Freakonomics Radio - 695. Can the U.S. Close Its Fertility Gap?

0:0650 years ago, one of the biggest fears facing humankind was overpopulation with predictions of widespread famine and death. Today, one of the biggest fears is the opposite. The fertility crisis, as it's usually called, although it's not always clear exactly whom it's a crisis for, it is true that the global fertility rate has fallen by more than half since 1970. Why? There are many reasons, some of them quite unsettling.

0:36Really low-desired family size is a strong indicator that there is a deep deep pessimism about the future of a society But tucked inside the fertility crisis you will find another unsettling reality a fertility gap Not having kids you want to have makes you quite sad. They usually is a story of miscarriage infertility disappointment broken relationships Today on Freakonomics Radio, the fertility gap will lead us to some interesting places from the mechanics of fertility. You can't get pregnant by email. To the metaphysical. I am going on a limb and I'm declaring myself pro-human race. I just like people and I would like to see humanity survive. We also need to talk about the workplace. My lawyer friends basically they had to quit work.

1:25right, or go on some reduced track. And how about housing? It's really been hard in some sense for America to manufacture such housing scarcity in a land of such enormous abundance. Our two-part series on fertility and housing starts now. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. We have talked about the declining fertility rate several times on this show.

2:20It always brings a vigorous response, let's call it. Here is Melissa Carney. It's all like very emotional. There are a lot of different aspects and elements of the fertility decision-making process. Beyond empiricism, I think some conceptual clarity is helpful. Okay, so Carney's job today is to bring us that conceptual clarity. You might ask, what are her credentials for doing so? I'm an academic economist at the University of Notre Dame.

2:50and I study the economics of poverty, inequality, family, fertility, and social policy. Karne has also been on this show before talking about her research. There was one episode called, does early education come way too late? Another one called, the fracking boom, a baby boom, and the retreat from marriage. Most recently, she was the featured guest in an episode called, the facts are in, two parents are better.

3:18than one. That episode got a particularly spicy response. For the sake of this conversation, I asked Carney to begin by describing the state of fertility in the US. Probably the easiest is to think about the general fertility rate. That's the number of births per 1,000 women in any given period.

3:38over the past 100 years in the U.S., that's moved around a lot. It fell dramatically in the early part of the 20th century, and then it rebounded tremendously and resulted in what we all know as the baby boom. That was a huge increase in the general fertility rate between 1940 and 1960. Then it fell precipitously over the 60s and 70s, not surprising given all of the social, legal, cultural, institutional changes over that period. And then in the U.S., we had a period of general stability where this general fertility rate bounced around basically at a pretty steady clip for the next couple of decades. What's been really surprising is the general fertility rate has been falling in the U.S. since 2007. It coincided with the Great Recession, but the surprising thing is it never bounced back.

4:33In my exploration of what's been driving that decline since 2007, what I've realized is it's much more instructive to think about the fertility rate less in terms of this period specific general fertility rate and more in terms of the cohort fertility rate. What women of childbearing age are doing at each period so that we can look at how women in their 20s and 30s now compare to the earlier birth cohorts. And there what we see is that there's been a decrease in the share of women who have initiated childbearing basically through the ages we can observe them. Now it's complicated because they're not done with their childbearing. Yeah, and persuade me that what you're talking about now is not just a timing issue, that we know that the rate of teenage pregnancy in birth giving has fallen a lot, which everyone agrees is a good thing.

5:29But then when you get into the 20s and even 30s, most people agree it's a bad thing. Persuade me that the drop that we're seeing in let's say women in their 20s is not a timing issue and that more of them will have children, but later. For a long time, sort of sanguine demographers were making this point about the decrease post-2007. Oh, this is just people responding to the recession and then it'll bounce back. And that never happened.

5:56We're talking about over 15 years of year over year decrease. Let's set aside the COVID pandemic where there was a, you know, a bust and then a rebound. The idea that this is still women just delaying childbearing gets harder and harder to buy with each year. Right now it's like 50% of 30 year old women have not initiated childbearing. They're childless.

6:22Let's be clear. I had three kids in my 30s. I realized that's possible. But we also know there's a biological constraint here. The idea that we're going to get down to 10% women childless by the time they're 44 would take an unprecedented, perhaps even impossible, increase in sort of post-age 30 fertility for that to happen. You're saying in previous recent cohorts, only 10% of women age 44 in the US did not have children. Is that right?

6:50between like 10 and 15 percent. Got it. And you're saying that to go from 50 percent now, childless at 30 to only 10 percent or even 15 percent at age 44 is a gamble that no gambler would like. Exactly. But let's remember, Melissa Carney is an economist, not a demographer, even though she does a decent impression. So let's hear from a demographer. We'll have to see if he's one of the sanguine demographers that Carney mentioned.

