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Unemployment, fertility, pensions

(… on the day of the dead, let's take care of the unborn …)

Alberto49, in a comment on the previous post, urged us to deal with pensions.

It seems like an excellent idea to me, especially since now, in my new role, I am forced to do it. Nemesis has hit me: I, who have always been largely uninterested in my future, am now forced to deal with that of everyone else! Therefore, I might as well share with you, to expose it to your peer review , the necessary study activity that my role requires.

I would start by sharing with you an idea, in particular a misconception: that demography is an exogenous variable with respect to economic processes, as it is determined exclusively or mainly by sociological and cultural factors. The idea, in short, that if "women no longer have children" (a phrase that I find rather hateful, because yes, it is clear that motherhood is first and foremost, by definition, a choice of the mother, but "having children" is usually inserted into a common family project), the blame would be, strictly speaking, female emancipation, with various declinations and nuances, ranging from the (objective) difficulties of reconciling motherhood with a career path, to more or less delusional about the selfishness (?) of modern women (considerations which also lend themselves to being expressed in an insidious and apparently less delusional progressive key).

The data, however, as I mentioned in a Facebook Live, tell us a different story, this:

The one in blue is an old friend of ours , the unemployment rate, which among other things has given us the satisfaction of unmasking the real hoaxes ( here : they still gnaw…). The one in orange is the Total Fertility Rate, i.e. the average number of children per woman (measured on the right scale). Yes, there were years in Italy in which "women had" more than two and a half children each (an example is my mother who "had" three). Those were the years in which unemployment fluctuated between 4% and 6%. Then things went as you can see. The correlation between the two series is -0.85, which means what you see: when unemployment increases, fertility decreases.

Could it be a spurious correlation, like the one between the number of marriages and swallows in the sky (there are still outliers )?

I don't think so, for two reasons: firstly, because under this correlation there is a good theoretical model whose validity each of you can verify (I hope not directly). To prepare yourself, not for procreation, but at least for its prerequisite, you need to have a clear head of thoughts, and not knowing if you will have enough to feed yourself tomorrow is not exactly an aphrodisiac and does not lead to expanding your family. Then, because the graph's intuition is supported by more accurate studies, like this one :

(note the emphasis on male unemployment).

I don't think there is a problem of the direction of the causal link. It can hardly be argued that the fact that fewer potential workers are born causes the fact that there are more unemployed people!

I limit myself to observing two things.

Meanwhile, in addition to the obvious "semi-secular" component of declining fertility and increasing unemployment, medium or short-term components are also clear. It is very clear, for example, that the decline in the unemployment rate from 1999 to 2007 is associated with a (timid) recovery in the fertility rate, while the season of austerity, which brought unemployment back beyond its maximum, brought fertility back to the minimum (reached at the previous maximum).

Then again, this stuff doesn't just concern Italians. I'll show you, on an unfortunately shorter sample because I don't have time to extend the series (good times when I had time…), how things are in a set of countries sufficiently different from each other to make understand that the phenomenon is quite ubiquitous. We find it in Mediterranean countries:

(correlation -0.89), in less Mediterranean countries:

(correlation -0.88), in countries without a pressing demographic problem:

(correlation -0.32, weaker but significant), etc.

Let's immediately forestall the usual idiotic objections: no, I'm not saying that fertility depends only on unemployment, and therefore on austerity policies (including restrictive monetary policies). I am saying that it also depends, and significantly, on the macroeconomic context that these policies help to determine. This means, in essence, that even if a series of "microeconomic" measures, such as all those that can help a woman (but I would say a couple) to reconcile the choice to procreate with their professional path, are necessary, they however risk not be sufficient if the macroeconomic problem is not addressed, that is, if we do not leave an institutional context in which the solution to every problem (whether balance of payments imbalances or inflation) is to induce a recession (by cutting incomes , raising rates).

Because it is certainly possible to imagine measures that protect the career path of a woman, or rather of a couple, who decides to raise a child, or at least that alleviates their income position, for example with more incisive tax relief: the fact remains, however, if there is no work, protecting the path of a career that does not exist is not of much relief, exempting from taxes on income that is not earned does not provide much incentive, and therefore children are still not raised.

Naturally, if children are not had, the dependency rate increases, with well-known consequences for the sustainability of the pension system. You will therefore notice a nice European paradox: worried about our debt, and in particular about the liabilities implicit in the pension system (the contingent pension liabilities ), in recent years the European Union has asked us for policies that tend to make them less sustainable. A short-termism that we all risk paying for, that is, not just us, but them too, and which we find in many other political directions that come from those institutions, last but not least worryingly, the green delirium, which, as you know, is revealing a bubble that will contribute to increasing (making them unsustainable) those energy costs that it was intended to reduce. A bit like austerity has certainly, through many channels (the one described here is just one of many), contributed to making the debt it wanted to reduce unsustainable.

Which always brings us back to the crux of the matter: are we sure that if we were arbiters of our own destiny we would be able to do worse than this?

I don't, but unlike talk show experts I always leave the door open to doubt and discussion.

I therefore declare the general discussion open.

This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2023/11/disoccupazione-fertilita-pensioni.html on Thu, 02 Nov 2023 09:54:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.