Baby Boom

Bringing back birthrates

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Just a generation ago, we nervously asked ourselves if there would be enough food for future generations. Today, however, due to technological breakthroughs and falling fertility rates, we ask ourselves if there will be future generations to feed. Instead of an uncontrolled population explosion, societies worldwide are now grappling with the prospect of population implosions. As we know, people form the nodes of a global social supercomputer. Therefore, one by one, governments are setting up pro-natal policies designed to encourage larger families. Here, we examine how well these policies work and what we can do to bring birthrates back.

Falling Fertility

Among the most shared essays on Risk & Progress argued that, in a bizarre twist of fate, we have gone from worrying about too many people to too few. I made the case that when it comes to progress, scale matters. Economic growth models track the steady expansion of human capability and are underpinned by an assumption that the population will continue to grow. This assumption is key, for current research suggests that population decline could lead to a dystopian world of stagnation. A larger population enables greater specialization of skills and the creation of more new knowledge. A shrinking one engenders precisely the opposite.

Recent research, including a study published in The Lancet, forecasts that the world population will peak at about 9.7 billion in 2064, before falling to 8.8 billion by 2100. Fertility rates in 183 nations will fall below the 2.1 threshold needed to maintain a stable population. In more than 23 countries, populations will shrink by more than 50 percent. These include Japan, South Korea, Thailand, Spain, Italy, and Portugal. It’s hard to imagine what these societies could look like in 2100. I envision half-empty apartment blocks, decayed roads, and poorly maintained, underutilized infrastructure. This is not the optimistic future we are looking for or hoping for.

Many hold that a falling human population will bring environmental benefits. Fewer humans presumably require fewer resources. However, the literature suggests that the population declines necessary to significantly mitigate human environmental impact would far exceed those forecasted by demographers. On the other hand, faster innovation, the ability to do more with less energy and fewer materials, would more meaningfully benefit the environment in this century. Counterintuitively then, population decline could, to the detriment of the environment, stunt the innovation required to reduce humanity’s footprint. Modest population growth may benefit the environment more than negative growth.

A word of caution here: measuring fertility is more challenging than it appears. The most widely utilized measure is the Total Fertility Rate (TFR), or the sum of fertility rates by age in a calendar year. However, TFR is highly variable and often misinterpreted as a measure of final family size. TFR statistics can be skewed when families choose to have children later in life. Ultimately, to get a sense of the true “fertility rate” we need to look beyond TFR to the total number of children born to women at the end of their reproductive cycles, or “complete cohort fertility.” This number is not influenced by delayed childbearing as TFR is. Thus, it is more stable; countries can fluctuate between high and low TFRs while maintaining similar family sizes.

The problem with completed cohort fertility data is that it takes decades to observe trends because we have to wait for a cohort of women to reach a certain age. With delayed data, it becomes impossible to assess the impact of government policy on fertility. For this reason, researchers have developed alternative indicators that combine the best elements of completed cohort and TFR data to observe fertility trends in “real-time.”

Pronatalist Efficacy

Measurement difficulties acknowledged, there is no doubt that fertility is declining globally. The cause, however, is a greater mystery. In a 2008 study, Bruce Sacerdote and James Feyrer postulated that, to some degree, falling fertility correlates directly with the rising status of women in the modern world. When women have few opportunities in the workforce, they tend to have many children. As their status and labor participation rates climb, they tend to have fewer children. This all appears to come down to burden and opportunity cost. As a woman’s income increases, the opportunity cost of leaving the workforce and taking on the time and expense of raising a child gets too high.

Pro-natalist policies attempt to balance this “opportunity cost” by forcing it in the other direction. Bruce Sacerdote and James Feyrer’s research reveals that fertility increases when the burden, the cost of raising children in terms of time and money, is shared. Indeed, the level of public spending aimed at families, measured as a percent of GDP, correlates fairly well with fertility. For example, a significant increase in family spending in Sweden from the 1960s through the 1980s led to an increase in fertility relative to other Scandinavian countries. How these financial resources are allocated, however, matters a great deal. Pro-natal responses to falling fertility fall into three broad camps: 1) parental leave schemes, 2) childcare assistance, and 3) direct financial assistance. Research indicates that the impact of each varies considerably.

