After WWII, America became the face of prosperity and glamour in the world. Its fast-growing economy and expanding power filled the people, especially the returning soldiers, with optimism about the American economy.

What followed is known as “the baby boom”- the years between 1946-1964 during which the American population grew by 78.3 million, as fertility rates all across America were at an all-time high.

But before we understand how did the baby boom affect the US economy, it’s important to understand what factors led to this abundance of babies.

The Years Preceding ‘Baby Boom’ – A Nation on the Path to Recovery After World War II

The Servicemen’s Readjustment Act or The GI Bill passed in 1944 can be seen as a welcome back gift for American veterans returning back home. It guaranteed economic security to the soldiers who had fought for the American dream in a foreign land.

The benefits they were offered eventually led to increased wages, growing consumer comfort, and general well-being.

These benefits included:

  • Healthcare
  • College stipend
  • Inexpensive loans and mortgages
  • Unemployment compensation

All this was done in order to avoid a period of depression and economic turmoil similar to the one that followed WWI when millions of soldiers returned home to find themselves in financial crisis due to lack of employment and monetary compensations for their efforts.

Around 10 million veterans took advantage of the benefits offered by the GI bill. That’s essentially what eventually resulted in a baby boom leading to the eventual economic boom as well.

People were now more confident than ever that there was a promising future for their offspring in America.

But other than being the result of post-war economic prosperity, the baby boom also led to further economic growth. However, this economic boom eventually turned into a bust.

The Economic Boom – Getting Closer to the American Dream

The image of a happy family, with healthy children and a beautiful house, was something that was finally achievable by the average American.

In the years that followed WWII, consumerism grew. Veterans went on to buy homes and financing their business, leading to a growth in the suburbs of America to accommodate the rise in families.

These suburban homes were equipped with modern items such as refrigerators, dishwashers, washing machines, televisions, vacuum cleaners, sometimes an air conditioner, and a fancy branded car on the front porch. People were starting to tap into the market for luxury items.

So, how did the baby boom affect the US economy? More babies meant more food, more clothes, more schools, and more consumers overall. The US economy grew at a rate of 3.5% as consumption of goods (including toys for the many many babies) and services grew.

Companies began to expand, new products were innovated to keep up with the growing population growth and as a result, family wages also increased.

Education became more important as more baby boomers enrolled in colleges and specialized in fields such as science, engineering, and medicine. As a result, Americans were able to make several advancements in various fields. As a ripple effect, this generated even more income and prosperity, making America truly the greatest place to be.

Baby Boomers Now – A Shortage in Retirement Fund

In 2020, there are around 71.6 million boomers aged 55 to 73. They are nearing or have already crossed the retirement age. A generation that saw a period of immense growth and financial security must now prepare itself to sustain its lifestyle post-retirement.

The heavy burden of their pension and healthcare could possibly exhaust the American social security.

There are not enough taxpayers to support the current structure in place for pensions and care for this aging population. Hence, it is necessary that they plan their retirement and savings to support themselves in the future and invest in insurances for healthcare as well.

So, although Americans were previously optimistic about the future, there are now growing tensions about what lies ahead for this population of America as they leave the workforce. In fact, they are often recognized as one of the biggest burdens on the American economy today.

FAQs about Era of Baby Boom

As baby boomers age, there is growing concern about the number of people depending on the American youth. This high dependency ratio will have a negative impact on the future economy and cause strains.
More households and more people meant growth in demand. Although America faced high inflation rates, the demands were met with an equal industrial expansion.
People felt optimistic about the American future due to the passing of the GI bill. After WWII, industries expanded and there was widespread consumerism. True capitalism prevailed in the USA.