Socio(b)log

By: Chiara Ludovica Comolli Recessions and economic crises are well known to make people postpone life-changing decisions, such as having children. In a new study in Demographic Research, I conclude that couples postpone childbearing not only because they are insecure about their future job or income stability but, on top of that, also because they are uncertain about the financial solidity of their country. In order to grasp why fertility drops during periods of exceptionally high economic insecurity, we need to take these more diffuse feelings of uncertainty into consideration.

The recent recession has been the longest and strongest downturn that western economies have faced since the Great Depression of the 1930s. Scientific research confirms conventional wisdom and shows that the Great Recession had a paralyzing effect on childbearing in most western economies. After a period of positive trends, these countries saw their fertility rates plummeting after 2008.

Periods of economic depression in developed societies are characterized by downturns in fertility, followed by more prosperous periods when fertility is recuperated. The impact of economic depressions on fertility rates is though normally rather small and of short duration because economic factors are relatively short-term shocks compared to secular demographic trends. However, most 20^th century recessions occurred in a context of long-term fertility decline that was only accelerated by economic hardship, while the Great Recession hit western countries during decades of stagnant fertility at exceptionally low historical levels. This means that even though the short-term consequences of the Great Recession for births might seem only mild and temporary, the long-term negative effects on fertility rates might be substantial and persistent.

. Most existing studies in the aftermath of the Great Recession address separately the nexus between productivity, economic growth or stagnation, and fertility, or labor market trends and fertility, or measures of economic confidence and fertility. This study offers a more comprehensive investigation of the fertility response to a combination of these different aspects of an economic downturn: structural conditions and economic insecurity, a rich set of labor market indicators – total, youth and female unemployment – and various indexes of financial and economic uncertainty: sovereign debt risk, economic policy uncertainty (Baker et al. 2012) and consumers’ confidence.

The study shows that economic and financial uncertainty impacts on the persistence in the decline of birth rates, over and above the deterioration of labor market conditions. Even when unemployment rates return to pre-crisis levels, diffuse feelings of uncertainty about the near future still inhibit couples from procreating. Couples postpone childbearing because they are insecure about their future job or income stability but also, in case of Southern European countries, because they are uncertain about the country’s financial solidity.

Figure 1 illustrates the decline of fertility rates, in different age groups, in response to a one-percentage point increase in unemployment rates in 32 western countries and in the cost of public debt (long-term government bond yields) in Southern European countries. The figure shows that during the crisis, birth rates reacted similarly negatively to both the increase in unemployment rates and to the rise in public financial risk. The sovereign debt crisis in Southern European countries has questioned the credibility of government and the stability of states. Households perceived that risk as relevant as the skyrocketing unemployment rates, and reacted to that postponing childbearing as much as they do when labor market conditions get tight. This drop in fertility rates is especially sizeable among young women in their late teens and early twenties who can afford the postponement of parenthood. For instance, a one percent increase in government bonds interest rates reduces fertility rates among 20-24 years old women of 0.2%. Women around 40 are less willing to renounce to motherhood, even in response to the crisis. A one percent increase in unemployment rate reduces fertility rates among 40-44 years old women of around 0.075%. Finally, it is interesting to notice that female unemployment has an even stronger negative impact on fertility rates at all ages (not shown).

My findings suggest that if we limit research to the usual macroeconomic indicators, we miss a non-negligible part of the negative effects that the crisis had on childbearing. Labor market security and women’s labor force participation are key determinants of fertility, especially during recessions, and policies such as paid (and shared) parental leave and childcare services certainly mitigated the effects of the Great Recession in Northern European countries where they are more efficiently applied. The strongest consequences of the crisis, in fact, were registered in the US and in Southern European countries where, first, financial and economic uncertainty was not only linked to job losses but to a broader sense of insecurity but second, family policies and incentives to female labor force participation are extremely insufficient.

Figure 1: The fertility response to a one percent increase in unemployment rate and government bond interest rate during the Great Recession, by different age groups.

Source: elaboration by the author based on data from the US and 31 European countries. Southern European countries only for Government Debt. Data sources: Eurostat, ECB, Bank of England, OECD and FED Data, US National Vital Statistics and US Treasury. Coefficients and 95% confidence intervals. Log-log models.

Note: This blog post is based on the recently published article by Chiara Ludovica Comolli ”The fertility response to the Great Recession in Europe and the United States: Structural economic conditions and perceived economic uncertainty”, Demographic Research, volume 36, pp 1549-1600.