Recessions and Making Babies

It would appear that the severity of the global recession is affecting fertility rates in many countries.  The fertility rate as measured by the number of live births per woman in Europe has dropped substantially in a number of countries according to The Economist.  These results suggest that rather than lowering the opportunity cost of having children, recessions create the economic uncertainty that makes those about to undertake breeding much more skittish and therefore more likely to postpone childbearing.  Unemployment and enchanted romantic evenings are not positively correlated.

Canada has of course continually maintained that it has been weathering the recession more successfully so is there evidence to this effect from our fertility rate?  Well, Canada’s fertility rate (as measured by children per woman by Statistics Canada) has been rising from 1.54 in 2005 to 1.68 in 2010 though the increases have been small since 2008.  What is actually more dramatic is the evidence from the total number of births.  As the accompanying figures show (Figure 1), we are in the midst of what seems to be a rather modest baby boom at least by historical comparisons. The birth data is from Historical Statistics of Canada for the 1921 to 1974 period and Statistics Canada from 1971 to the present.  The period from the early 1920s through the Depression era saw a decline in the number of total births in Canada followed by a surge starting in 1938 from 237,000 births to a peak of 479,000 in 1959.  There then occurred a bust followed by slow growth that peaked in the early 1990s (another recession) and then a sharp decline.  However, since 2000, total births started to grow again and went from 327,000 to 386,000 in 2010.

 

FIGURE 1

Compare this to the United States.  While the fertility rate in the United States is higher than in Canada, it has been declining since 2007. When the total birth data is examined, it shows that since 2007, there has also been a drop(Figure 2).  Total births went from 3.891 million in 1996 to a peak of 4.316 million in 2007 when the financial crisis hit.  Since the onset of the financial crisis and great recession, total births have dropped in each year and in 2011 sit at 3.961 million – drop of eight percent since 2007.  In retrospect, the recovery of the US housing market is likely also being hampered by fewer births and less new household formation.  Canada’s housing market is receiving the benefit not only of a better performing economy and low interest rates but also the stimulus from a rising total number of births and the household formation it entails. 

 FIGURE 2

Total births can also provide a crude snapshot of optimism and opportunity on a regional level.  If we create an index of births for each province with 1996=100 and plot, you get a pretty good picture of where the opportunity is in Canada (Figure 3).  Total births in the Atlantic provinces and British Columbia are generally below where they were in 1996.  Quebec, Ontario and Saskatchewan are above where they were in 1996.  Alberta is ahead by leaps and bounds with total births in 2010 over 40 percent higher than in 1996.  There are substantial differences even within provinces.   For example, economically depressed Northern Ontario has seen the total number of births drop since 1996 while Ontario as a whole has seen an increase.  Within the North, the relatively more buoyant Northeast saw a smaller percentage decline than the forest sector ravaged Northwest.

FIGURE 3

Comments

[Nick Rowe]

Good post Livio. I wonder though, with the interprovincial comparisons, could it partly be that people in the breeding years are more likely than older people to move to where the jobs are, rather than staying put and having fewer babies?

[Highlander]

"Unemployment and enchanted romantic evenings are not positively correlated."

Possibly the best WCI quote I have read. A nice analysis too.

[Livio Di Matteo]

Nick: Migration is indeed more likely when you are younger and a factor in these trends.

[Ryan]

Further to Nick Rowe's point, I wonder how the charts might look if you graphed the per capita birth rate instead. An area with a higher percentage of people of child-bearing age will certainly have a higher fertility rate. What are the age demographics of the regions discussed above?

[J.V. Dubois]

This is interesting, I lately revisited an older paper that among other thing contained a similar argument: http://www.demographic-research.org/volumes/vol13/22/13-22.pdf

So in Sweden the financial crises in nineties caused the fertility rate to drop from 2.0 to 1.5. The upside was that as soon as the crises passed the fertility rate caught up so that the long-term trend of 2.0 was unaffected. So it seems that the crisis caused women only to delay their decision to have babies. But I still wonder what would happen to a modern society that lives in a permanent crises - where women with children cannot be supported by traditional social network of broader families.

[Livio Di Matteo]

Ryan
Per capita is a good suggestion. in terms of demographics, Alberta is the "youngest" province with the smallest proportion over age 65. The Atlantic region is definitely the "oldest".

[Linda]

I agree with Highlander on the quote - I love it, and will certainly pass it on to my Econ of the Fammily class!

[Determinant]

Well, I'm 30, the recession came down on my head and I don't have kids. It's awfully tough to pay for dates when you have other priorities to pay for. Poor isn't sexy.

My brother has a job, a house, and my sister-in-law gave birth to my niece last year. My reaction, aside from loving my niece completely? I want a kid.

30 year old SWM Canadian with engineering degree, aspiring public servant, bilingual and member of the United Church seeks compatible female. Looking to settle down into that blissful/boring family life so no jet-set expectations or hard partying should be expected. Ladies, any takers? ;)

[Lorenzo from Oz]

Australia did not have a recession at all, and births seems to be up and the fertility rate had a minor drop since 2008 up is still higher than 2007.
http://www.abs.gov.au/AUSSTATS/[email protected]/Web+Pages/Population+Clock?opendocument#from-banner=LN

[Bob Smith]

Its anecdotal, but at least in the legal profession, there seems to have been an upsurge in young bay street lawyers having children and taking maternity leave in 2009. Part of that is no doubt the opportunity cost analysis (if no one is going to be hitting their billable targets anyhow, now's a good time to have a kid).

Mind you, being a cynic, I couldn't help wondering if this wasn't also a clever job preservation strategy. Sure, maternity benefits at Bay Street firms aren't particularly generous (though, in fairness, they're not terrible), but in an era when law firms were shedding associates (and 2009 was a bloodbath), being on maternity leave gives you a degree of job security for a year (I suspect its illegal to lay-off someone on maternity leave, but even if it isn't, the optics are terrible and law firms are quite sensitive to optics)

[Frances Woolley]

Ryan is right about graphing births on a per capita basis - or, ideally, a per woman of child bearing age, basis.

[rsj]

Humor me.

Making babies is a Leontieff production function. If women view male partners as valued by their wealth/income outlook, then it can appear as if there is a "shortage of good men" to have children with. Concentration of wealth in the hands of a minority leads to an overall reduction in babies.

Therefore widespread redistribution, as well as a commitment to continued redistribution, would increase the supply of babies.

Alternately, preferences for what an eligible father requires can change. But that takes a long time.