Parental leave schemes are often government-funded, aimed at giving new mothers (and sometimes new fathers) time off of work to recover and care for a newborn child. Depending on the duration of that leave and the level of pay, such schemes, in theory, make it easier to have a child. However, studies on parental leave are mixed as to whether or not they boost “completed” fertility. Indeed, one study of 15 European nations found that expanded parental leave programs do not affect completed fertility, while others have estimated small reductions in childlessness.

Childcare assistance programs, on the other hand, have a much more discernable impact. Policies like publically provided daycare services are positively correlated with higher fertility. For instance, Luci-Greulich and Thévenon (2013) estimated that in OECD countries, a 10% increase in childcare enrolment would increase the tempo-adjusted TFR by 0.08. This is especially true when the childcare is of high quality, aligns with parents’ working hours, and is long enough in duration to bridge the gap between parental leave and public schooling.

Financial Assistance also appears to be an effective policy tool. In one study, Kevin Milligan evaluated the Allowance for Newborn Children (ANC) that ran in Quebec from 1988 to 1997. In this scheme, families were provided direct cash benefits for every child they had. The payment size was determined by the birth rank of the child, with payments made quarterly up to a total of $8000. The introduction of the ANC saw the fertility rate of Quebec increase relative to the rest of Canada. His findings conclude that the fertility rate of eligible recipients increased by 12 percent on average. Similarly, Azmat and González (2010) estimated that an added tax credit for working mothers with children under the age of 3, alongside an increased tax deduction for families in Spain, led to an increased probability of new births by about five percent.

Designing A Family Package Policy

Notably, while having some effect, none of these policies move the needle all that much, especially in isolation. Restoring birthrates will likely require an “all of the above” approach, but it’s a delicate balancing act. In my view, new mothers should be provided six months of fully paid parental leave. Indeed, the World Health Organization recommends newborns breastfeed exclusively until they are six months old because breastmilk is associated with long-term well-being, including a reduced risk of obesity, cancer, and asthma. Providing newborns with the greatest opportunity to receive these benefits is as much a health issue as it is about fertility. The cost of providing fully paid leave pales in comparison to the long-term public health benefits.

As for childcare, the aim should be to help families bridge the gap between parental leave and public schooling. Here, we may institute a voucher program that issues all parents a voucher covering the cost of preschool or daycare. This system would function similarly to my proposed education voucher system for funding public schools. The merits again, however, go beyond fertility. PISA (Programme of the International School Assessment) survey research conducted in 2015 illustrated that quality early childcare programs, when combined with generous public expenditures on early childcare, are positively correlated with better performance at school at age 15.

Alternatively, instead of vouchers, we could fold a direct cash assistance scheme into a childcare initiative by providing new parents with direct financial assistance that would cover the cost of childcare plus additional subsidies for raising the child. The advantage of direct cash assistance would be lower administrative costs and greater freedom for parents who would then be free to use the funds in any way they saw fit. They could hire an au pair or a nanny, for example, instead of relying on childcare, or simply keep the funds and stay home with their child.

Ideally, direct financial assistance would function like the child tax credit, except that it would be fully refundable and paid in installments throughout the year, for every child. Here again, the benefits are broader than merely raising fertility. In a study by Irwin Garfinkel et. al., researchers performed a systemic review of cash and near-cash income transfer programs. The literature was nearly consistent: the long-term effects of cash transfers are overwhelmingly positive. Their research found that children of parents who were provided cash assistance had better health, longer lifespans, increased future earnings, and a reduced probability of incarceration. They estimated that a permanent $1000/year expansion of the child tax credit in the US, similar to the one passed in the American Rescue Plan, would cost $97 billion per year but lead to $982 billion in net social benefits annually.

Baby Boom

It is possible that our shrinking numbers will not be as big a problem as some believe will be. Perhaps my fears of an “empty planet” will prove just as unfounded as Malthusian empty stomachs. That said, there is little reason to believe that a falling population will meaningfully benefit the majority of us either. I must also emphasize that it would be naive to assume that the above policies will promote a sustainable population in a vacuum, they won’t. It is well established, for example, that economic growth and affordable housing are also good predictors of fertility. Thus, a sustainable population requires pro-growth and pro-progress policies that comprehensively and coherently promote maximum human potential.

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