Labor market polarization and the fertility decline

In the years since the Great Recession, social scientists have anticipated that economic recovery in the United States, characterized by gains in employment and median household income, would augur a reversal of declining fertility trends. However, the expected post-recession rebound in fertility rates has yet to materialize. In this study, I propose an economic explanation for why fertility rates have continued to decline regardless of improvements in conventional economic indicators. I argue that ongoing structural changes in U.S. labor markets have prolonged the financial uncertainty that leads women and couples to delay or forgo childbearing. Combining statistical and survey data with restricted-use vital registration records, I examine how cyclical and structural changes in metropolitan-area labor markets were associated with changes in total fertility rates (TFRs) across racial/ethnic groups from the early 1990s to the present day, with a particular focus on the 2006–2014 period. The findings suggest that changes in industry composition—specifically, the loss of manufacturing and other goods-producing businesses—have a larger effect on TFRs than changes in the unemployment rate for all racial/ethnic groups. Because structural changes in labor markets are more likely to be sustained over time—in contrast to unemployment rates, which fluctuate with economic cycles—further reductions in unemployment are unlikely to reverse declining fertility trends.

That is from a new paper by Nathan Seltzer, via the excellent Kevin Lewis.

Comments

Fertility rates are low *because* of improvements in conventional economic indicators. The negative correlation between income and fertility is one of the strongest relationships in demography, both within the United States and in a cross-country comparison. When people are more affluent, they have more options for what they want to do in life and those options tend to crowd out child-bearing.

Yet fertility rates fell during the great recession.

And, most people want to have more children than they end up with. A common reason given is the cost.

I think the cost theory is hard to square with the fact that the richest people (and countries), who can objectively most afford costs, also have the fewest number of kids.

When people say costs are an issue, they mean they can’t afford the living standards they expect to give their kids. However, these expectations are not rooted in real necessity but go up when people are more affluent. In fact, these expectations seem to increase faster than income does. The rich have the highest expectations, so they have the fewest kids. Thus, when societies as a whole become more affluent, fertility falls (which I view as a good thing).

I will square that theory. The "richest people" are not the same people who are having kids. The richest people are actually old people who are incapable of having kids. Second to them are single people. The people having kids are people in their 20s and 30s making real economic tradeoffs for family vs career. These people having families on average end up less rich than those who forgo children. For the same reason that women's earnings take a financial hit to have kids, families take a financial hit to have kids. "The rich" don't have high expectations, they are the people who have chosen to put their career first, either by waiting long enough to limit the number of kids they can have or by not having them at all.

In a macro sense you are right, but your averages are hiding the assumptions about specific choices which are wrong when you get down to the personal level.

And yet, the wealthiest people within the U.S. have the most children

That squares with the overall observation. After a certain point money doesn’t really make much of a difference for standard of living, so the foregone earnings aren’t as big a deal.

I don't think so. According to the CDC study of only women of childbearing age 15-44, there is a strong negative correlation between income and fertility (https://www.cdc.gov/nchs/data/nhsr/nhsr113.pdf). The chart on page 10 shows that the average woman living at 149% of the federal poverty level has 1.8 kids, compared to only 1.0 kids for women living above 300% of the federal poverty level. When you consider that richer people are more likely to be older (and therefore have passed more of their childbearing years), the true gap in fertility due to income is likely even larger. The gap in fertility between high school dropouts and women with bachelor's degree is huge--over 2.5x.

I'm also not sure families take a financial hit to have kids. Women do make less, but studies also show that men make more (as they work harder). According to this, men's incomes increase by 6% for every child they have, more than offsetting the 4% decrease to women's incomes: https://www.nytimes.com/2014/09/07/upshot/a-child-helps-your-career-if-youre-a-man.html

300% of the federal poverty level is what? $45k/yr? You consider someone making $45k "the wealthiest people"? Rather, these are the people most likely to be stuck in the middle, where it makes good sense neither to stay home with children nor to pay someone else to care for them.

At 150% with children you may be receiving substantial benefits from the government not to work?

