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Accumulated Income and Fertility Martin Kolk1 Abstract Accumulated income and fertility Martin Kolk1 Abstract: Research on income and fertility has largely focused on either the cross- sectional relationship between income and current number of children, or the income the year before child bearing. In the current study, I introduce a novel and superior measure on the relationship between income and earnings in relation to childbearing to asses if poorer or richer individuals have more children. Accumulated income histories are calculated and presented for men and women in contemporary Sweden for cohorts born between 1940 and 1970 using administrative register data. It is shown how income is related to completed fertility and parity, for two different operationalization of income; disposable income, and earnings. There is a strong positive gradient between accumulated income for men for all cohorts, and the gradual transformation from a negative to a positive gradient for women. 1 [email protected] Demography Unit, Department of Sociology, Stockholm University; Center for the Study of Cultural Evolution, Stockholm University; Institute for Future Studies, Stockholm Please consult with the author before circulating or citing 1 Introduction The relationship between income and fertility is a classical topic in demography. In the current manuscript, I use longitudinal Swedish register with over 44 years of yearly income histories to calculate to relate accumulated income over the life course to fertility outcomes at ages 20 to 60. The usage of actual accumulated income over the life course is an ideal measure to assess whether rich or poorer individuals have more or fewer children, as it is a measure the accurately capture different wage trajectories, reduced formal labor participation following childbearing and income penalties related to childbearing. I focus on differences by gender, and how this has changed over time, which is essential given changes in female labor force participation over the period. I present detailed differences on different income levels at different parts of the life course, with a particular focus on parity differences in number of children. Men and women who are childless or have, 1, 2, 3, 4, or 5 children differ substantively in income trajectories. I also examine how mean fertility change across the entire life course income distribution, providing evidence both for men and women with very low income, as well as the top 1 and 5% of incomes. The longitudinal scope, and life course measurement provides several advantages over earlier research on the topic, and the study evidence of a positive association between fertility and income, that grows stronger over time. The pioneers of social science in the 19th century such as Galton and Pearson were interested in the relationship between income and fertility, and throughout the 20th century the topic was of continuing interest for social scientists. The relationship is also central in theorizing on the relationship between the economy and population growth by classical economists and demographers such as Thomas Malthus and David Ricardo, and has in since the 1960s once again been a major topic in labor economics. Throughout the 20th century until today, demographers have continued to examine how fertility is related to various dimensions of social status. Most previous research on income and fertility can broadly be divided as two falling into two parts: – How does income affect childbearing? – How does having children affect income? 2 What I do in this study is to examine to joint effect of these two effects by looking retrospectively at completed fertility, to avoid endogeneity issues, and asses the overall bivariate association between fertility and accumulated income. To my knowledge, the relationship between accumulated income and fertility has never been assessed using empirical data in previous literature. – How does total income associate with fertility? In other words, do rich or poor people have more children over the life course The study question directly answer one of the major questions in the social sciences, often referred to as the degree of differential fertility. It is plausible that the effect of income on fertility decisions is more important than the effect of childbearing on income, at least in dual earner society with high penetration of government subsidized childcare such as Sweden. Below I summarize previous theorizing on how researchers have argued that the relationship between childbearing and fertility works. Does higher income increase childbearing? A different way to put the question of if fertility increases by fertility is:”does an increase in income increase the consumption of children?”. In general, more income and wealth leads to a greater possibilities to meet demands and desires for most aspects of life. In the words of economists the question is then if children are a “normal good“? As children are both very desirable for most people, and additionally very costly both in material resources and time this is an intuitive assumption. Expensive objects meeting these two requirements would typically behave as “normal goods” in which the demand for quality and quantity of children would increase with income. Classical demographic theory such as Thomas Malthus writing on population (Malthus, 1798) assumes that childbearing will increase with increasing income. In general, in historical societies and at lower levels of development the evidence for such a relationship is also robust (Galloway, 1988; Lee, 1987; Skirbekk, 2008). While the theoretical arguments for children to behave as a normal good are strong, overall industrial societies in the 20th century have instead shown a reverse pattern. In most 20th century population it has been repeatedly shown that higher income, and to an even greater extent education, has been negatively related to completed parity (Jones & Tertilt, 2008; Skirbekk, 3 2008). Based on such evidence, economists (most famously Gary Becker) have instead theorized as that children are very time intensive, and time is fixed for all parents (and is assumed to be non-substitutable, unlike most other goods), the relative cost of children increase with income (Becker, 1991; Becker & Lewis, 1974). In essence, the argument is based on the idea that a large part of the investment is based on parental time. Researchers assume that time in child rearing and paid labor cannot be easily substituted, or in other words, hired non-parent caregivers cannot replace parental caregivers. Higher income parents will therefore have a higher relative demand for leisure and other goods that poorer individuals, who on the other hand have a relative abundance of time. This leads to the relative cost of children being lower for lower income parents, and that they consequently have fewer. There are many variation of this argument (see Jones, Schoonbroodt, & Tertilt, 2010, for an excellent summary). In general a large number of assumptions have to be met for this argument to be true (Jones et al., 2010), most importantly that children require time investment that is not easily substitutable, and that there is a strong elasticity of substitution between leisure and childrearing (you have to choose between them). Does childbearing affect income? It is also possible that having children might influence income trajectories. This would be the second part of the two way relationship that cause an overall relationship between accumulated income and fertility. It is obvious that having children are labor intensive and as such compete with wage labor. Even with public childcare having children should compete with time in paid labor (as rearing children takes time), and if cultural norms do dictate parents (or wives) to stay home to take care of children, such effects have a dramatic effect on couple income. In countries with non-subsidized pre-school child care the financial costs for dual earner families are also very substantial. In all societies, parents must stay out of the labor market at least briefly, and even if parental leave is subsidized by the government this will reduce income and disrupt careers. Sociologists and economists have focused much on “fatherhood premiums” and “motherhood penalties” in the labor market as employees might change their behavior, and employers might also treat employees differently (Budig & England, 2001; Sigle-Rushton & Waldfogel, 2007). It seems clear from empirical evidence that there is a negative effect of having 4 a child on both labor supply and wages of women after the birth of a child (Cools, Markussen, & Strøm, 2017). It should be noted that a forward-looking individual with perfect information and a good idea on the effect of income on childbearing would consider all such factors when choosing both career and childbearing preferences. As such, assessing the empirical relationship between accumulated income and fertility should be informative for how people of different income (expectations) make fertility choices. It can be noted that as for example as that people know that children are expensive, individuals with a high desire for children, might work more and deprioritize leisure both before and after childbearing. Fertility, income, and selection Finally, and very importantly, groups can just differ in their desire for children for other (cultural, socialized, religious, etc) reasons, and these groups can also differ in their income. One would in such cases observe a relationship between income and fertility when not holding such group level factors constant, but once adjusting for such factors there would either be a positive or negative relationship between fertility and income (based on a researcher’s view of the underlying relationship). An economist would say that the taste for children differs for different groups. Such arguments have been used to explain the negative empirical relationship between income and fertility in the 20th century (Blake, 1968; Borg, 1989; Easterlin, 1969; Jones et al., 2010). An example might be that recent immigrants to a country both have high fertility norms, and lower income, and that this creates a spurious relationship between income and fertility.
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