Jackson Hole Symposium – The Downside of Fertility
Welcome to the Real Estate Espresso podcast, your morning shot of what’s new in the world of real estate investing. I’m your host Victor Menasce. On today’s show, we’re talking about the conference that the Kansas City Federal Reserve Bank hosts every year at Jackson Hole. All eyes are on the opening speech from Jerome Powell, and that was widely covered by the news media. To me, the more interesting talks are the invited speakers who give talks on various elements of the economy. The theme this year at Jackson Hole was demographics and the impact on the labor market.
So this week, we’ll be doing a mini-series summarizing some of the most noteworthy talks from Jackson Hole this year. Many of these talks are considered boring by the news media and they just don’t get any coverage, but for those who seek to understand how the economy functions, these talks have the potential to be interesting. Our first one is focused on a talk by Claudia Golden from Harvard University. Her paper was called The Downside of Fertility.
The global fertility decline is a widespread phenomenon with birth rates falling below replacement levels in many countries, including rich nations. That’s been a steady trend since the mid-1970s. The decline is not new. The current surge in concern prompts an investigation into its underlying causes and structural impediments. The author’s central argument is that the unifying factor behind fertility decline is the increased agency of women coupled with a mismatch between women’s desires and men’s willingness or ability to make credible commitments regarding shared responsibilities.
This downside of fertility arises when women, empowered by improvements in education, employment, and reproductive rights, face insufficient changes in men’s roles particularly concerning household and childcare duties. The author develops this sophisticated model where women are in an educated career path, are highly dependent on the dependability of the child’s father for assistance in order to avoid the child penalty on their wages. If the proportion of dependable men is too low or if men cannot credibly signal their commitment, educated women may delay or even forego having children, even if they desire to have them. That leads to a lower birth rate especially as women’s opportunities and the college premium increases. Societal support like subsidized childcare can also mitigate the mismatch.
This paper, The Downside of Fertility, examines these two primary examples. They look at women in the States that form the post-baby boom that went from the 1950s to present day. The US experienced an extended baby boom after World War II, peaking in 1957 with a fertility rate of 3.74.
A turning point came with the advent of the birth control pill, initially approved for medical use in 1957, and then for contraceptive use in 1960. The impact of contraception unfolded in stages, early on it enabled married women to space out births, and then eventually state laws changed in the late 1960s and early 70s allowing single women to gain access to contraception. That newfound reproductive control allowed single women to delay marriage, to pursue higher education and to establish careers, leading to greater financial independence and bargaining power. The median age at first marriage for college-educated women increased significantly, from around 23 in 1972, and then the birth rate fell across all educational groups, with college-educated women experiencing particularly rapid declines.
The paper also examined the macroeconomic impact of both gendered and generational conflict. The Group 1 nations made up of Denmark, France, Germany, Sweden, the UK, and the US, experienced relatively steady economic growth post World War II. They have moderate, though below replacement, total fertility rates. In contrast, Group 2 nations, which include Greece, Italy, Japan, Korea, Spain, and Portugal, endured economic stagnation until the 1950s and 60s, followed by a burst of rapid catch-up growth and significant rural to urban migration. These Group 2 nations now exhibit the lowest fertility rates, below 1.3. The Group 2 nations show far greater childlessness and higher rates of women never marrying, often due to strong social norms against having children outside of marriage.
Beyond the rich world, middle-income and poor nations like India, Brazil and Mexico have also experienced significant fertility declines, initially driven by contraceptive programs, later, people getting married later in life, and increased schooling for girls. The spread of media like telenovelas in Brazil even promotes smaller family sizes as a sign of wealth and sophistication. While those factors are similar, the extent to which these mismatch factors apply in these nations remains a little less clear.
Ultimately the recent increase in concern over lower birth rates is, in fact, multifaceted. It includes perceived needs for internal population growth, as an alternative to immigration. It focuses on the family’s role in social stability and a pushback against gender egalitarianism by some. By attempting to reverse progressive social change without addressing the fundamental mismatch, the need for men to credibly commit to shared responsibilities to support women’s autonomy, could inadvertently lower birth rates even further.
The Downside of Fertility is that greater female autonomy, in the absence of sufficient supportive change in male roles, produces lower birth rates.
Now, when I look at papers like this, I generally apply critical thinking and ask some basic questions. If you go back to the 1960s and the 1970s, it was possible for a single-income family to even own a home. That’s true in the Group One nations and the Group Two nations. With consumer price inflation in the 1970s and 1980s, that became increasingly difficult, and in today’s environment, it’s virtually impossible for the average single-income family to afford a home and a reasonable lifestyle.
The necessity for both members of a couple to work just to make ends meet is definitely a factor which, frankly, this paper has failed to examine. The assertion in the paper is that higher income is correlated with lower fertility. It’s as if the need to develop a mathematical equation to describe the factors took over the desire to fully understand all of the factors before reducing it to an equation. There’s no question there are significant demographic shifts that have occurred.
The change in fertility from 3.74 in 1957 to 1.6 today in the United States, that’s massive. The paper presented at Jackson Hole, in my opinion, is kind of amateurish. It didn’t really merit being presented at such an event, let alone being presented as the first paper immediately after Jerome Powell’s opening address. But then, I don’t have to agree with everything. Nevertheless, I do appreciate having read and having taken the time to share it with you. As you think about that, go and download a copy of the The Downside of Fertility by Claudia Golden. You can download it from the Jackson Hole symposium website. As you think about that, have an awesome rest of your day. Go make some great things happen. I’ll talk to you again tomorrow.
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