Family Planning And High Income Households

When it comes to investing in children, quality and quantity matter (abstract):

Fifty Years of Family Planning: New Evidence on the Long-Run Effects of Increasing Access to Contraception
Martha J. Bailey

This paper assembles new evidence on some of the longer-term consequences of U.S. family planning policies, defined in this paper as those increasing legal or financial access to modern contraceptives. The analysis leverages two large policy changes that occurred during the 1960s and 1970s: first, the interaction of the birth control pill’s introduction with Comstock-era restrictions on the sale of contraceptives and the repeal of these laws after Griswold v. Connecticut in 1965; and second, the expansion of federal funding for local family planning programs from 1964 to 1973. Building on previous research that demonstrates both policies’ effects on fertility rates, I find suggestive evidence that individuals’ access to contraceptives increased their children’s college completion, labor force participation, wages, and family incomes decades later.

One of the lesser known characteristics of the Asian Tiger economies is that they generally started supporting family planning policies in the 1970s. Malaysia by contrast went the other way – after complete neglect of the link between family size and economic welfare until the 1980s, we ended up implementing a policy to increase the population to 70 million.

While the goal of creating a larger market of both consumers and workers might have made some sense (I’m doubtful), what the policy helped create was a delay in Malaysia’s demographic transition – that boost to growth that comes from a higher portion of the population in the workforce. The Tigers have demographic age profiles that look like other high income economies. Malaysia’s looks like a low income economy just about to start on development.

In addition, economic theory and the empirical evidence, such as laid out in the paper above, tells us that more children in the presence of budget constraints means that each child in a family receives less parental investment in both quality and quantity. That has enormous repercussions down the road, even if the education system was up to mark, as life outcomes depend crucially on the very early years of a person’s life.

Moreover, those with larger families tended to also be among the poor and in rural communities, which acts as a barrier for social and economic mobility, thus exacerbating income and wealth inequality. The 70-million population policy essentially handicapped a whole generation of Malaysians.

While there’s not much we can or should do about the overall situation now – it’s already largely resolving itself through lower fertility rates – lower income households continue to have more than the average number of children. As a consequence, not only are they unable to afford to invest more as a family, they invest less per child.

As heretical as this might sound, we need to pass some condoms around.

Technical Notes

Martha J. Bailey, "Fifty Years of Family Planning: New Evidence on the Long-Run Effects of Increasing Access to Contraception", NBER Working Paper No. 19493, October 2013