7:18My name is Lyman Stone. I'm the director of the pronatalism initiative of the Institute for Family Studies, which means my job is to try and make the fertility line stop going down and start going up. First, let's define some terms. Institute for Family Studies is what and funded by whom? It's a nonpartisan think tank. We work on family policies. The name would suggest stuff like child tax credit, age limits on social media or marriage penalties. It's funded by a range of typical foundations that like to give money for policy, individual donors. Broadly, we're kind of small sea conservative in our outlook, but we put the non in nonpartisan. We've been pretty ferociously critical of this administration in particular on a range of issues. I'm reading here, I guess this is from the Institute for Family Studies website. Strong families make strong societies. Fragile families make fragile societies. I can imagine a lot of people hearing that and nodding. I can also imagine a lot of people hearing that and maybe cringing.

8:14What's the empirical argument for that? That is a very broad statement. But I would say across a million different points, we can say, well, you know, when kids grow up with two married parents, their outcomes are going to be much better. When fewer kids are orphans separated from biological parents, that society is going to have just better outcomes across the board. If we see a society where parents and children are constantly at odds, where there's not a lot of harmony in a family, where there's a really high divorce rate, Nobody looks at a society like that and says, yeah, that's a society with nothing wrong. We all know this intuitively and our belief is that in the long run, societies that manage to transform the natural bonds of love into stable institutional bonds of marriage and in those marriages produce children who have security at home are going to have advantages across every social process. This idea of pronatalism has become a sort of political wedge. Absolutely.

9:09It sounds to me like you are hoping for that wedge to not be political or maybe for it not to be a wedge at all. But what do you say to those who argue that, hey, you know, if we're going to have freedom of choice in all different kinds of things, free markets, voting, et cetera, et cetera, then there also needs to be freedom of choice in how I want to live my life, including family formation or the lack thereof. And therefore, get your pro-natalyst instincts out of my ears and airwaves and op-ed pages. What do you say to someone who feels that strongly? 100% agree, and they're correct. Okay, that was easy. No, I mean, really, that's what I say. I mean, if you really don't want to have kids, it's not my job to persuade you. When we say strong families are the building block for a strong society,

9:56Strong families are not typified by a bunch of unwanted children. That's not our goal here. The reality is most Americans do want children. However, the average American woman of reproductive age, depending on exactly how you ask the question, wants somewhere between two and 2.7 children. That number's been approximately stable. The problem from my perspective is not that fertility is low. The problem is that fertility is lower than what people want.

10:23Most of those surveys are conducted from what I know by organizations like yours, which are pro-family institutes. I know there are some surveys that are straight down the middle that are population-wide surveys. But again, persuade me that the data you're giving me now are absent a thumb on the scale. In the US alone, we've got hundreds of data points. And I'm going to be honest, I actually don't know of any family research group other than IFS that's surveying the desired family size question.

10:52A lot of family research groups actually would prefer not to look at desires. They don't want to be constrained by what people want. A lot of people would be like, we need to get to 2.1, this magic number where population is long run stable. I don't care about replacement rate. I don't care at all. I care about the family size you want to have. If you want to have one kid, then I want you to have exactly one kid. If you want to have three kids, I want you to have exactly three kids. Societally, the average desired family size in the US is actually a little bit above replacement rate. On the other hand,

11:21In Malta, average desired fertility, most recent surveys by a euro barometer are like 1.8 children. That's below replacement. In China, there's, you know, we can debate the quality of survey data about family size in China, but it's probably somewhere between one and 1.7. When you see a place where the desired family size is so much lower than the US, what does that indicate to you about that culture, economy, political economy, whatever? If people are saying, look, I just don't think that creating a next generation of my culture is worth the cost. And what they're saying is a really negative evaluation on their culture. Now you could say it's a really negative evaluation on the cost of the kid. And we can talk about cost of kids and say, that's a fair argument on some level. But the usual way these questions are asked is we ask something like, in an ideal world, if you could have everything go the way you want, how many kids would you have? We're setting aside the cost.

12:16So you are a demographer by training, and it's what you do for work as well. I don't associate demographers with a historically high level of accuracy. Tell me where I'm wrong. I mean, if you look at like old UN forecasts from like 1950, they called the 2000 population levels for most countries with almost comically small margin of error in many cases. The stuff we predict we do a pretty good job at.

12:43Where we excel though is on the actual data precision side. The reason you have synthesis is because demographers invented them. Economists will talk about GDP and then you look at the GDP and you're like, well, okay, what do we actually know about this? Okay, it doesn't actually correlate with night lights for these countries. Okay, well, there's this huge like shadow GDP over here that, oh, well, yeah, sorry, we just forgot like all the rich people are hiding their money and so GDP is wrong for this country. That doesn't happen in demography. The reality is we collect the best data in the world for our field.

13:13And demographers will have these brutal knockdown drag out fights about like a fraction of a percentage change in something because, oh, this data says there's, you know, this many million births in India and this data says 3% difference. And this is a huge error. And then you look at the GDP numbers and they're like, oh, we revised it by 15%. Okay. I will accept your defense of demography.

13:38In general, a phrase we hear a lot, including in the U.S., is fertility crisis. Do you agree with that characterization? And if so, what exactly is the crisis? Crisis is almost always a moment of climax, a turning point, a pivot. And that's not how fertility works. It's not like one day the fertility rate is fine and dandy, and the next day you have a crisis. It is a train coming at you from a long distance away, and it looks real slow moving. Someday it hits you.

