It's unclear to me that "plain old growth" is going to get people into a higher-fertility lifestyle bucket unless and until it's accompanied by progress in addressing the Baumol cost disease for childcare. Right now, very high income people can afford a great deal of help raising their kids, freeing them up to still do all the other things they want to do with their lives in parallel. At the tippy-top, this includes the "farm them out to live-in nannies/governesses" strategy that used to be the normal way for rich people to handle childcare.
But that strategy is so labor intensive that it's logistically impossible for a majority of the population to adopt it. If I were a pro-natalist venture capitalist, I would try and fund companies working on robot diaper changers and the like; that's the only really long-term-sustainable way I can see to make the great mass of people substantively rich enough that they feel like having kids is relatively cheap and easy.
Another intuitively pro-natal progress direction, ISTM, is healthspan and fertility-span extension. Part of the opportunity cost of kids is that you only get one life, and one youth, and having kids means navigating a quite narrow fertility-vs-career timing tradeoff and spending a large chunk of your most energetic and enjoyable years burdened by raising young children. If people could confidently expect 100 years of healthy, outgoing life, and women could reliably and healthily have kids up to age 50, that would make it a lot easier to "have our cake and eat it too". And since some lucky people *do* already get that much life and fertility, it's at least in principle possible for many more people to do so.
Double "like" for the healthy life extension "solution." I think it is especially important for women so that an x year career interruption for child rearing is a low portion of the total career..
Definitely agree that baumol's cost disease is important and that life extension would be helpful for avoiding population collapse in many ways.
The only thing I think is a bit inconsistent with your first claim is that the time spent on child care is also higher for wealthier parents. This suggests they aren't just using higher wages to work and pay for outside childcare, but that they are using high incomes to buy their own time back and use it on providing childcare themselves.
Yeah, that is counterintuitive and interesting if true! Here are some deeper dives I would want to do on that:
1. See whether Lyman Stone thinks that those time use figures are believable -- he is not always right but always worth listening to about these kinds of studies.
2. Break it down by ages of kids. Preschool age child care is a very different beast from ages 5+ and my anecdotal belief is that preschool ages are where money currently buys the most labor intensive outsourcing, and 5+ is when people are most likely to instead buy more leisure time to spend with their kids.
3. Figure out where this time is coming from. Are wealthier parents working fewer hours? Are they eating more takeout so they spend less time cooking? Or what else are they doing less of?
You can currently improve on the labour productivity of child rearing (compared to either individually hiring nannies or having a stay-at-home-parent) through free or highly subsidized daycare and preschool systems. There's a reason the rest of the economy shifted from home-craft production shifted to division of labour. It's obviously a limited boost to productivity (caregiver-to-child ratios are inherently limited), but it's one that can be scaled to the entire population with enough state resources. If that's the price to pay for not only ensuring that people can afford to have the family size they want, but also that humanity can continue to perpetuate itself and even grow with time, in the long-run that's a price worth paying. Raising children has enormous positive externalities for the rest of society, yet we expect parents to internalize all the costs of deciding to have kids.
Good analysis, Max. Incidentally, my last two posts have been about family-unfriendly land use policies that reduce the availability of housing and childcares. The intent was to explain why young families or those who want to have families flee to the suburbs, but your analysis supports how a dearth of housing and childcare would also reduce fertility for those at the bottom of the U-curve, where they have enough money to live nice childless lives but not enough to support families.
This is a cool analysis but I think things might change for the younger generation (where we see an unprecedented increase of childless women at age 30)
Yes, I worry about the self reinforcing culture of childlessness. I hope that the US has a strong enough pro-natal contingent and enough culturally insulated diverse groups to avoid the worst of this.
Speaking also from personal experience, I share the suspicion that affluent households may be more willing to have kids not because they are in the downward sloping part of the labour supply curve but because they can afford to buy childcare services, especially to deal the less rewarding aspects of childcare (while maintaining those aspects that are more complementary to leisure, eg travelling the world with the children). This would be consistent with the fact that working hours have not declined - actually the opposite - for highly paid professionals in spite of economic growth. When reading Keynes’ prophecy about the economic possibilities of future generations I wondered whether he applied the same logic to his own ‘work’’ and that of his peers. Any reader familiar with his writings would also know that he took for granted that he and his peers would always have servants at their disposal (even if did not have children).
