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The Economy of Birth: Why we See Lasting Effects of Economic Crisis in Fertility Rates

As we surpass the ten year mark after the 2008 financial crisis, we continue to see the lasting effects of a hit to the economy.

December 12, 2018
Katie Visco

Everyone knows that raising a child isn’t cheap. As a matter of fact, it costs nearly $233,000 to raise a child in the United States - and no, that does not include college. As we surpass the ten year mark after the 2008 financial crisis, we continue to see the lasting effects of a hit to the economy. These lasting effects rang from political attitudes, home ownership, and even fertility rates, or the number of children a woman has on average. Here we’ll take a look at the patterns of declining fertility in developed nations since the 2008 financial crisis, looking to understand possible sources from which fertility rates are declining.

Declining Fertility Rates Following 2008 Financial Crisis

Patterns of fewer births in developed nations

declining fertility rates after the 2008 financial crisis
Image Courtesy of IMF Blog

The 2008 Financial Crisis was a driving force of a variety of economic issues not only in the United States, but across the world. Because of the nature of the globalized world that we live in today, when one large developed nation hit financial crisis, it is likely that we see the results of the financial crisis across the world. Markets that took the greatest hits were within those developed nations where global commerce is a huge portion of GDP and national income.

As we see the effects of the financial crisis on a macroeconomic scale, the results continue to be evident on the microeconomic level of individual families and businesses. Businesses struggled to stay open, homes were foreclosed on, and the unemployment rate within developed nations spiked. This meant less money for families, making it more difficult to support multi-child households, or any children at all.

We see this pattern in an OECD (Organization for Economic Cooperation and Development, a trusted sources for socio-political research across the world) chart (above) of the declining fertility rate following the 2008 financial crisis. Fertility rate up through 2008 showed increase from developing nations and from the OECD on average. A “healthy economy” (that is, prior to 2008) was more supportive of families having children due to the ability to establish financial stability - while, in emerging markets (underdeveloped countries), the fertility rate declined, and steadily declined without notable change in 2008.

In the United States alone, the fertility rate peaked in 2007 at 2.1 children per woman. By 2016 - almost ten years after the financial crisis - the U.S. fertility rate was 1.8. Nations like Spain and Greece saw an even greater decline, showing a slow and difficult recovery from the financial crisis from developed nations.

Possible Explanations for Decreased Fertility Rate

Ways in which the economy and childbearing ability are interconnected

Baby Touching Woman's Face

As we dive a little deeper, we allow ourselves room to analyze more of the sociologic and socioeconomic effects that the financial toll on families and society as a whole. We look at this changes from assumptions about the actions that families take and decisions families make regarding their financial well-being and their family-growing potential:

  • Career Uncertainty: During financial crisis, many jobs are lost and cut due to a declining consumer market. As families lose their jobs, they often lack the financial security to have a child and support a home, making for an unwise decision to have children during or following a financial crisis.
  • Welfare Cuts: It could be important to note that while removing a developed nation from financial crisis, there are often cuts in government spending. Depending of the nature of the government at the time and presently available welfare programs, families may fear that crucial programs like WIC, Food Stamps, and subsidized housing may be cut during economic recovery.
  • Increase in Women in Workforce: While people are laid off during financial crisis, many seek employment of any type - much of which is considered underemployment that is low-paying. This type of change could move a single-earner household to the necessity of a second earner, meaning many women - who otherwise may have planned to be at home raising children - would need to enter the workforce to support the existing household.

Future Impacts of Decreasing Birth Rate

Can we anticipate long-lasting impacts of this decrease in fertility?

Man and Woman Standing Alongside With Their Children

The hard truth of this declining fertility rate: it has a variety of last effects. These low fertility rate, come 18-25 years following the recession, can lead to a low labor force participation rate compared to previous years, meaning there are less people actively working, because there are simply less people who need jobs. This type of change may affect production and output to our consumer markets. If strict immigration policies exist within these markets, replacing the retiring labor force will be notably difficult.

Policymakers have already started suggesting a toying with idea on how to fix this issue, starting with ways in which we can increase the fertility rate. The key: providing support systems to women and families looking to have children. This would include subsidizing child care to make child care more affordable, creating family-friendly workplace laws (like required paid maternity/paternity leave), and creating tax policies that benefit secondary earners rather than penalizing them.

If we can use our current knowledge of declining fertility rates to preemptively create policy to prevent future financial crisis, we can stabilize fertility rates and a contributing factor of the highly-interconnected economy.


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