14:08But it's not because it sped up at the last minute. It was always coming. It's a very serious issue. It's a long run problem. But I don't like the crisis language. So tell me why it's a long run problem as we've all been reading for.

14:20decades now. The conventional wisdom is that you need more young people to support a society from the ground up, but especially because a lot of the payments that go to older people in retirement, Medicare, social security, etc., are funded by younger people working. But, you know, we've all heard a lot of conventional wisdoms over the years. It turned out to be either half wrong or mostly wrong and or subject to change. AI productivity growth might replace all the young workers. Sure. Yeah. There you go.

14:49So do you see that demographic problem as we've been reading about for decades as problematic as non-demographers do? The math is pretty punishing when you get few enough young people. Sure, productivity growth can rise to offset it in principle, but you do need a lot of productivity growth. You need to be very much kind of a maximum AI optimist to think that South Korea is going to be sustainable. South Korea being sustainable, what is their fertility rate right now?

15:15The latest official number is like 0.7. Wow. Children per woman. So that means that each generation is like 30 or 40 percent the size of the one before it. But again, this doesn't keep me up at night. I actually don't worry about that. When I think of the problem of low fertility, I'm not mostly thinking about how we're going to pay for social security.

15:33I'm mostly thinking about what life is going to be like in a world where 70 or 80% of people get to age 45 not having the family they want to have. And they spend the last 40 years of their life, because life expectancy is going up, basically miserable and unattached from the next generation, feeling like they don't care about what's coming next and that they only really need society to live long enough to pay for their social security. Do you really feel that not having your own children will make you miserable and unattached from the next generation?

16:01We have a lot of data on this from like the health and retirement survey that suggests that, yes, having children around in retirement absolutely contributes to healthy aging, especially to mental health. It contributes to the political engagement you have. We've got longitudinal surveys where we ask somebody how many kids they want to have when they're young. We follow up with them over 30 years. We say how many kids they do have. And the result is when people don't have the number of kids they want to have, they're sadder as they get older. We can see as well in IVF when you have failed IVF rounds.

16:29people who have a successful IVF round, they get a baby, and there's no big change in the trajectory of their mental health, as measured by the prescription of antidepressants or antipsychotics or something, whereas people with failed or long delayed IVF success have these huge increases in the use of mental health services and prescriptions. That tells us that not having kids you want to have makes you quite sad. It's quite unfortunate. It usually is a story of miscarriage, infertility, disappointment, broken relationships, things like that. And all of that to me says the real burden of low fertility in the long run is not a budget math problem. It's a heart math problem. Coming up after the break, the budget math

17:13Matters too. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. If you were to ask five friends to explain why fertility is falling, you might get five different answers. And with something as personal and all-consuming as having children, it may be easier to figure out what isn't causing the decline. A lot of the exploration I've done has basically led me to rule out potential explanations.

17:56That, again, is the economist Melissa Carney. When my co-author Phil Levine and I started looking at the post-2007 decline, we looked at all the usual things that applied micro-economists look at. Mainly, let's think about prices and income. Income, actually, at an individual household level is positively associated with people having more kids. Incomes have not collapsed since 2007. Things that make having kids more expensive childcare being a key one, it's not like all of a sudden in 2007 childcare has become more expensive. If you think about the opportunity cost of women's time, it's not as though all of a sudden women's wages increased or their employment opportunities dramatically increased in 2007. So basically our work has led us to rule out a lot of those more standard price and income effects that economists tend to focus on. What about education?

18:52Because we've certainly seen huge increases related to cost of living in education in the US. Do you attribute any of the decline to that? No. The net price of going to college actually has fallen in recent years. I know people like to focus on the sticker prices, but that doesn't really hold up. If you look at the amount of student debt people are holding, that doesn't hold up as an explanatory factor. Where I've landed is really to think about Why are the generations of young adults who are now in their 20s and 30s making different decisions than people in their 20s and 30s, 10, 15, 20 years ago? We've landed on what we call this sort of overarching way of thinking about this social equilibrium determination of shifting priorities. And what I mean by shifting priorities is that there are norms around work.

19:47around leisure, around gender roles. There are broad economic social conditions. There's been an expansion in the consumption, leisure, lifestyles that are available to young people today. And the confluence of all of those things are pushing people towards making different decisions, in particular delaying or foregoing marriage and having kids. It certainly looks like family formation and parenthood is a less central force shaping people's decisions in their 20s and 30s. But this is why...

20:27You know, Steven Economist, we obsess over language. This is why we say shifted priorities and not preferences. Because if you look at survey data, people still say they want to have kids. They still say their ideal family is about two kids. So what people are saying doesn't look like they've dramatically changed their preferences. But what people are doing certainly looks like they've changed their prioritization. Another explanation you hear.