One thing I think is a bit inconsistent with your claim here is that the time spent on child care is higher for wealthier parents. This suggests they aren't just using higher wages to work and pay for outside childcare, but that they are using high incomes to buy their own time back and use it on providing childcare themselves.
But yes it's definitely true that wealthier parents also buy more childcare services.
Wonderful piece Maxwell explaining how economic growth *check notes* may paradoxically lead to high fertility rates in the future. If you are correct, the dire consequences that I have written about may not play out….
I will certainly update my future write up on demographics with some of these insights for Risk & Progress.
I am a little suspicious of this just because there are so many correlates of living in an expensive regulated city that also have an effect of fertility: childcare costs, wages, education.
I would also agree with [insert here] that deregulating housing does not necessarily mean less space for housing in cities. It does mean more density, but everyone can increase their home size in the same land area by building up a lot more.
And!! The most immediate thing is that childless younger couples, à fortiori singles, and olders, can live in smaller units, freeing up existing bigger units for young families
Good point, I guess two incomplete answers would be to focus on increasing surface area and quality at least as much as total units (happily, it seems pretty clear that less regulated housing would include at least some bigger units) and that the income effect might dominate the density effect.
There are several issues here, internal and external.
1. People with high incomes (over 200k USD/year) are different from ordinary people. They are older and more male, more intelligent, and they have higher ability to defer gratification, and they are far less likely to be single parents. Old males with high incomes and other social prestige are able to choose mates who are willing to bear more children, so maybe there is a male preference for higher fertility. Maybe.
2. The U shape suggests that children are a lower priority than other goods. They are acquired only after other desires have been met, or if those other desires can not be met. As some of these other desires are for positional, zero sum goods, like choice of neighbourhood or access to the best schools or holiday destinations, it is not possible to generalise from high status families to the population at large.
3. Parents in high-income households can afford help with childcare and household management, reducing opportunity costs for them as much as they desire. If all incomes rise, including those of home help, then modal households will still face high opportunity costs.
4. Desire for children is culturally determined. (Those with low impulse control get them by accident, of course.) Economic tools are not sufficient for diagnosing the situation because they take desires as fixed and exogenous. To increase fertility, make child-raising a high prestige activity.
"[C]hildcare is a complement to many leisure activities rather than a substitute." This is very dad-coded to me.
I think the mechanism by which higher income/education = more hours providing childcare is that more intelligent/ambitious mothers have a different standard for childcare than is available in the paid childcare market. That is, there is a big quality difference between having a high school educated daycare/aftercare worker shepherding your child through the day than a college educated mother who has certain expectations of enrichment, discipline, nutrition, etc. For example, I don't think parents homeschool or do Kumon with their children because it is "leisure".
the politically feasible approaches are not materially realistic and visa versa.
The financially/economically/technologically realistic approach is to have confiscatory top marginal tax rates that kick in at relatively low levels, then have those rates come down closer to US red state tax rates based on the number of children the earning couple has.
First, I would like to see confidence intervals on the chart titled Total Fertility Rate by Income Group. Second, I wanted to bring up a point I have been considering associated with population decline. I wonder if an increase in the "productivity," of the portion of the population that is now not productive could more than offset a decrease in the population. I use the word "productive," for lack of a better term. I'm referring to people who for whatever reason have lives that could be more satisfying, like people living on the streets or working in jobs that do not use their full potential. If these people could somehow become more "productive," and I also certainly also mean happier and "self actualized," then couldn't the economy continue to grow, and couldn't more innovations be conceived and actualized? In other words, if a society somehow helps the disadvantaged and underemployed, could this be a supplement or even an alternative to pro-natal policies? I hope my point comes across despite the clumsy language.
The elephant in the room and the uncomfortable question...
