RIA BHANDARKAR – MAY 3RD, 2021

EDITOR: SEAN O’CONNELL

Fertility rates drive social, economic, and cultural trends, and current events determine fertility. That simple trend can seem terrifying since all of those factors are difficult to control. But the recent focus on differentiating “Baby Boomers,” those born shortly after the second World War, from the younger Gen Xers, Millennials, and Gen Zers demonstrates how the events surrounding Americans’ birth and historical context can shape perceptions of politics and culture. The next generation’s birth will be surrounded by the pallor of the COVID-19 pandemic. Enter the Baby Busters.

Current estimates predict that 300,000 fewer babies were born during the pandemic than what was previously expected for 2020. The uncertainty caused by worldwide shutdown decreased people’s willingness to reproduce. One-third of women surveyed last April revealed that they were delaying plans to conceive. The natural result of lower fertility rates could be a population decrease in the forthcoming American generation.

What would population decline mean for future economic stability? Labor markets are directly tied to population decline and growth, as is aggregate demand. The “baby buster” phenomenon is a perfect example of how societal disruptions can have major effects on economic development. Although the pandemic’s effect on birth rates may be temporary, the repercussions could reverberate through the economy for the next century.

Boom or Bust

Funnily enough, demographers initially predicted the pandemic to create a baby boom. Some believed that the increased time spent at home would be ideal for pregnancy and raising newborns. After all, pet adoptions dramatically rose during the pandemic, as new pet owners were able to spend time training their new animals. However, birth rates still lowered due to the combination of the pandemic, recession, and quarantine. Previous recessions have seen births drop by about half of what was measured in 2020.

The early baby boom prognostications were sparked by a common myth that birth rates increase after crises which force people to stay home. Examples to support this theory include blizzards or blackouts. But with the pandemic having an unclear ending, it wasn’t surprising that families waited before welcoming new additions.

Family Planning

There are two different types of births sociologists consider when they look at the reasoning behind a baby bust. The first is unplanned. Nearly half of adults have reported a decline in sexual activity, with younger people and those with no current plans to conceive experiencing the largest drop in sexual interactions. With everyone remaining inside, it’s almost certain that unplanned births will therefore remain lower until well after the pandemic concludes.

The economics behind the second category, planned births, can be a bit more complicated. On a micro level, individuals are putting pregnancy plans on hold until there is more economic and social certainty. On an economy-wide level, that pragmatism has widespread effects; not only did the pandemic force many to go into quarantine, it also delayed weddings and increased unemployment. A 1 percent decrease in the unemployment rate corresponds with an equal decrease in births, mostly likely due to adjustments made to financial planning in correlation with finances. 

Planned birth rates had already declined during the 2008 Recession, but had not yet rebounded when the pandemic began. As a matter of fact, an estimated 5.5 percent of the reduction in births in the first year of the pandemic can be attributed to unemployment alone. Besides that reality, and the general feeling of stagnancy during the pandemic, the decline of mental health among the population may have also discouraged reproduction.

Class Privilege in Reproduction

These statistics still have one important outlier: the upper class. 17 percent of the women surveyed about plans to get pregnant indicated that they wanted to start trying to conceive sooner because of the pandemic; these women were less likely to be Black, Latina, or lower-income than the one-third who had delayed family planning. This outlier group is made up of people with higher salaries who were less likely to lose their jobs due to coronavirus and therefore experienced less financial ambiguity. It also includes the large number of women, primarily mothers, who plan to leave the workforce during the pandemic.

The increase in fertility among higher income families goes against commonly believed theories about birth rates and income. Children follow the same pattern as an inferior good; countries and areas with higher GDP have lower birth rates. This can be attributed to the lower opportunity cost of child care in areas where salaries are lower, lower infant mortality rates in developed countries, and higher investments in educating individual children in developed countries. During the pandemic, opportunity costs are lower for highly paid professionals who can work remotely and remote education is more difficult in households without reliable Internet access or space.

Fertility and the Economy

All of these trends help form the conclusion that fertility rates should be treated as an indicator of economic stability in developed countries. As previously stated, the percentage of women of childbearing age who give birth during periods of economic recession empirically declines. Research has even shown that fertility can rise and fall with the business cycle. In 2008, the birth rate change per state correlated to the housing price and income per capita change, indicating that planned births had decreased the most.  

Falling birth rates have already become a future inevitability globally. Japan, China, and Bulgaria are all expected to or have already reached a peak in total population. Since developed economies have lower fertility rates, increasing development can lead to healthy population decline. If children are viewed as an economically durable good, it makes sense that their demand would decrease if the amount spent per child in education increases.

Birth rate declines also have major demographic effects which can shift the labor supply. The average population age will decrease, creating an undersupply of working age individuals in the future. Wealth markets may also face unstable demand since higher income families are having more children but higher income countries as a whole are having fewer children.

There are plenty of industries and organizations which rely on a supply of younger individuals. Higher education relies on a large influx of young people to enroll so struggling institutions may shut down. Meanwhile, Social Security payments and military recruitment could decline when average population age increases.

The economy will continue to shift in other ways when population decreases. Falling birth rates can lead to falling interest rates. The drop in fertility is considered the largest reason for falling growth and interest rates since 1980. Financial markets will be affected by lower twenty-year bond yields as a result.

Working with Families

To help lessen the effects of these consequences, the government should ease the situation for families during uncertain times through better policy. Policies signal desirable behavior, so fulfilling new parents’ basic needs, such as childcare and paid leave, can increase the number of planned births once the economy begins to re-open after the pandemic. 

Until birth rates spike again, new legislation will have to adapt to a shrinking workforce. Decreasing immigration restrictions would allow for an inflow of new workers. Tax revenue will decrease but there will also be fewer people to spend on. The teen birth rate will decrease, hopefully having a positive effect on welfare.

Targeting lower income families when trying to increase fertility rates is imperative. They may be the ones who are most likely to benefit from universal childcare, increased education spending, and universal healthcare. It is always important to remember that those with the best education about financial planning and contraception have the most freedom in determining the number of children they have.

Conclusion

The Baby Buster generation will be born into an economy with major obstacles. With birth rates declining globally, financial markets and public policy will need to adjust to demographic shifts. Drops in fertility tend to correlate with recession but these recent fertility trends don’t seem to be rebounding to previous numbers. As a consequence, policymakers should advocate for a reorientation in current legislation.

Reproductive freedom is a right that not all Americans have. Since lower income families have been the most affected by the pandemic, both financially and psychologically, they will account for the highest decline in fertility rates. Policymakers need to encourage support for low income parents so that they can make up for the lack of youth population in their communities. If fertility rates continue to decline among this specific demographic, which is far larger than the higher income groups experiencing a slight boost in fertility, this trend could continue after the pandemic.

At the time of their birth, the Baby Boomer generation was associated with economic prosperity, patriotic idealism, and social conservatism. The Baby Buster generation could grow up in opposite circumstances, during a social crisis, not after one. The impact this will have on future culture and government will depend on how the government responds now.

Featured Image Source: Shutterstock

Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of Berkeley Economic Review staff, the Undergraduate Economics Association, the UC Berkeley Economics Department and faculty,  or the University of California, Berkeley in general.

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