How many employers pay men (or women) more because they have kids? While there used to be such a thing as a "family wage" that's been gone with the wind for many years now. If men with kids make more money than men without kids. It's far more likely the causation is going the opposite direction: men with an income capable of supporting kids are more likely to have kids.

At any given level of educational attainment The Rich Have More Kids. It appears that sometimes pregnancy crowds out schooling and other times schooling crowds out pregnancy.

Education and income are highly intertwined (rich people have more educational opportunities, and education helps people make more money). I don't think it's appropriate to control for education in this context.

Why? The fact that education and income are connected does not mean that rich people don't have more kids.

Although I agree with a part of that, I think another elephant in the room is 'uncertainty'...which granted is a very relative term. For almost 30 years now in both this country and others (like Japan) job security, rising wages, and speed of the economic cycle have all been inversely correlated. In such a situation, it is increasingly difficult - with the Great Recession still in the relatively short-term in the rear-view - for many people, not just the young, to make effective 5, 10, and 15 year judgements much less 20 or 30 years. From my vantage point I see a greater priority being put on flexibility and mobility, and having families - even 21st century ones - are not flexible and mobile enough, even with resources - to offset other detrimental factors to major changes.

If you think about what the last 2 decades of American life have looked like effectively starting with the dot-com crash and 9/11, Great Recession, 2 wars, and further political divide not seen since the Civil War, I think a term like 'uncertainty' is an understatement.

This is a good point. However, it seems that we’ve had steady (albeit slower) growth since the Recession—it will likely be the longest expansion in US history. Perhaps people are still scarred by the memory of the Recession (although people in prime child-bearing years today would have still been in school then), but we will see fertility start rising again as the Recession fades into memory.

Mobility/flexibility probably does hurt fertility, and disproportionately affects the rich, who have lower fertility. One thing I’ve seen among my upper-middle-class professional friends is that it’s harder to get into relationships when everyone is moving to a new city every few years, and people who do get into relationships often suffer the two-body problem where they can’t both pursue careers in the same city. This adversely affects fertility. I don’t see this as strictly or even primarily economic though, I’d bet most people in this situation wouldn’t give up their careers even if they suddenly got a large inheritance so that they didn’t need to work.

This is not true at all I don't know why conservatives repeat this lie repeatedly with no evidence at all.

Er... women with high paying jobs tend to be somewhat busy doing that, and hence why they have fewer kids...?

Adjust income for correlation with hours in employment and ideally the hours out of employment spent in training and preparation...

Adjust for the known negative and causal effects of childbirth on future female earnings.... (even in Denmark - https://ourworldindata.org/economic-inequality-by-gender#the-motherhood-penalty)

Income and child nurture should be inversely correlated because each poses a limit on time.

But at a given level of hours employed, I'd bet the higher income disposes to more children (albeit with plenty of noise). People don't have children because they can't afford to anything that they'd rather do. To think this is what is the case is rather a misunderstanding of least how most psychologically typical women think (having children *is* most often what they want to do, and that's no less the case for more economically dynamic women than less so).

Sigh alas alack tsk and tut: if only our social scientists and the economists informing them maintained strict skeptical regard concerning augurs . . .

--so much for "data-driven" academics.

Economists since circa Reagan say "cut costs!" "cut costs!" "cut costs!"

Children cost a lot.

"cut costs!" "cut costs!" "cut costs!"

Children are bad for the economy because they cost too much.

"cut costs!" "cut costs!" "cut costs!"

Trump advocates importing adults who European governments have paid all the costs of making them skilled workers so the US does not have the cost burden of turning costly children into skilled workers.

"cut costs!" "cut costs!" "cut costs!"

"The findings suggest that changes in industry composition—specifically, the loss of manufacturing and other goods-producing businesses—have a larger effect on TFRs than changes in the unemployment rate for all racial/ethnic groups." In other words, Trump supporters aren't reproducing. Make America Great Again.

Less work, more time with the kids.

If your theory is so good, then why do the poorest countries have the highest birth rates?

Boom...

Allow me to offer a counter thought.