20:56is that fertility is falling because of the decline in organized religion. Many religions put a high priority on having kids be fruitful and multiply and all that. So as religion becomes less central to some people, does that help explain the decline? I've yet to see a study that really nails the causality in a way that gives the magnitude that we'd want. A lot of these things move together. I'm going to start a family and so We're going to go to services, all of these things sort of bundle together in a way that's hard to separate. There are studies that show the sort of shocks to, let's say, exposure to the Pope's lectures. There's a nice paper that shows this leads to an increase in childbearing nine months later. I'm totally open to the idea that religious influences, much like other messaging and social media messages, those affect what people do.

21:54every time we publish an episode that has anything to do with fertility, we do hear from a lot of people who say, what are you thinking? Why would I as a young person want to bring a child into a world that feels like it's on fire? So how quantifiable is that? How much do you think that might be a factor in declining fertility? I hear this from young adults all the time too. There's a lot about it that's remarkable. One being, has there ever been a generation as fortunate or well situated as today's young adults in the United States of America. Income is up. Life expectancy is up. Employment opportunities are widespread. Do young people really believe that life is that tenuous? They have it better than their grandparents certainly did and their grandparents had a lot more kids. Most of them have it better than their parents did on all sorts of metrics.

22:52If they really feel this sense of dread and anxiety that raises a whole host of issues for us, why? What are we doing that's convincing young people life is so hard? Are people just consuming so much negative news that they genuinely feel this way? The second response I have gets to what you said about revealed preference.

23:17There is something about that being a convenient answer like, oh no, I want to have kids, but you know, I'm actually a very responsible person and I don't want to bring kids into the world if they're going to be bad for the climate or I can't guarantee that their life is without struggle. So there's that possibility. And then the third possibility, which is outside my expertise, but I think is an interesting one. You know, some historians will point out that it's actually people who live in places where there's famine or war or groups of populations that have really experienced trauma, they are more likely to value the preciousness of life and actually have births. I'm curious what you think about as a fertility deterrent, the notion of intensive parenting, the idea that the bar has been raised on how much a parent has to do

24:13as opposed to just open the gate and let the kid run outside like in the quote old days. Intensive parenting is almost surely driving some of the fertility decline. And here's how I think about that. Let's think about how people in their 20s and 30s now, they're more likely to have grown up in the 90s when parenting started getting really intense, seeing their parents driving them around from one thing to the other.

24:37having to answer a gajillion emails from schools, like not being able to just let your kids out in Rome, whereas kids who grew up in the 70s and 80s, the parents did their thing. Parenting felt less at odds with other goals that adults might have. In today's world where you have young adults, they have career, professional, individual autonomy, their goals, and the choice of being a parent Free-range parenting is not commonplace. The social norm is intensive parenting. That is literally a daily logistical hassle for 18 years. In a way that mothers in the 60s, 70s, and 80s didn't quite experience. Okay, so do you have any solutions for that 18-year problem? I mean the obvious one? Don't have children. No, no, no. Oh, sorry. I wasn't paying attention plainly. The two obvious answers.

25:35is to have institutions or jobs that permit flexibility. Here's where the folks who like to talk about flexible scheduling or work from home, those things would probably have more of an effect than the incremental policies that we've seen had not had much of effect, like expanded paid leave. Let me be clear, I'm all for increased paid leave, but that's a one-time very short-term thing.

26:01creating structures in the workplace where people can more readily combine parenting and their kid's schedules will be super helpful. And then on the other side, of course, is how do we ratchet down the intensity of parenting? I think most people would agree that a lot of it is very counterproductive. Give me some examples of what you think people might argue is counterproductive. An obvious example is travel sports. Basically, the whole travel sports industry has obliterated rec sports. If your kids 12 and like playing baseball, there's not really the active town rec sports where they play on Friday nights anymore. You got to sign up for one of these travel leagues and then, you know, travel all over and it's very expensive and it's very time consuming. And so then when you're choosing that against the other things you might do with your time that really weren't available or socially accessible to previous cohorts.

26:57It's not hard to see that people are making different decisions. A friend of mine who doesn't have kids. It should be like, Melissa, why would I want to have kids? You spend all your weekends at like soccer or hockey tournaments. And I'm like going off for brunch and going to Pilates, right? And what do you say to her? Nothing. I grant that she looks better and she's less tired. I think this is the blueberry problem. Here again is the demographer Lyman Stone with the Institute for Family Studies. When I was a kid.

27:27If I was like, hey mom, I want some fruit. She would have reached into the cabinet and pulled out this plastic cup and inside would be chunks of something floating in like a liquid. I don't even know what the liquid was. That was fruit, okay? Now if my children are like, hey, Baba, I want some fruit. I open up my fridge and I pull out a $9 pint of blueberries from Peru. Yeah, from Peru and they pound the whole thing like.

27:5345 seconds. And so whereas my mom was paying like 15 cents for a fruit cup for me, I'm out nine bucks. There's been this huge change in parenting towards like a high-end boutique niche type of product. Describe for me what you see as the main drivers of declining fertility in the U.S. over the past whatever number of decades.

28:13Let's keep it to the last 25 years, because before that, you're talking about a bunch of these declining child mortality, invention of contraceptives, honestly, things that are super important, but not relevant for our current conversation. Over the last 20, 25 years, the single biggest factor shaping declining fertility by far is declining exposure to marriage. Once you control for the number of reproductive years that people are married, there's basically been no decline in fertility. But then that raises a new question. Why did marriage decline?

