The US is at risk of becoming a ‘demographic time bomb’ — and it may have contributed to Toys R Us’ demise

  • Toys R Us will close or sell each of its more than 700 locations in the US.
  • In the company’s most recent annual filing, it cites declining birth rates as a threat to sales.
  • In the US, births have decreased rapidly since 2008.

This week, Toys R Us officially filed liquidation papers. It will shutter or sell each of its 735 stores across the US.

The toy chain’s sales have declined in recent years, largely due to competition from online retailers like Amazon, some $US4.8 billion worth of debt, and a rise in labour costs. All of these factors are laid out in Toys R Us’ most recent annual filing, published in April 2017.

In the filing, the company also mentions another, more unexpected threat to its business: declining birth rates.

“Most of our end-customers are newborns and children and, as a result, our revenues are dependent on the birth rates in countries where we operate,” the filing reads. “In recent years, many countries’ birth rates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results.”

In the US, births started to decline rapidly after the Great Recession (which began in late 2007 and ended in 2009), and have continued to fall since then. Meanwhile, the average life expectancy has stayed relatively high at 78.6 years.

Some economists say the US is at risk of becoming “a demographic time bomb,” which means fertility rates are falling at the same time that longevity is increasing. Japan – where 2017 marked a 118-year low for fertility and people are living longer than ever before – is regarded as the poster child for this phenomenon.

According to the most recent CDC data available, US births hit a record low in 2016, bringing the general fertility rate among women aged 15 to 44 to 62 births per 1,000 women.

Some demographers are wringing their hands about what that means for the nation’s economy. As The Washington Post’s Andrew Van Dam notes, the shift could have far-reaching implications for retail stores that target newborns and young children.

Recent societal trends could explain why more Americans are not having kids. Due to shifting views of gender roles, more women than ever before are entering the workforce and becoming mums later (if at all). In addition, millennials are increasingly choosing to forego parenting in an effort to rise in their careers, tackle their student debt, and gain financial independence from their parents. Since 1990, the US teen pregnancy rate has also been falling, which the Department of Health and Human Services attributes to increased access to contraception and sex education.

Parenthood is now one of many paths women can take – which is good for gender equality but troubling for stores like Toys R Us.