Covid’s WFH revolution helped fuel a baby boom

By Alicia Wallace, CNN Business

Economic factors, not just lockdown-induced forced proximity, played a key role in last year’s “baby bump,” according to the economists behind a new working paper released earlier this week.

Economists from UCLA, Northwestern and Princeton universities found that pandemic trends, such as increased work flexibility, helped push up US birth rates last year to 6.2% from pre-pandemic levels, marking the first major reversal in declining fertility rates since 2007 and counteracting a longstanding economic certainty: Birth rates don’t increase during economic downturns.

“It’s really remarkable, because it’s the first recession where we see fertility going up rather than down,” said Hannes Schwandt, a health economist at Northwestern University, who co-authored the report with Martha J. Bailey, from UCLA, and Janet Currie, from Princeton.

While a recession is typically defined as a prolonged period of economic decline marked by high unemployment, the Covid-19 recession of early 2020 was unlike any other. As a result of the lockdowns, the unemployment rate quickly surged to almost 15% but those job losses were followed by months and months of robust gains.

In addition, the US government and the Federal Reserve doled out billions of dollars to support the economy which, in turn, pushed up home prices and the stock market, helping to shore up household and business finances.

The birth rate bump was most noticeable among first births and women under 25, which suggests that the pandemic led many people to start families sooner, wrote Bailey, Currie and Schwandt. The baby bump was also pronounced among women aged 30 to 34 and those between the ages of 25 and 44 with a college degree.

The latter group was more likely to retain their job during the pandemic and work from home.

“That goes right back to the classic economic theory that you need income, you need money to have children, because they’re expensive; but more importantly, you need time,” Schwandt said. “For young, professional, high-skilled women in childbearing ages, time is probably the scarcest resource they have.”

The 2021 increase in the birth rate followed a sharp drop in 2020. While that decline was initially attributed to behavioral changes spurred by economic uncertainty and job losses caused by the pandemic, it was subsequently attributed to fewer births from mothers born outside the United States, the researchers found.

The declines reflected “travel restrictions, health concerns and the sudden disappearance of economic opportunities for migrants,” they wrote. “Among US-born mothers, there is little evidence of a protracted baby bust.”

The findings highlight the significance of foreign-born women boosting US fertility rates as well as the importance of lower “opportunity costs” that made it more feasible for working women to have children, according to the study.

The pandemic helped to expose the critical role the child care industry serves in bolstering labor market participation. A reduction in care options kept many people from reentering the workforce, compounding some of the job losses of women disproportionately affected by heavy service-sector layoffs and who remained out of the labor force to shoulder care responsibilities.

The results of the research show how the large time costs of child rearing serve as an important driver of fertility rates and suggest that measures to ease those costs — including improving child care and allowing parents more flexibility to work from home — might be associated with higher future fertility, according to the paper.

That knowledge could be particularly salient in a time when labor participation rates have fallen in part to the retirements of the massive Baby Boomer generation, Schwandt added.

“The US has experienced declining fertility rates now for over a decade, and this has been a concern to many policymakers,” he said. “We can analyze this big change in society and then we can learn from this and how some of those [developments] were actually useful for highly educated, young, professional women and the labor force, and maybe we should try to learn from that and continue those changes.”

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