28:41I would say there are a lot of factors there, but the two biggest ones, one is basically just what we could think of as skills bias technical change. The economy changed to reward advanced skills more and to change the kinds of skills that are rewarded. And the result of that is that young men in particular became a lot less economically viable relative to older men and to some extent relative to peer age women. But the bigger distinction is relative to older men. That is The age at which a man is at the earnings where he can clearly communicate stability is older than it used to be. The second biggest factor, and I do think this one's really important, is the rise of smartphones. There's two ways smartphones can matter. One is maybe they like transfer around different ideologies and norms, et cetera. But I think the biggest one is their role in social incapacitation, that basically people don't socialize anymore. Just earlier this week, I was looking at the American Time Use Survey data, looking at the amount of time that

29:35people of different ages spend outside of house, work and school with friends. Teenagers, 15 to 17 year olds used to spend something like 10 hours a week doing this. Now it's like less than two. Teenagers actually spend less time hanging out with friends than the parent age group does. On a Friday night, the parents are more likely to have plans than the teenagers are. And I just think that's pitiful.

30:00But also, I think this is why marriage is declining. Marriage is a matching problem. And to match, you need to burn through a lot of lower quality matches along the way. I should be clear. When I say burning through a lot of matches, I don't mean like having sex with everyone you meet. The main way you swipe left on someone in the real world is you just talk to them for five minutes and then decide, no. I would think, however, that dating apps via cell phone would be an antidote to that. Why is it not?

30:25Well, the main things you match on aren't actually things that you can see on a profile. There's a kind of chemistry and compatibility that you work through in person. It's not just finding a good match. Often you don't know what a good match is. You think you do, but then you're hanging out a party and in one party, you essentially swipe on 40 people. And then you find, oh, this person, we actually hit it off. And maybe it surprises me, right? If you'd asked like 17 year old Lyman to describe his ideal wife, you know, would I have predicted the woman I actually fell in love with and married? I don't know.

30:55Let's hear the difference. What would you have predicted and who did you actually marry? You know, I think I have to plead the fifth on that. There is some empirical evidence to back up Lyman Stone's claim about the smartphone. Caitlin Myers and Zekele Hooper of Middlebury College recently published a working paper called Is the iPhone Earth Control Causal Evidence from AT&T's 2007 to 2011 Carrier Monopoly.

31:27The paper attributes a significant drop in the fertility rate, especially among women in their 20s, to the iPhone rollout. So would a smartphone ban boost fertility? Maybe, but that's not likely to happen. However, governments around the world have been offering financial incentives to boost fertility, like cash bonuses and tax credits. I asked Lyman Stone which of these have been successful and not.

31:55When I say most successful with this one, I don't necessarily mean the effect is biggest. I mean, if you do this, you will get more babies, and that is throw money at the problem. I'm working on a meta-analysis right now that I'm going to be publishing soon where we have hundreds of effect estimates of what happens when you just pay people to have kids, a bigger child tax credit, a baby bonus, a child allowance, whatever. And the result is you do get more babies. It's reliable. It's a persistent effect. It occurs across study qualities.

32:22And it's not just changing the timing. It's actually increasing the volume. It does change the timing, but it's not only changing the timing. The other thing is tempo effects are fine. If you think about it this way, a society that has two kids on average and has them at age 20 is always going to have faster population growth than a society that has two kids on average at age 30. But if you're a government concerned about social security, tempo effects are still a win. So these cash benefits, they do work. Now, what I would say is They'll drive you bankrupt if you try and solve the whole problem that way. The price tag for like the US to buy our way to replacement fertility would be like $150,000 check for every baby. Like the baby's born years $150,000. I would not advise doing that for like a lot of reasons. It's something like 4% of GDP is what you pay for it. So then the question is, could you pay for it another way? And the answer is yes, you could. Oh, how's that?

33:19We live in a world that has a magical force that makes money called the stock market. So all you've got to do is when a baby is born in your country, you put some money in an investment fund, maybe $5,000, maybe $10,000. And then when they have a baby, they get that account at its matured value. And by the way, if you marry another person who is also born in the same country and has that benefit, then you both get it.

33:47You very quickly realize, oh, I can give you a hundred thousand dollar baby bonus per kid for like, you know, like 0.4% of GDP spend on the front end. What's this called and where has it been tried? No one has tried it. There's a proposal to do it in Finland right now called Volvo Sampo, which is a delightful finish word that sounds like some elvish technology.

34:09And it actually is a reference to the Kalevala, this Sampo device that Vainemouyan uses. But if you're not into Finnish mythology, it basically means baby factory. So there's a proposal to do this. I think it's a fantastic idea. Full disclosure, I'm one of the authors on the papers advancing it. What do you think of the Trump version of funding for babies born?

34:29the Trump accounts? I mean, look, I'm all for giving some money to parents. I think it's a lovely thing just because I'm a parent and I'm greedy. But at the end of the day, putting a thousand bucks in an account that the kid just gets for, it's like just turning 18, right? That does nothing. That doesn't create any new incentive for fertility for anyone. So the pro natalist demographer thinks that throwing money at the problem will work. But what would an economist think? Here's Melissa Carney.

