Has the Baby Bubble Burst?

On 12 April, the Sydney Morning Herald reported that “Exactly nine months after Peter Costello announced his $3000 baby bonus, Australia produced its first mini-baby boom in nine years.” The tenor of the article was that the Federal Government’s maternity payment was responsible for a recovery in the number of babies born in Australia to approximately 255,000 in 2004. This theme has recurred in media coverage of this issue since then, to whit: “fertility rates should improve further after the introduction of the Federal Government’s baby bonus, which will rise to $5000 a child from July 1, 2008.”

I hate to rain on the parade, but:

* the relatively high birth rates of the 2003-2004 financial year, and the 2004 calendar year, are almost certainly due, in the main, to factors other than the Federal Government’s maternity payment; and

* recent evidence suggests that the “mini-baby boom” was a baby bubble which has now burst.

First, some figures. In the 2003-2004 financial year, the number of births in Australia rose to 254,600, after having been 247,400 in 2002-2003 and consistently below 250,000 from 1999-2000. In the 2004 calendar year, the number of births was 255,200, compared with 249,300 in 2003 and consistently below 250,000 since 1999. The quarterly figures (rounded to the nearest hundred) are as follows:

September 2002: 63,500
December 2002: 61,800
March 2003: 60,000
June 2003: 62,100
September 2003: 65,000
December 2003: 62,200
March 2004: 63,500
June 2004: 61,400
September 2004: 66,000
December 2004: 64,300
March 2005: 60,200

This means we can say, roughly speaking, that the purported “mini-baby boom” commenced during mid-2003.

Now the Federal Government announced its maternity payment in the budget in May 2004, the payment (initially set at $3000 per annum) came into effect on 1 July 2004, and only mothers of babies born after this date were eligible to receive it. Most of us know that the birth of a human baby requires a certain sequence of events to take place, and that this sequence of events takes a fairly regular period of time to unfold. We can therefore deduce that the maternity payment would not have been a factor in the increased births in the 2003-2004 financial year.

It is also unlikely to have been a significant factor in the high number of births in the September quarter of 2004, as women who gave birth during this quarter would have been at least 18 weeks pregnant when the maternity payment was announced in the 2004 Federal Budget, and thus would have been fully resolved to carry the pregnancy to full term irrespective of anything in the budget.

Therefore the maternity payment could only have been a significant factor in the birth rates in the December 2004 and March 2005 quarters. What we see here is a relatively high number of births in the December 2004 quarter (64,300) followed by a return to a lower birthrate in March 2005 (60,200).

Figures are not yet available for births in the June 2005 and September 2005 quarters. However, we have a proxy for them in the ABS statistics for labour force status by sex, age and relationship. These figures showed that between July 2003 and July 2004 there was an increase in the percentage of women who were mothers in the 15-24 and 35-44 age cohorts, and a particularly sharp increase in the percentages in these cohorts who were full-time homemakers with children, in both cases reversing long-term trends of decline. This is consistent with a rising number of births and therefore a larger number of women in these cohorts temporarily withdrawing from paid work during their youngest child’s first year.

However, between July 2004 and July 2005 there was a fall in the incidence of motherhood and of full-time homemaking with children in these age cohorts. In the 25-34 and 35-44 cohorts (which account for the great majority of births) there were particularly sharp falls in full-time homemaking concurrent with sharp increases in the percentages of working mothers. This is most obviously explained by a return of mini-baby boom mums of 2004 to the workforce in 2005, which is clearly not being offset by the temporary withdrawal of a similar or greater number of new mothers in 2005.

This, and the return to a low number of recorded births in March 2005, strongly suggests that the mini-baby boom of 2003-2004 is a bubble which has burst, and that Peter Costello’s much vaunted maternity payment has had, at best, a temporary elephant juice effect on the birthrate.

So why did the mini-baby bubble occur when it did? Peter Brain of National Economics argues that it was the result of broader economic circumstances and the state of the housing market making children affordable for young couples. This relationship — between childbearing and macreconomic conditions – seems intuitively reasonable. It is worth noting that the two previous temporary recoveries in the fertility rate occurred during the recessions of the early 1980s and early 1990s. I would explain this in terms of depressed labour market opportunities for women during the recessions reducing the social opportunity cost of childbearing.

An interesting question which arises from all of this is why commentators on changing work-family choices and reproductive behaviour attach so much importance to things like family tax structures, maternity benefits and the like, to the exclusion of things like macroeconomic factors and government policies which, whilst not directly focused on encouraging or supporting families and childbearing, are nonetheless as important — and probably more so – in creating the incentive structures within which women (and couples) make decisions about these matters.

It seems to me that this is partly due to simple gender blindness in “mainstream” discussions of economic and social trends, public policy, etc., so that it is often not realised that such things have implications for families, relationships, childbearing and parenting decisions, etc., or that there are gendered differentials in their impact. As examples, think of the debates in the 1980s and 1990s about the shifts to debt-funded higher education, self-funded retirement, IR decentralisation. How often was a gender analysis of these issues raised, much less seriously taken into account by the policymakers responsible for these decisions?

It is partly also due to the framing of women and their life choices as the “problematic other”, to be explained in terms of “special” factors distinct from those which pertain to the male norm. For example, discussions on male patterns of labour market participation focus on cyclical and structural trends in the economy, changing production processes and workplace organisation, changing IR regimes, etc., whereas for women we have Catherine Hakim’s “preference theory” to explain it. Likewise, Bettina Arndt is fond of supporting her conservative claims about women’s work/family preferences pointing to the fact that the percentage of Australian women in full-time employment has only risen slightly in the last three decades, yet nobody discusses the significant fall in the rate of male full-time employment in the same period in these terms.

Then again, it could simply be that most “mainstream” commentators on these issues aren’t really intellectually equipped to discern and grasp complex relationships between economic and social variables and the aggregate measures of people’s existentially significant life choices (especially when this requires some skill in quantitative analysis), much less explain such relationships to the wider public.