How many of those high income households have asymmetrical income earning by the spouses, where one brings home the majority of the bacon, allowing the other to be a full time child rearer?
And also if the incomes are asymmetrical, then how many of unions were done not for economic necessity (ie we need to partner up to afford rent, mortgages, together, and thus need two incomes) but partners chosen for having children in mind?
Wealthy people have more kids as they can afford more help and space. Simple. I don't think it follows that societies as a whole can afford more help and space as they become wealthier as those are distributional issues. There isn't an endless supply of nannies or 5 bedroom appartments to go after.
AI progress has been so rapid that I don't think it's unreasonable to assume AI will be able to at least alleviate this problem, if not solve it completely. I think this is true even if one is relatively conservative about future AI capabilities.
In addition to AI, other solutions will also likely be technological. Some of them coming in the not too distant future are artificial wombs, household robots capable of doing domestic tasks, and embryo selection/genetic editing, which will allow for continued innovation and growth, even with fewer people, because these technologies will dramatically increase the human capital of the population.
Regarding the cultural aspect of fertility, I think the way that culture will become more pro-natalist is through these technologies. Now, if one were to think of a way to transform culture without these technologies, I would say the best bet would be for the government to offer a huge amount of money to parents to have children. Basically, if having children was a short-term and long-term net positive financial decision for the middle class and upper class, then this could end up turning the culture in a pro-natalist direction.
It's unclear to me that "plain old growth" is going to get people into a higher-fertility lifestyle bucket unless and until it's accompanied by progress in addressing the Baumol cost disease for childcare. Right now, very high income people can afford a great deal of help raising their kids, freeing them up to still do all the other things they want to do with their lives in parallel. At the tippy-top, this includes the "farm them out to live-in nannies/governesses" strategy that used to be the normal way for rich people to handle childcare.
But that strategy is so labor intensive that it's logistically impossible for a majority of the population to adopt it. If I were a pro-natalist venture capitalist, I would try and fund companies working on robot diaper changers and the like; that's the only really long-term-sustainable way I can see to make the great mass of people substantively rich enough that they feel like having kids is relatively cheap and easy.
Another intuitively pro-natal progress direction, ISTM, is healthspan and fertility-span extension. Part of the opportunity cost of kids is that you only get one life, and one youth, and having kids means navigating a quite narrow fertility-vs-career timing tradeoff and spending a large chunk of your most energetic and enjoyable years burdened by raising young children. If people could confidently expect 100 years of healthy, outgoing life, and women could reliably and healthily have kids up to age 50, that would make it a lot easier to "have our cake and eat it too". And since some lucky people *do* already get that much life and fertility, it's at least in principle possible for many more people to do so.
Double "like" for the healthy life extension "solution." I think it is especially important for women so that an x year career interruption for child rearing is a low portion of the total career..
Definitely agree that baumol's cost disease is important and that life extension would be helpful for avoiding population collapse in many ways.
The only thing I think is a bit inconsistent with your first claim is that the time spent on child care is also higher for wealthier parents. This suggests they aren't just using higher wages to work and pay for outside childcare, but that they are using high incomes to buy their own time back and use it on providing childcare themselves.
Yeah, that is counterintuitive and interesting if true! Here are some deeper dives I would want to do on that:
1. See whether Lyman Stone thinks that those time use figures are believable -- he is not always right but always worth listening to about these kinds of studies.
2. Break it down by ages of kids. Preschool age child care is a very different beast from ages 5+ and my anecdotal belief is that preschool ages are where money currently buys the most labor intensive outsourcing, and 5+ is when people are most likely to instead buy more leisure time to spend with their kids.
3. Figure out where this time is coming from. Are wealthier parents working fewer hours? Are they eating more takeout so they spend less time cooking? Or what else are they doing less of?
https://twitter.com/lymanstoneky/status/1776598894316581313
You can currently improve on the labour productivity of child rearing (compared to either individually hiring nannies or having a stay-at-home-parent) through free or highly subsidized daycare and preschool systems. There's a reason the rest of the economy shifted from home-craft production shifted to division of labour. It's obviously a limited boost to productivity (caregiver-to-child ratios are inherently limited), but it's one that can be scaled to the entire population with enough state resources. If that's the price to pay for not only ensuring that people can afford to have the family size they want, but also that humanity can continue to perpetuate itself and even grow with time, in the long-run that's a price worth paying. Raising children has enormous positive externalities for the rest of society, yet we expect parents to internalize all the costs of deciding to have kids.
