Business school students get a heavy dose of quantitative training that naturally results in the widespread use in our field of higher mathematics and sophisticated models. While these tools can certainly be helpful, I have come to believe that human behavior and psychology are actually the keys to understanding economies and markets which are just the sum of individual decisions and actions. We currently have a wonderful example of the critical importance of human behavior in that decisions regarding having children during the pandemic varied significantly across the world.
From the late 1990’s through 2009, the number of births in the U.S. increased by about .4% per annum. Following the Great Financial Crisis, the trajectory changed markedly with an annual decline of .96% between 2010 and 2019. While there were likely other factors involved, the lingering trauma of the crisis was certainly an important psychological influence.
With the arrival of the pandemic in March of 2020, births in the U.S. declined by more than 4% for the entire year. That trend continued into early 2021 as births declined 9.4% and 2.9% in January and February, respectively, as compared to the same months in 2020. While more recent data is not yet available, it appears that births bottomed in March of 2021 and are likely back on the pre Covid-19 trajectory. The bottom line is that Americans responded to the pandemic with great caution and concern as demonstrated by a significant decline in conception.
In contrast, several Nordic countries have experienced a baby boom despite the fact that they also had experienced decades of declining fertility rates! Births have been rising in Iceland since 2018 and the third quarter of 2021 set an all time record. (Although the absolute numbers are small) For the year, births exceeded normal levels by about 9%. The baby boom forced Iceland to import midwives from other countries and there were a number of days when full maternity wards resulted in births taking place in emergency rooms.
Similarly, births grew in 2021 by 3%, 5%, and 7%, respectively, in Denmark, Norway, and Finland. Sweden was the Nordic laggard with 1% growth although that figure is quite strong vis-a vis the rest of the industrialized world.
Demographers are hard pressed to explain this phenomenon. The most frequently cited factor is that Nordic countries have very generous family leave programs that allowed individuals to place careers on hold during the crisis without fear of financial distress. However, France has very comparable programs yet its pandemic birth experience has been very similar to other non-Nordic industrialized countries. Another possible explanation is that Iceland, Finland, and Norway had the lowest Covid-19 rates of the European bloc. Or, perhaps Scandinavians simply have a more optimistic mindset and chose to make different decisions. We may never really know the answer to this riddle but it once again demonstrates that it is all about the human factor.