The Trustees make basic assumptions for several of these factors based on analysis of historical trends, historical conditions, and expected future conditions. These factors include fertility, mortality, immigration, marriage, divorce, productivity, inflation, average earnings, unemployment, real interest rate, and disability
incidence and
termination. Other factors depend on these basic assumptions. These other, often interdependent, factors include total population, life expectancy, labor force participation,
gross domestic product, and program-specific factors. Each year the Trustees reexamine these assumptions and methods in light of new information and make appropriate revisions. The Trustees selected the assumptions for this report by the end of January 2015.
Future levels of these factors and their interrelationships are inherently uncertain. To address these uncertainties, this report uses three sets of assumptions, designated as intermediate (alternative II),
low-cost (alternative I), and
high-cost (alternative III). The intermediate set represents the Trustees’ best estimate of the future course of the population and the economy. With regard to the net effect on the actuarial status of the OASDI program, the low-cost set is more optimistic and the high-cost set is more pessimistic. The low-cost and high-cost sets of assumptions reflect significant potential changes in the interrelationships among factors, as well as changes in the values for individual factors.
The following sections briefly discuss the various assumptions and methods required to make the estimates of trust fund financial status, which are the heart of this report.
1 There are, of course, many interrelationships among these factors that are important but are beyond the scope of this discussion.
Table V.A1 displays the principal demographic assumptions relating to fertility, mortality, and net immigration for the three alternatives.
Historically, birth rates in the United States have fluctuated widely. The total fertility rate
2 decreased from 3.31 children per woman at the end of World War I (1918) to 2.15 during the Great Depression (1936). After 1936, the total fertility rate rose to 3.68 in 1957 and then fell to 1.74 by 1976. After 1976, the total fertility rate began to rise again until it reached a level of 2.07 for 1990. From 1991 to 2006, the total fertility rate averaged 2.03 children per woman. Then, the total fertility rate dropped from 2.12 in 2007 to 1.88 in 2012 and, based on preliminary data, to 1.87 in 2013. The recession and high unemployment are likely reasons for this drop. The estimated total fertility rate for 2014 is 1.88.
Historical death rates are calculated for years 1900‑2011 for ages below 65 (and for all ages for years prior to 1968) using data from the National Center for Health Statistics (NCHS).
3 For ages 65 and over, final
Medicare data on deaths and enrollments for years 1968 through 2011 and preliminary data for 2012 are used. Death rates by cause of death are produced for all ages for years 1979‑2011 using data from the NCHS.
The total age-sex-adjusted death rate
4 declined at an average annual rate of 1.06 percent between 1900 and 2011. Between 1979 and 2011, the period for which death rates were analyzed by cause, the total age-sex-adjusted death rate, for all causes combined, declined at an average rate of 0.96 percent per year.
Table V.A1 contains historical and projected age-sex-adjusted death rates for the total population (all ages), for ages under 65, and for ages 65 and over. Age-sex adjustment eliminates the effect of a changing distribution of population by age and sex, allowing the pure effects of changes in death rates to be observed. Under the intermediate assumptions, projected age-sex-adjusted death rates are slightly lower for ages under 65, and slightly higher for ages 65 and over, than the death rates in last year’s report. These changes primarily result from incorporating an additional year of historical data.
Demographers express a wide range of views on the likely rate of future decline in death rates. For example, some believe that the long-standing historical tendency for mortality to decline more slowly at the highest ages will cease in the future. Others believe that biological factors, social factors, and limitations on health care spending may slow future rates of decline in mortality.
5
Legal immigration increased after World War II to around 300,000 persons per year and remained around that level until shortly after 1960. With the Immigration Act of 1965 and other related changes, annual legal immigration increased to about 400,000 and remained fairly stable until 1977. Between 1977 and 1990, legal immigration once again increased, averaging about 565,000
6 per year.
The Immigration Act of 1990, which took effect in fiscal year 1992, restructured the immigration categories and increased significantly the number of immigrants who may legally enter the United States. Legal immigration averaged about 780,0001 persons per year during the period 1992 through 1999. Legal immigration increased to about 895,000 in 2000 and about 1,060,000 in 2001, primarily due to an increase in the number of persons granted legal permanent resident status as immediate relatives of U.S. citizens, the only category of legal immigration that is not numerically limited. However, legal immigration declined to less than 770,000 by 2003 as processing slowed and the number of pending applications increased. From 2003 to 2006, processing accelerated and legal immigration increased until it reached about 1,215,000 for 2006. For 2007 through 2009, legal immigration decreased to about 1,110,000 and declined further to about 1,050,000 for 2010, 1,055,000 for 2011, 1,020,000 for 2012, and 990,000 for 2013. The estimated level of legal immigration for 2014 is 1,000,000.
This report presents a July 1 (i.e., midyear) population for each year, which is derived from surrounding December populations. Table V.A2 shows the historical and projected population for July 1 by broad age group, for the three alternatives. It also shows the aged and total dependency ratios (see table footnotes for definitions).
Life expectancy at a given age reflects death rates at that and all older ages. Period life expectancy is somewhat related to the age-sex-adjusted death rate discussed in section V.
A.
2. However, life expectancy places far greater weight on death rates at lower ages than at higher ages. Therefore, changes in death rates at lower ages have far greater effects in changing life expectancy over time. It is important to keep this concept in mind when considering trends in life expectancy.