Good analysis, Max. Incidentally, my last two posts have been about family-unfriendly land use policies that reduce the availability of housing and childcares. The intent was to explain why young families or those who want to have families flee to the suburbs, but your analysis supports how a dearth of housing and childcare would also reduce fertility for those at the bottom of the U-curve, where they have enough money to live nice childless lives but not enough to support families.
Housing: https://www.ryanpuzycki.com/p/cities-arent-for-families
Childcare: https://www.ryanpuzycki.com/p/who-cares-about-childcare
This is a cool analysis but I think things might change for the younger generation (where we see an unprecedented increase of childless women at age 30)
Yes, I worry about the self reinforcing culture of childlessness. I hope that the US has a strong enough pro-natal contingent and enough culturally insulated diverse groups to avoid the worst of this.
Speaking also from personal experience, I share the suspicion that affluent households may be more willing to have kids not because they are in the downward sloping part of the labour supply curve but because they can afford to buy childcare services, especially to deal the less rewarding aspects of childcare (while maintaining those aspects that are more complementary to leisure, eg travelling the world with the children). This would be consistent with the fact that working hours have not declined - actually the opposite - for highly paid professionals in spite of economic growth. When reading Keynes’ prophecy about the economic possibilities of future generations I wondered whether he applied the same logic to his own ‘work’’ and that of his peers. Any reader familiar with his writings would also know that he took for granted that he and his peers would always have servants at their disposal (even if did not have children).
One thing I think is a bit inconsistent with your claim here is that the time spent on child care is higher for wealthier parents. This suggests they aren't just using higher wages to work and pay for outside childcare, but that they are using high incomes to buy their own time back and use it on providing childcare themselves.
But yes it's definitely true that wealthier parents also buy more childcare services.
Wonderful piece Maxwell explaining how economic growth *check notes* may paradoxically lead to high fertility rates in the future. If you are correct, the dire consequences that I have written about may not play out….
I will certainly update my future write up on demographics with some of these insights for Risk & Progress.
Thanks for reading and commenting!
I think it's still a pretty open and important question but I hope I am right!
General Agreement
Here is my view:
https://thomaslhutcheson.substack.com/p/population-fear-of-falling
I'd like to push back against the idea that rising pc income reduces pc growth. Why should it?
What is pc income?
pc is per capita in the context of economic analyses.
I very much hope it's true that we can grow our way to higher fertility, but I fear higher density/YIMBY may be bad for fertility, as Sam and Lyman have noted https://reasonalone.substack.com/p/yimby-is-probably-bad-for-fertility https://x.com/lymanstoneky/status/1775154652452999259?s=20
I am a little suspicious of this just because there are so many correlates of living in an expensive regulated city that also have an effect of fertility: childcare costs, wages, education.
I would also agree with [insert here] that deregulating housing does not necessarily mean less space for housing in cities. It does mean more density, but everyone can increase their home size in the same land area by building up a lot more.
And!! The most immediate thing is that childless younger couples, à fortiori singles, and olders, can live in smaller units, freeing up existing bigger units for young families
Good point, I guess two incomplete answers would be to focus on increasing surface area and quality at least as much as total units (happily, it seems pretty clear that less regulated housing would include at least some bigger units) and that the income effect might dominate the density effect.
Yeah I'd like to do that. Not sure the fertility effect is genuine though https://x.com/lymanstoneky/status/1775579103363514795?s=20
I was able to replicate it from the income brackets in this 2022 CPS data table (https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-finc/finc-01.2022.html#list-tab-650840761) by graphing mean number of related children by household income.
It's not quite as extreme as the ACS graph but it's topcoded at 200k instead of 1mil and it is still U-shaped.
