For decades, significant economic growth in the U.S. was spurred in part by the country's growing population. However, the U.S. Census Bureau believes a demographic shift within the next three decades is inevitable and is projecting that, by 2050, the population growth rate will fall to about 0.2% annually compared with 0.6% during the last 10 years (chart 1). In addition, U.S. Census Bureau baseline population projections show multiyear population declines will start by 2085.

Population aging is a global trend that can have credit impacts through multiple channels. As discussed in "Credit Implications Of Global Aging: A Complex Interplay," June 23, 2025, although the related credit dynamics can be complex, we identify five key credit impact drivers associated with aging populations: age cohorts, labor force participation, productivity, migration, and public policies.

S&P Global Ratings believes that for many U.S. public finance issuers, the slowdown in population growth has long-term implications, including changing service delivery needs and a smaller workforce, which together, could lead to slower economic growth.

Chart 1

A Shrinking Working Age Population Could Pressure Incomes And State Budgets

Not only is the U.S. population growing more slowly, it is also aging faster than at any period in the nation's history. S&P Global Ratings believes that nationwide, aging could affect state economic output as the percentage of working age population decreases.

Contributing factors to the aging of the country's population are lower birthrates, longer life expectancy, and evolving immigration trends. According to census bureau projections, the percentage of the total U.S. population aged between 18 and 64 will drop from 60% in 2025 to 55% in 2100, and the total number of individuals in this age cohort will fall by 2.2% (chart 2).

Chart 2

The census bureau also projects that by 2035 the number of people 65 and older will outnumber those under the age of 18 for the first time. As the population ages, people leave the workforce; this steadily expanding group of retirees could place an increasing share of the burden for funding government services and economic growth on younger generations. This shift could create economic, fiscal, and social challenges for governments at the state and local levels. For public utilities, many regions with the most significant population declines also have the oldest infrastructure; thus, the reinvestment costs will be spread across a smaller, and potentially older, customer base.

An older population could mean lower household incomes

Beyond the shrinking workforce, aging demographics will also have repercussions on incomes and consumer habits, affecting tax revenue. Although household incomes increase as people age, median household income drops by approximately 40% between the 45- to 64-year-old and the 65-and-older cohorts. The drop is largely due to individuals leaving the workforce, retiring, and becoming more dependent on investment savings.

Furthermore, among age cohorts median income varies significantly; households with residents older than 65 earn about 50% less than those with residents between 35 and 64 (chart 3). Typically, at retirement age, individuals either leave the workforce entirely or transition from full- to part-time employment. Across the country, peak labor participation occurs during prime working-age adult years (25 to 54) before steadily falling after 55.

Chart 3

Demographic Trends Have A Clear Link to Credit Quality

We believe demographic trends could become relevant to credit quality because they affect key assessments such as revenue generation, costs, and capital planning, which we use to determine ratings assigned to public finance entities. However, the impact on each sector could vary and, in some cases, create opportunities to leverage new services.

Demographic trends influence public policy decisions, revenues, and expenditures, and inform the direction of a public entity's economic and fiscal future.

In our view, the credit impact of demographic for public finance issuers could stem from slowing economic outputs, changing demands, labor force participation, rising costs, and affordability challenges. Due to the interaction among these factors, the potential credit transmission channels may be diverse and often complex, occurring at the macroeconomic, sector, and issuer levels. We believe the credit impacts of aging and slower population growth will filter through these channels to traditional credit components such as revenue, costs, leverage, and funding (see graphic).

Management of demographic trends is a long-term factor affecting credit quality and is an important consideration in our holistic analysis. These trends evolve over long time horizons, and we look at how entities manage, plan, and make decisions in response to projected changes in key demographic variables as an important underpinning of credit quality.

The Impact Of Demography Varies By Region

Although the census bureau projects that the total U.S. population will rise by about 4% by 2050, it expects the growth will be unevenly distributed across the country. Population growth rates vary considerably by income groups and regions (see map).

As people age and, in particular, leave the workforce, they may seek to move away from costly urban areas to locations that serve different needs, such as lower housing costs, warmer weather, or better health care. For example, states with the largest net migrants aged above 55 are generally in the south (Florida, South Carolina, and Texas).

In total, 17 states face projected average annual population decreases through 2055, ranging from Maine's 0.1% to West Virginia's sharp drop of 0.5%. The highest growth states are concentrated in the Mountain and West regions, while the steepest drops are largely in the U.S. Northeast and Midwest. We believe states with population gains will benefit from increases in tax revenue, service demand, and general economic activity, in part due to a larger labor pool.

Regions with an aging population face long-term problems exacerbated by a combination of slow domestic population growth and in-migration that is insufficient for population replacement. Delaware, New Hampshire, and Vermont have the highest projected rise in population aged 65+, suggesting that they and the municipalities in them may face more acute economic pressures than those of the nation as a whole.

