico should create a long-term plan to create vibrant and inclusive communities with amenities such as parks, schools, and recreational facilities that can make neighborhoods more attractive for families.


7. Marketing and Promotion – Promotion plays a key role in the population growth of the island. Puerto Rico must be promoted as an attractive destination for living, working, and investing. A successful marketing plan can help attract new residents and businesses to the island. Additionally, a long-term marketing plan could help bring back some of the 5.8 million Puerto Rican people who currently live in the United States.


4.      Closing remarks


Between 1950 and 1964 the Baby Boom Era introduced high population growth due to an annual increase in births as high as 3% per year. Currently, this trend is backward, where births are decreasing from 1% to 3% rate each year, thus the introduction of the baby bust era. Given this trend, and as established in this article, measures must be taken to slow down the age distribution in Puerto Rico.


Puerto Rico’s demographic problem is very complex, and there is no right answer to solve this problem. Puerto Rico is going through a perfect storm of variables that fuel low birth rates such as young families migrating, 1 child per family, low fertility, high cost of living, and poor-quality public services (education, safety, utilities, housing) that do not incentivize having a family in Puerto Rico. This problem is common with developed economies and countries such as ours, so solutions are not simple and have to be innovative.


As established previously in this article, the United Nations expects Puerto Rico to be one of the countries with the highest distribution of elderly people in the world with 49% of their population 65 years or older by 2100. This estimate should be enough incentive for the Government and each Puerto Rican to adjust their long-term strategy for economic and future development in Puerto Rico. The main strategy to solve this problem should be to move forward with creative economic solutions and adjust as demands change. Solutions and incentives should not be fixed, as many solutions are in Puerto Rico. Incentives and/or suggested solutions should be measured, revisited, and adjusted accordingly to provide the best outcome for the population and economy of Puerto Rico. We must start working now toward the future we want and take steps to make the corresponding changes so that Puerto Rico can lay the foundation for sustainable growth and prosperity in the years to come.

 

Disclosure

The views in this article are solely the responsibility and the opinions of the authors and HI Project Consultants, LLC. Opinions should not be interpreted as reflecting the views of any other company affiliates. All information used in this article is public, published information referenced in each table and/or graph.

 

About the Authors


Hector Rivera, MBA, PMP, ChE, is an economic advisor with over 20 years of experience in the fields of economy, finance, and federal funds. He has been a part of “Fortune 500” financial firms in New York City, top consulting firms in Puerto Rico, and Leadership roles in Government Agencies in Puerto Rico such as COR3 and FOMB. Currently he is HIPC’s Economist and Director.


John Bozek, MA, CEcD, ChE, is an economic development professional, with over 15 years of experience in the public, private, and non-profit sectors. He has been part of New York State’s chief economic development agency, a top consulting firm in Puerto Rico, and is currently the Director of Research and Strategy in Invest Puerto Rico.

 


[2] Puerto Rico housing data from OCIF 2023, US Census Median Household Income data (Table D-1), US housing and income data from the Federal Reserve Bank of St. Louis: S&P/Case-Shiller US National Home Price Index, and Median Income since 1983.


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