35:02What the empirical evidence shows is that the types of incremental policies that might be considered pro-natalist, baby bonuses, tax credits, tax incentives, expanded parental leave, expanded subsidies to childcare. The best evidence is that on fertility effects, it's like null to small. There's lots of reasons to do this. It makes people's lives easier. It gives resources to young families with kids. And there's lots of benefits for having more resources, especially for those who are economically disadvantaged. But in terms of increasing fertility, none of these things have really meaningfully increased fertility in a sustained way. OK, let's double check the math with another economist. Paying people to have kids is not very effective. That is Nick Bloom at Stanford.

35:57I mean government policies in the US to increase fertility you know where to start is a mess the current administration talks a lot but doesn't seem to actually do anything to try and promote fertility the things that have historically been tried is one is tax breaks and paying people that is just phenomenally ineffective and if you also look at where those kids tend to show up they tend to show up in low-income households that already have a large number of kids often single parent households so is expensive and it's maybe not where you want to be generating extra kids. But Bloom has identified something that does boost fertility. This is just the most obvious policy you want to be doing. If you want to increase fertility, it's free and it works. I mean, what else would you want? Whereas most policy is costly and doesn't work. What's the free, effective fertility booster that Nick Bloom has found?

36:53That's coming up after the break. I am Stephen Dubner and this is Freakonomics Radio. The Stanford economist Nick Bloom has been on the show before, most recently in a 2022 episode called The Unintended Consequences of Working from Home. This is a topic that he continues to research. Five percent of days in the U.S. will work from home pre-pandemic. It was 60 percent of the peak of the lockdown. It's now set at about 25. We've had about a five-fold increase.

37:36And most people are aware now that's permanent. Tell us what you learned about the characteristics of a person who will either benefit from or want to work from home versus someone who doesn't benefit from or doesn't want to. I'm guessing that the preferences here are extremely what you economists like to call heterogeneous, yes? I'll give you three characters, which have different views. So character one is I would say like a 22 year old new college grad like my undergrads that just started work typically they want to go into the office four days a week they'll say look it's more sociable i want to learn like where am i going to work from home i'm sharing an apartment with four friends i don't want to be in my bedroom 24 hours a day character two is almost the exact opposite so if you think of a 35 year old with two or three young kids

38:28they will say, look, I maybe only want to go in one day a week. Why? Well, they've had a lot of mentoring and experience already. They have a nicer house. They live further out and they want to, you know, they have a life that's very focused outside work as well. So they're the opposite end. And then you get a bit of a snapback. Look, I'm 52, kind of my age upwards. They tend to be heading back in towards the office to some extent because they're empty nesters. So they tend to be, you know, I'd like to come in three, but I'd like Monday and Friday at home because it reduces commuting.

38:56If I had asked you, Nick, what would you say are on average the main knock-on effects of work from home that might surprise a lot of people? What would those be? Work from home has just changed everything. One, the housing market. It seems obvious, but it's had enormous effects. It's pushed down relatively prices in city centers, pushed them out in the suburbs because folks are now like, I'll put up with an hour commute if I've only got to go in three days a week. It's affected leisure.

39:24It's generated a boom in golf because people can play in the week at a boom in gyms. It's even affected crime. There's a study that shows there's less suburban burglaries because no one wants to break in if there's somebody working in the living room or even the neighbour is working can see what's going on. It's had a very positive effect on health. I'm working in a study right now showing that it's reduced pollution because there's less commuting.

39:48And you can link it to something like a thousand less deaths a year in the US. Because remember where that pollution shows up? It typically shows up in city centers. The center of New York, the center of San Francisco, is now less polluted because of less driving. OK. So those are some pretty significant knock-on effects of the work from home revolution. But in a new research paper, Bloom and several co-authors identified what you might call a knock-up effect. The paper is called Work from Home and Fertility.

40:16A group of us spanning across the US, Mexico, across Europe decided to look at how work from home would affect fertility. And many people have made comments about it's easier to look after kids when you're home. It's easier to conceive when you're home. And so the question is, does this show up in the data? What did you see as the particular challenges of gathering data to answer this question? One of the issues is because work from home wasn't very common before the pandemic, not many people were measuring it. So, you know, national statistics agencies just didn't have any data on it. So, we really went after collecting data from 40 countries on levels of work from home. And you kind of think, why are you at it? Why are you running these surveys? You might as well collect some other data. And one of the natural things is, how many kids have you had? Do you have any kids now? Do you have plans to have kids in future? OK. So, tell us what you found. Globally, if both members of a couple work from home at least one day a week,

41:15You see they have a third of a child extra. In the U.S., that's almost half a child extra. These are really huge effects. Given the U.S. baseline fertility rate is 1.7, if you take a couple that are both going to the office five days a week and now they're both, say, working from home two days a week, we're predicting they would have something like 2.2 kids rather than 1.7. State the parameters again of how much both parents need to be working from home for that number.