The Great Recession drove up the value of education - be it formal BS, MS, MD, etc. or licensed trades like electricians and plumbers. On average more people are spending longer in training and education before becoming full adults. The Great Recession made things worse by up-credentially more positions leading to greater competition for the remaining uncredentialed positions.

Secondly, the "U-haul" solution to economic clustering results in increased costs of housing to raise a family, and particularly large families (large families having a fat tail impact on total fertility). Be it everyone in tech heading to a few coastal states, everyone in media decamping to New York, or roughnecks heading to Williston ... you have a lot of people who maybe have good paying jobs chasing a much slower growing housing market. As more economic activity gets clustered into smaller areas, more people will be forced to choose between a (large) family, (more lucrative) careers, or terrible commutes.

Frankly, I have been unimpressed with the with economic growth of the current clustering model. It has required a continuous inflow of human capital and has drastically reduced the production of new human capital. Ignoring, completely, any question about individual preferences; I am amazed that we get such poor return on the hundreds of thousands of dollars in educational and rearing costs that decamp to the metropolitan areas. I mean the best performing counties are only growing about 10% more rapidly than the worst ... and yet they have a steady inward stream of young folks whose parents and neighbors invested massive amounts of money. And for that 10% growth rate ... we have to figure out how to deal with unsustainable demographics.

Is this paper finding that the shift to knowledge work and the constant career investment that it entails has contributed to reduced fertility?

Assembly worker: "Paternity leave is basically a sleepless vacation. When I get back, my job is still there, unchanged."

Knowledge worker: "It's great that paternity leave is paid for, but all of that time spent out of the loop means I'll fall behind and push my next promotion out by two years, at least."

How long do people take paternity leave for? A few weeks? It's highly unlikely anyone is missing out on vital technology changes in that short of a time span. If you're out of the workforce for a couple years, yep, that's a potential problem. But a few week? It takes longer than that to get approval and implement new software at most firms.

Life isn't always perfect. Everyone have to improve themselves so that society won't dessert him.

Australia hasn't had a recession for 27 years. There's maternity leave payments, child payments, and family tax benefits, but we've still got the US beat on not having children with a lower fertility rate. This is because the forces pushing people together and into having children have grown weaker, while those keeping people apart and childless have either remained the same or grown stronger. For example, a news article on Australia's ABC recently casually mentioned that teenage sex is a problem. Not unprotected sex or sex while sky diving -- just teenage sex. When something as vital to reproduction as sex between young people is seen as a problem, it shouldn't be surprise there is a decreasing fertility rate.

Teenagers shouldn't be having kids, for reasons that range from physiological to financial.

It's actually pretty simple. Real per capita PCE coats have doubled in tge last years. Real wages for 70% of employed Americans have stayed the same.

The low population growth rate is entirely due to government policy.

The world is going to end in 12 years.

Adding to humanity is a “sin” in the Gaia religion.

Children are being preached to animals are more important than they are from the time they are in grade school.

Why are people surprised when The Chosen choose not to have have children?

Commitment is old fashioned. If you can’t commit to your partner in marriage, how can you commit to raising healthy, happy children?

Fewer children means we need fewer teachers, yet how many schools will continue to crank out teachers and those students will come out with 6 figure debt?

Fertility rates are collapsing the world over because even poor people are figuring out that having kids is terrible and no one should do it.

Could fertility and employment shifts be orthogonal?

This is an experiment on one data set that happens to be going in the same directions around the world. Did job changes change fertility or did fertility change job distributions or, as is more likely, they are not related?

We do know that fertility is negatively related to wealth and that the employment shifts require more education so you could make a similar useless argument that increasing education decreases fertility. Fertility is also inversely related to the age of the universe or the accuracy of clocks.

Social Scientists don't seem to understand what they are talking about and most of their conclusions are meaningless.

"... Social Scientists don't seem to understand what they are talking about and most of their conclusions are meaningless."

Boy, you can say that again! (Or, 'Girl.')

The low unemployment rate hides a high rate of contingent, unstable, or gig-based employment.

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