There are several issues here, internal and external.
1. People with high incomes (over 200k USD/year) are different from ordinary people. They are older and more male, more intelligent, and they have higher ability to defer gratification, and they are far less likely to be single parents. Old males with high incomes and other social prestige are able to choose mates who are willing to bear more children, so maybe there is a male preference for higher fertility. Maybe.
2. The U shape suggests that children are a lower priority than other goods. They are acquired only after other desires have been met, or if those other desires can not be met. As some of these other desires are for positional, zero sum goods, like choice of neighbourhood or access to the best schools or holiday destinations, it is not possible to generalise from high status families to the population at large.
3. Parents in high-income households can afford help with childcare and household management, reducing opportunity costs for them as much as they desire. If all incomes rise, including those of home help, then modal households will still face high opportunity costs.
4. Desire for children is culturally determined. (Those with low impulse control get them by accident, of course.) Economic tools are not sufficient for diagnosing the situation because they take desires as fixed and exogenous. To increase fertility, make child-raising a high prestige activity.
"[C]hildcare is a complement to many leisure activities rather than a substitute." This is very dad-coded to me.
I think the mechanism by which higher income/education = more hours providing childcare is that more intelligent/ambitious mothers have a different standard for childcare than is available in the paid childcare market. That is, there is a big quality difference between having a high school educated daycare/aftercare worker shepherding your child through the day than a college educated mother who has certain expectations of enrichment, discipline, nutrition, etc. For example, I don't think parents homeschool or do Kumon with their children because it is "leisure".
the politically feasible approaches are not materially realistic and visa versa.
The financially/economically/technologically realistic approach is to have confiscatory top marginal tax rates that kick in at relatively low levels, then have those rates come down closer to US red state tax rates based on the number of children the earning couple has.
First, I would like to see confidence intervals on the chart titled Total Fertility Rate by Income Group. Second, I wanted to bring up a point I have been considering associated with population decline. I wonder if an increase in the "productivity," of the portion of the population that is now not productive could more than offset a decrease in the population. I use the word "productive," for lack of a better term. I'm referring to people who for whatever reason have lives that could be more satisfying, like people living on the streets or working in jobs that do not use their full potential. If these people could somehow become more "productive," and I also certainly also mean happier and "self actualized," then couldn't the economy continue to grow, and couldn't more innovations be conceived and actualized? In other words, if a society somehow helps the disadvantaged and underemployed, could this be a supplement or even an alternative to pro-natal policies? I hope my point comes across despite the clumsy language.
The elephant in the room and the uncomfortable question...
How many of those high income households have asymmetrical income earning by the spouses, where one brings home the majority of the bacon, allowing the other to be a full time child rearer?
And also if the incomes are asymmetrical, then how many of unions were done not for economic necessity (ie we need to partner up to afford rent, mortgages, together, and thus need two incomes) but partners chosen for having children in mind?
Wealthy people have more kids as they can afford more help and space. Simple. I don't think it follows that societies as a whole can afford more help and space as they become wealthier as those are distributional issues. There isn't an endless supply of nannies or 5 bedroom appartments to go after.
Great piece! But will rising incomes push fertility rates above replacement level? Most rich couples might opt for only one or at most two children.
AI progress has been so rapid that I don't think it's unreasonable to assume AI will be able to at least alleviate this problem, if not solve it completely. I think this is true even if one is relatively conservative about future AI capabilities.
In addition to AI, other solutions will also likely be technological. Some of them coming in the not too distant future are artificial wombs, household robots capable of doing domestic tasks, and embryo selection/genetic editing, which will allow for continued innovation and growth, even with fewer people, because these technologies will dramatically increase the human capital of the population.
Regarding the cultural aspect of fertility, I think the way that culture will become more pro-natalist is through these technologies. Now, if one were to think of a way to transform culture without these technologies, I would say the best bet would be for the government to offer a huge amount of money to parents to have children. Basically, if having children was a short-term and long-term net positive financial decision for the middle class and upper class, then this could end up turning the culture in a pro-natalist direction.