41:40It turns out it's roughly 50% for each one. It's pretty even on men and women. Our sample is roughly 50%, men 50%. Women, we are only looking opposite sex couples. What happens if only one parent is working from home regularly? You get about half the effect.

41:57Perhaps surprisingly in the data we don't see much difference once you get one plus day a week at home. We were expecting that the more days you have at home, the higher the impact on or higher association I should say with fertility is. We don't see it. Walk me through what you think are the possible stories for why work from home infertility are so strongly linked.

42:18There are two stories here and many people jump to the obvious one which I'll start with. One is what I call the conception story which you know it is easier to conceive kids if you're working from home. You can't get pregnant by email. I mean that's a genuine thing. The second is the childcare channel that is just a lot easier to look after kids. That tends to show up in having more kids. The other interesting thing is the effect is less on having the first kid. It's more on having additional kids. And it's basically parents thinking, this is hard. And if both of us are working in the office five days a week, it's just too much to have another child. What about the selection story, though, and that the kinds of people who are most likely to either be able to or want to work at home are the same people who are most likely to want kids or more kids? That is right. There's kind of a push and a pull thing here.

43:10One reason could be, look, I'm working from home, therefore it's easier to have kids. You could also have the reverse, which is, I have kids and therefore I want to work from home. Your paper finds that work from home accounts for roughly 8% of US births. That's just under 300,000 a year. Am I reading that right? Yes. We estimate that there are 300,000 extra births a year in 23, 24, 25 because of the increase in work from home after the pandemic.

43:40If you look at the data, you can see a clear rise in fertility rates of 30 plus post-pandemic. And so I don't think it's that surprising. Why is total birth not gone up is because there's been a big drop in teenage pregnancies. But yeah, 300,000 extra births a year is a big change. It is not massive in the scheme of things because there are three and a half million births a year in America. So it's not going to generate a fertility explosion, but it's definitely pushing up rates in a sizeable way.

44:07If there's any policy that will move the needle on fertility that's feasible and it could be done tomorrow, it is allowing more work from home. For the opponents of work from home, whether they object on practical grounds or philosophical grounds or whatever it is, do you think that your finding that work from home boosts fertility might affect their arguments? Because I'm thinking or maybe guessing that a lot of those opponents are actually also in favor of a higher fertility rate. It's like the left side fighting the right side. The current US administration on the one hand is very into increasing fertility, this whole nativist thing that they want more kids. And then they're beating up on work from home when work from home is really the only effective and certainly free policy we know. So it just does not add up. I can't explain that.

45:01A recent working paper by the economist Andrew Johnston came to a different conclusion. He found a slight decrease among married college-educated women who work from home. Nick Bloom says he is puzzled by Johnston's results, and he disagreed with the methodology and how Johnston categorized work from home. With the spike in remote work being so new, the literature is still developing. I asked Melissa Carney about Nick Bloom's research.

45:30Work from home I think really allows people more of this flexibility in a sustained week-to-week way. It's also one of the cases where people who want to have kids are more likely to select into jobs that allow them to work from home. I think it's very instructive of this is the kind of thing we might want more people to have access to.

45:50Carney also wondered what else might be good for people to have access to if the goal is more babies. She and Lisa Detling, an economic researcher at the Federal Reserve Board, recently published a working paper called Can Housing Policy Raise Birth Rates? Lessons from Federal Mortgage Programs During the Baby Boom.

46:10The thought occurred to us that maybe if we could understand what drove the baby boom, we'll have some insight into what kind of conditions might turn around the current period. What's interesting about the baby boom is there is a very long literature on it. Economic historians have had a lot to say about it. There's a bunch of different explanations.

46:30My read is probably all of these things combined. We had very good economic conditions, post-war, people felt rich. There's lots of improvements in infant formula, maternal health, all of these things that would have pushed towards increased fertility. Pent up demand because of the war? That's what I always heard as a kid was, oh, you know, the soldiers came back from war and everyone made babies. But that's like a four year.

46:55episode. The Baby Boom is actually the 20-year period from 1940 to 1960. So it's actually much bigger than that. So we looked back at the Baby Boom. We had the National Housing Act of 1934, and we had the GI Bill of 1944. What those two acts did was created government-backed mortgages. That had the effect of completely transforming housing finance in a way that resulted in a dramatic increase in home ownership among young families. Tell me what it was like for a young family to buy a home before and after the FHA and VA-backed loan scheme. Before these government-backed mortgages, the share of 18 to 44-year-olds who owned a home was less than 20 percent because it required a really large down payment to be able to get a housing mortgage, a typical mortgage

47:52required 50 to 60% of a down payment. And that was just too much money for anybody outside of the upper income class to really be able to access. And the reason they required so much is there just wasn't as much credit offered by banks, is that right? That's a good question. I suppose it was just a matter of the risk. So what these laws did was basically the government was a backstop. Private lenders would put up their own capital.

48:20but then they'd have this government insurance. Now, what both the Housing Act of 1934 and the GI Bill did, though, was require these mortgages to have certain features, in particular, 20% or less of a down payment and fixed interest rates. And long-term, right? And they had to be long-term, fully amortizing.