The U.S Census Bureau projects that by 2050, 23.4% of the U.S. population will be aged 65+, a significant increase from the current figure of 17%. As with the total population, the nature and magnitude of projected changes vary across the country (chart 4).

Chart 4

States with shrinking populations face one dilemma

Beyond the slowdown of economic output and reduced revenue base for entities with dwindling populations and slower growth, various levels of government face a need to reprioritize current financial resources to meet the needs of changing populations. This could include cutting services and closing underused schools and other facilities, as well as selling assets.

…while states with expanding populations face another

Rising populations present relative opportunities to governments but may come with their own set of difficulties. States and local governments in rapidly expanding regions will likely face pressure from rising debt burdens as they fund capital needs to accommodate swelling populations. They may also need to plan for higher demand on clean water. Furthermore, a strain on operating budgets could lead to officials facing difficult choices to rein in some expenditures so they can ramp up service levels to accommodate new residents.

In each state, population patterns could differ

Although census bureau data provides insight on state-level demographic changes, an entity's location within a state may be more indicative of future growth, or otherwise. Even in high-growth states such as Texas, population is rising the fastest, particularly among young adults, in areas surrounding major urban areas while some more remote areas are seeing population declines uncharacteristic of most of the state (see table). Cities and towns with anchor institutions such as a university or large employer could also see population swings with the expansion or shutdown of these anchors.

Enrollment rates are falling in some regions, but rising in others

Lower birth rates are decreasing the size of both the working-age population and the minor population, and the number of high school graduates is flat to declining. We expect this trend will continue, with a big drop-off or "cliff" in some regions in 2025 and 2026. In a recent article, the Western Interstate Commission for Higher Education projects that the nine states in the U.S. Northeast will see a 17% decrease in high school graduates between 2023 and 2041. Meanwhile, however, it projects states like Texas and Florida will see enrollment growth of 5% and 12%, respectively.

We expect that the large number of higher education options across the country and the significant projected demographic declines will intensify competition for students and underpin persistent pressure on enrollment. Most colleges and universities have been preparing for this shift for some time and have broadened their reach through expanded marketing efforts and targeting degree completion programs. However, those schools with a highly regional draw are already facing material enrollment decreases. K-12 schools are also facing rising competition for a smaller pool of students.

Long-Term Trends Present Opportunities To Change The Impact Of Credit Headwinds

Understandably, demographic trends receive much attention from governments, not-for-profit institutions, and policymakers due to the impact they can have on revenues, demand, and service levels. However, these trends are typically predictable in the long term, giving governments an opportunity to take actions that shape future demographics or cushion potential adverse impacts.

While demographic trends are predictable, their effects introduce uncertainty and we recognize that certain factors could influence how these trends affect the U.S. and public finance entities over time. Future policies, developing trends, health care advancement, and innovations in productivity will continue to interact and shape the effects of demographic trends. Recognizing these factors can help management create more effective strategies to address challenges and opportunities created by these trends.

Innovation and technology advancement.   As technology evolves, it could create opportunities to stall demographic trends by shaping the way population grows, produces, and evolves. For example, continued automation in manufacturing could facilitate more productive work hours and reduce cost of production, leading to more economic output with less resources.

Change in work patterns.   The concept of retirement could evolve to include job participation later in life, increasing the productivity span per worker. More flexible work hours could encourage retirees to pick up part-time work and motivate businesses to adjust their needs to use nontraditional labor pools. Remote work may help to even out disparities in affordability and allow some regions to optimize economic output despite population declines. Governments may also reform pension systems to encourage older people to work longer and limit cost exposures.

Change in migration.   Although demographic trends in the U.S. might dampen worker participation in the future, the effects may be mitigated to the extent that the country is able to stall the trends through international migration. Typically, working age and young families migrate the most, sustaining labor participation rates and education enrollment levels. S&P Global Ratings' economic forecast for the next four years is based on the expectation of immigration returning to pre-2019 levels. Our current base case is for lower immigration than in the past five years, which were record-breaking and propelled economic growth beyond expectation.

The U.S. Census Bureau projects that in a high-immigration scenario, the U.S. population could rise about 28% through 2100, compared with 8% under its baseline scenario (chart 5).

Chart 5

Management And Planning Will Be Critical

For public finance entities, population growth and aging have far-reaching effects on revenue sources, infrastructure, and service levels. The fiscal resilience of these organizations will hinge on the ability to adapt to demographic shifts, making strategic management of the dynamics of population and aging important to long-term credit quality.

Related Research

• Credit Implications Of Global Aging: A Complex Interplay, June 23, 2025
• U.S. Labor Market Snapshot: Holding The Line, But Headwinds To Test Resilience, May 14, 2025
• Three U.S. Public Pension Points To Watch In 2025, Feb. 4, 2025
• U.S. Public Finance 2025 Outlook: Cautiously Stable For Most Sectors While Others Are Pressured, Jan. 29, 2025