The impact of labour market deregulation reforms on fertility in Europe

It is theoretically ambiguous whether a more loosely regulated labour market should inhibit or foster fertility in a society. Micro-level studies on the effects of employment instability on family formation have primarily focused on single episodes of unemployment or temporary employment, by means of event history analyses modelling the instantaneous effects of labour market transitions. This approach has highlighted the existence of a negative association between employment instability and fertility but makes it difficult to evaluate the overall fertility consequences of the several waves of labour market deregulation reforms implemented in Europe. Furthermore, the few existing studies analysing the relationship between employment protection legislation (EPL) and fertility have found mixed evidence. This paper reconciles the ambivalent conclusions of previous studies by analysing the impact of labour market (de)regulation reforms on total fertility across 19 European countries between 1990 and 2019. We operationalize the country-specific regulatory strictness of regular and temporary contracts over time through the OECD EPL indexes. Our results indicate that an increase in employment protection for regular workers positively affects total fertility. However, an increasing gap between the regulation of regular and temporary employment – that is, labour market segmentation – negatively impacts total fertility. These effects are relatively homogeneous across age groups and geographical areas and are especially pronounced among the lower-educated. We conclude that labour market segmentation, rather than a rigid EPL per se, depresses fertility.