48:42This could be instead of paying, let's say 50% down payment for a house that I want to buy and maybe a five to 10 year mortgage at a relatively high rate or an adjustable rate that I couldn't control. Instead, now I'm getting lower down payment, longer term controlled rate, correct? Yes, but the way to think about why this mattered so much.

49:05to young people, it was less about the monthly payments going down and more about you just didn't have to accumulate so much wealth and savings. And so that's really what we see is the life cycle profile of home ownership really shifted much earlier. So this sort of just took off. And of course, this is what mortgages look like now. This really transformed it. Okay. So tell me how this spike in home ownership affected fertility?

49:34Basically, for every thousand government-backed mortgages issued in a state in a year, the following year, there are 305 additional babies being born. Wow, one baby per three mortgages, extra baby. So we actually just checked in the 1960 census. It does look like about 35% of people who buy a home have a kid the year later. If you're worried about causality, you might worry, well, people take out mortgages when they want to have kids. And so what you're just showing me is this correlation to check that we implement an instrumental variable strategy where we isolate variation in the issuance of these government backed mortgages in a state in year based on supply side factors. We're stripping out the demand side factors and we exploit just supply side factors. And that gives us a very similar estimate. If anything, it's a little bit larger.

50:33You also did a falsification check having to do with redlining. Can you just explain that quickly? Yeah. So a horrible historical fact is that these government backed mortgages essentially wound up really being available to white couples or white adults who were going to buy in all white areas. And when you read the historical accounts on this, The Color of Law is a great book by Rothstein.

51:01It's quite explicit. It's explicit in the appraisal standards, banks basically in order to qualify for loans to build their suburban units. They had to promise they were going to build in white areas or sell to white families. Essentially, if this channel that we're proposing is a causal channel, we shouldn't see a meaningful or as large of a link for non-white births. And in all of our analyses, that's exactly what we see that this link between government-backed mortgages and fertility in the following year is really entirely driven by birth to white women. Okay, so government-backed mortgages drive a rise in fertility among white women at least, but what are the details or maybe nuances of that rise?

51:52Demographers have shown that the baby boom in the U.S. was, quote, unquote, achieved by people getting married and starting their childbearing at a younger age. Why were people getting married earlier and starting their families earlier? Well, we know they were buying houses at a younger age. Mind you, this is exactly the opposite of the trend we're seeing in the U.S. today and actually in other high-income countries today. Home ownership is not getting access till later.

52:20people aren't getting married until later, and people aren't initiating childbearing until later. This is one place where we actually do see young adults today in a worse economic position than previous cohorts of young adults. The share of young people under 45 who are homeowners, that has fallen post-great recession from around 40% to around 30%. Okay, let's recap because there are a lot of things going on at once here. We are currently looking at a significant fertility decline. There's also a fertility gap that is people who want one or more children but aren't having them. As we've been hearing today, there are a lot of potential drivers of that gap. So how about solutions?

53:21Since work from home boosts fertility, should we be boosting work from home? Should the focus be on affordable housing? I went back to the pronatalist demographer Lyman Stone, and I asked how hard he wants to lean on the housing side of things. I think housing is extremely important, not because it's the biggest cause of declining fertility, but because it's a place where we can make solutions. It is very likely if we could make family-friendly housing, more affordable and more abundant, that we would actually get more marriages and more babies. And there's so much about fertility that we don't know what would work. But on housing, we have enough of literature, enough evidence to think this will probably work. So if better housing policy is one way to shrink the fertility gap, how hard can better housing policy be?

54:18There was one town that defined a wetland as any wicked big puddle. So, you know, there are lots of different ways to say no. That's coming up next week in part two of this series. Also, we would love your help in a future episode we're making about healthcare costs. I want to know if your healthcare has gotten more or less affordable in recent years. I'm wondering if you've ever traveled overseas for cheaper care. Has your insurance influenced a recent medical decision?

54:48If you would like to lend us your voice, please use your phone to record a voice memo and send it to radio at Freakonomics.com with the subject line healthcare costs. Please make sure to record in a quiet place with your voice close to the phone. Be sure to say your name, where you live and what you do. Thanks so much in advance for that. We will be back next week with more housing and fertility. Until then, take care of yourself. And if you can, someone else too.

55:19Freakonomics Radio is produced by Renbud Radio. You can find our entire archive on any podcast app. It's also at Freakonomics.com where we publish transcripts and show notes. This episode was produced by Teo Jacobs and was edited by Ellen Frankman. It was mixed by Jake Loomis with help from Jeremy Johnston. The Freakonomics Radio staff also includes Claire Keenan-Kirgen, Dalvin Abouwaji, Eleanor Osborn, Elsa Hernandez, Emma Keisner, Pete Madden, and Tessa Troitline. Our theme song is Mr. Fortune by the Hitchhikers and our composer is Luis Guerra. As always, thank you for listening. Yes, so the most simple thing to do is coordinate your days in. I had a friend of mine and she said she comes in Monday, Friday and I said, post unusual days to come into the office and she said, well, I don't like my colleagues. The Freakonomics Radio Network, the hidden side of everything.