Economic models of fertility predict that the demand for children is linked to levels of female activity and that during periods of high unemployment there is an increase in the number of births, meaning it is countercyclical. However, many recent empirical studies show the opposite. One explanation is that unemployment is not just a temporary blow to women’s earnings but may reflect their more general perceptions of long-term career and wage growth consequences.
MiSoC’s Emilia Del Bono and her co-authors analyse the relationship between unemployment and fertility to assess whether fertility is mainly affected not only by the loss of earnings from not being in employment, but also by the change in career prospects and the effort required to find a new job which accompany any involuntary job loss, such as through a company closure.
The results show that losing a job due to a company closure negatively affects fertility, and the effects are stronger for women with higher wages and wage growth before the job loss. This shows that career and employment considerations are very important factors in fertility decisions and matter more than the short-term income effects caused by unemployment. From a policy perspective this is important as it provides new evidence that labour market institutions associated with higher uncertainty about long-term employment and lower career and promotion opportunities – such as temporary, part-time, or zero-hours contracts – can significantly reduce women’s demand for children.