What can governments do to increase birthrates?

Marcus Roberts
Jul 29 2015
Reproduced with Permission
Demography is Destiny

In so many countries around the world today we see low birthrates, ageing populations and governments struggling to think up ways to ensure that there will be enough taxpayers to pay for future old age pension schemes and healthcare. As The Economist notes , there are many different ways that countries have sought to encourage their citizens to have more babies:

"In Singapore couples receive S$6,000 (US$4,450) for having one child, another S$6,000 for a second child and a further S$8,000 for a third. Families with babies go to the front of the queue for government housing, in which most Singaporeans live. In South Korea the state reminds lovers that they can marry cheaply, without throwing an expensive wedding. In Russia couples are encouraged to get it on for the sake of the motherland on an official "fertility day"; a patriotic woman who gives birth exactly nine months later might be entered into a raffle to win a car."

Alternatively, governments could look overseas for more workers. However, this has the drawback of increased racial/cultural tensions between natives and immigrants. Further, immigrants are perhaps less valuable as recruits or conscripts in the armed forces. It is not surprising therefore that governments see pro-natalist policies as a better way to improve their demographic outlook.

One of the drawbacks to children is that they cost money to their parents. Parents must pay for their children's needs directly from the time of birth: clothes, extra bedrooms, food, school fees. At the same time parents may have to forego income in order to look after their children (or pay someone else to do it for them). Thus "in Europe a single child is reckoned to cost 20-30% of household income". What economic benefits do the parents get in return? Perhaps some help in later life, but there is rarely legal sanction forcing children to look after their elderly parents. Instead, it is the state which benefits from having another member of society that it can tax.

"Almost all pro-natalist policies try to improve this dismal deal by introducing a third transfer, from the state to parents. This might be a per-baby lump sum or an ongoing child-benefit payment. It might be generous paid leave or subsidised nurseries--Nordic countries tend to offer both. It might be child tax credits or tax breaks. The last measure particularly encourages high-earners to have children, which might be good for the exchequer but is hard to defend politically. Francois Hollande's government has pruned France's once-generous tax breaks for parents."

Although there seems to be a correlation between the amount of money a government spends on pro-natalist policies and birthrates, it seems that not all government spending is equally effective. According to Olivier Thevenon, an expert in natalist policies in the OECD, longer maternity/paternity leave entitlements do not encourage childbearing. Lump sum payments encourage couples to have babies more quickly but not to have more than they would otherwise have. Instead, the best use of government money is to subsidise child care. This allows women to combine motherhood and work.

However, in some cultures the pressure on women to work, raise the children and do all of the housework (we've talked about this before ) means that not even subsidised child care will be enough.

"In east Asian countries such as Japan and South Korea the expectations heaped on wives and mothers are even harder for educated women to bear. Working hours are so long that it is almost impossible to combine work and any active parenting role. Children must also be tutored for make-or-break exams, raising the cost of child-rearing."

In short, unless cultural expectations change, in some countries the government will be facing an uphill battle to implement policies that will help falling birth rates in any meaningful way.

Finally, The Economist points is another factor affecting birth rates that I had never considered before: cities are just too nice to have children in.

"In many countries, fertility is highest in rural areas, middling in small towns and suburbs, and lowest in the cores of large cities. Though it may be hard to believe amid all the Bugaboo prams and bulging primary schools, inner London has a fertility rate of 1.5, compared with 2 in outer London. Of course, many people move to suburbs and small towns to have children. But research on Britain and Nordic countries shows that the discrepancy remains even when you account for the people who move.

It might be that city-centre property prices have risen so high that urbanites feel they cannot afford to allocate space to children. It might be that the amenities of spruced-up inner cities are now so great that the opportunity cost of childbearing (all those nice restaurant meals forgone) is intolerably high. It is also likely that emerging patterns self-reinforce. People living in suburbs with lots of babies are encouraged to have babies; people in childless areas are more likely to skip procreation entirely. 'Fertility is contagious,' says Hill Kulu of Liverpool University, an expert on this matter."

The Japanese government is even trying to prevent young people from moving to the cities so that they will have more children in regional/rural areas. It seems unlikely though that this will have any major impact on Japan's dismal demographic outlook.

At the end of the day, are governmental programmes tinkering at the edges? Unless a government is going to draconically enforce demographic policies, like China, it seems that it is stuck in the prevailing societal attitude to work, household chores, and families. That is, unless people want to have children, will a government payout actually make much difference? Perhaps at best the government can remove some barriers to child raising, but it will take attitudinal shift to see significant increases in birthrates.