There is an annual 90,000 "baby gap" between the number of children women say they want and the number they have, a study suggests.
Parental leave should be paid for three months, the IPPR suggested
There would be 13% more births each year if women actually had the number of babies they said they wanted in their 20s, the IPPR report suggested.
However, a third of mothers who returned to work faced a "fertility penalty" in the form of low paid jobs.
Better childcare and parental leave was recommended by the think tank.
The Institute of Public Policy Research said women who became mothers at 24 missed out on £564,000 during their lifetime compared with the £165,000 that 28-year-old mothers missed out on.
It called for the government to promote family-friendly employment policies and lessen the pay gap.
Britain is "at a demographic fork in the road and in danger of taking the wrong direction", said IPPR director Nick Pearce.
"Although our population is rising, a fall in fertility would have serious long-term consequences," he said.
"It would make it harder to earn our way in the world and to pay for valued public services.
"Fertility patterns can take up to 40 years to change so politicians need to start taking action now."
- introducing pay for the current unpaid 13 weeks parental leave, including one month for fathers
- free part-time childcare as an entitlement for all children and means tested full-time provision
- increasing paternity leave pay from £106 per week to 90% of average earnings and extending the period of paid leave from two to four weeks.
It warned elderly people would also suffer from choices made by younger generations.
An ageing population means taxes will have to rise to maintain spending on health, pensions and other public services.
The basic rate of income tax would have to rise by 2p within 50 years and 9p by 2074 - if fertility falls, the IPPR claimed.
It said women were having children later in their lives, as fertility at ages 20-24 fell by 55%, while fertility at ages 35-39 went up by 34%.
As each generation of women postpones childbirth by a little more, the gap between generations expands. Over time, fewer generations are born and overall fertility declines.
When I was in my early 20's I always thought 4 children would be nice...I am now 28 with an 8-month-old baby. I have definitely suffered career-wise in that when I told my boss I was pregnant that put a halt on the new contract they were drawing up for me and basically ended my career. I am now a stay-at-home mum and loving it but I do wonder how easily I will get a job when I do return to work. Unlike when I was early 20's, I am now only planning 2 children.
Wendy, High Wycombe, England
I did not delay having my children, was 25 and 27 years old. But on returning to work had to change my career and work up on the career ladder. Now at 55 I am earning the salary that is comfortable but are competing with posts with younger women who have decided to build up their career before having children.
Ursula Siegle, Driffield, East Riding of Yorkshire
Encorage either the father or mother to stay at home and raise the children until at least secondary school age. No more youngsters arriving home to an empty house. In that respect treat both parents as equal human beings.
Derek Clark, Wolverhampton
While the idea of letting parents have more paid leave to spend with young children is good, the burden should not fall on businesses, especially small ones. If it is deemed A Good Thing for the country as a whole then the country as a whole should pay for it through taxes. Otherwise small businesses will be discouraged from employing people from the age group where they are likely to have children in order to avoid the costs.
Dave, Cambridge, UK
We always agreed that we would like 5 kids in our family. My husband has a daughter from a previous marriage and we have a son and daughter as well. We have had to postpone any more kids because financially I cannot take the time away from work, as my husband has a spinal injury and I am the breadwinner. This situation has gone on for 12 years now, although things have improved with maternity rights, I would still have to take a 50% drop in wages to take up maternity pay. I cannot afford to do that. We now have a granddaughter and our eldest says she cannot afford to consider another child either.
Laura, Wigan, UK
This is looking at selected statistics and then creating a hypothesis which seems to fit, without examining the many varied & complex reasons for woman delaying child bearing these days. Also, surely, with more educated, experienced and confident (but, yes, older) parents, we would in time find ourselves in a better position to properly educate the fewer children being born, and to ensure they are equipped to deal with a planet with an aging but hopefully falling population. Because forget tax burden, there are bigger issues than the number of pence in the pound at stake here. We have a world population explosion that needs to be halted if we are even to sustain our life on earth over the next few hundred years.
Caitlin, Farnham, UK
I just find it incredible that people should be suggesting that we what we need right now is more people on this planet.
I have two children and really would like to have another one but the problem that I am already paying too much for the childcare and can't afford anymore.
Also, at work it doesn't seem like people would accept that I should have different working pattern because I have kids. At work, I can't see so many mothers round me which makes me feel lonely.
I worry about women having children later, because the quality of the egg decreases, which means that there is a higher risk of the baby having severe disabilities, a higher risk of miscarriage and a higher risk of infertility. So the women who delay, are putting themselves at risk of not having the family they intended to have at all. I worry for them.