Incentives Do Not Fix Fertility Rate Decline

In this well-researched and well-written article at Reason magazine, the primary focus is on what has caused the fertility decline. It pinpoints no single factor, and says that all of the known factors combined still do not explain the dramatic drops in children being born. It suggests that everything matters, plus there may be lag involved, plus a whole lot of women are simply less interested in being Mums, regardless of reasons.

In the section regarding incentives, it does a great job summarizing things that have not made much difference:

  • Countries from Russia to Japan to Italy have tried an array of measures—from pressure campaigns to subsidized child care to giving people days off work for making babies—to raise national birthrates. Yet fertility rates remain stable or continue to fall.
  • South Korea spent more than $200 billion subsidizing child care and parental leave over the past 16 years, President Yoon Suk Yeol said last fall. Yet the fertility rate fell from 1.1 in 2006 to 0.81 in 2021.
  • The Japanese government almost quadrupled spending on families between 1990 and 2015, expanding child care provisions, paid family leave, parental tax credits, and more. The fertility rate went from 1.54 in 1990 to 1.3 in 2005 before rebounding slightly (1.4 in 2015) and then falling back to around 1.3.
  • And then there’s Singapore, which offers $8,000 for a first or second baby and $10,000 for every child thereafter—up from $6,000 and $8,000 back in 2014. The authorities have also tried offering tax rebates, guaranteeing 16 weeks of government-paid maternity leave for married mothers, giving housing subsidies to parents, matching Child Development Account savings up to thousands of dollars, and other schemes. None of this has stanched Singapore’s plunging fertility rate. In 1990, it was 1.83. In recent years, it has hovered between 1.1 and 1.2.
  • researchers found “one extra percentage point of GDP spending” on early childhood education and child care programs was “associated with 0.2 extra children per woman.”

Nagi, Japan – Baby Making Town

The WSJ reports on a town in Japan that is bucking the trend, and easily have fertility above the replacement rate. What is their secret?

The fertility rate reached 2.95 in 2019, and has slipped back to what is still a very commendable 2.68 in 2021, a pandemic year. Japan as a whole is a lowly 1.3.

Something to keep in mind is that the town only has 5,700 people, and based on the stats given, only 16 births per year. So it doesn’t take many extra babies to swing the statistics a little. Still, 16 is a lot more than the 8 they would have if they were typical of all of Japan.

Nagi-cho has received widespread media, especially now the national government is putting more effort into halting the declining population, and seven or eight delegations from other towns are arriving each month to learn the secrets, which are not particularly magical:

  • Capped daycare
  • Subsidised baby-sitting
  • Free medical care for children
  • Subsided bus transport to high schools in other towns (Nagi doesn’t have one)
  • Cash incentives for young couples to move to the town

The town has sacrificed other aspects of the budget to achieve it.

The first three factors are not particularly rare or innovative, but paying people to move there is. That seems to be the key for Nagi, and obviously it cannot improve the national fertility rate!

Korea’s Economy & Population Decline

When researching degrowth, I find that nobody ever advocates for or predicts actual degrowth. They end up discussing no-growth, which of course is impossible to keep at precisely not going up or down. So sometimes instead of degrowth they advocate for very low growth, below 1%.

But actual economic degrowth is too hard to discuss seriously. Being unprecedented, nobody really understands what will happen.

So this article, which I hoped would discuss how capitalism collapses via population decline, doesn’t. Its boldest prediction is, of course:

Some analyses are showing a grim picture of Korea that the persistent trend of low birth rate and population aging will result in its annual economic growth rate of less than 1 percent after 2050. It is a warning that the country might fall into a swamp of long-term low growth if it fails to overcome the labor shortage caused by population decline through capital investment or technological innovation.

Lee Jong-hwa, professor of economics at Korea University

It also avoids discussing that fewer people means a smaller domestic market, and of course most Korean businesses are not international.

Internal Migration Will Worsen Population Decline

While we tend to look at averages and global totals, the reality is the population decline is going to be very lumpy. After we reach peak global population, Africa will still grow for a while. Even though Japan peaked ages ago and there are empty houses everywhere, Tokyo is still growing and houses are being built.

When capitalism starts to falter (low or no growth due to fewer consumers and workers), it will affect some places quicker than others. And then people leave for somewhere more prosperous, even another city in the same state, exaggerating the effect in both places.

We have seen this recently, in a way, in San Francisco. While the cause was the pandemic, and partly because people could now work remotely, it does show how much mobility there is in where people choose to reside.

US Census data shows that the median household income in the area containing San Francisco, Oakland and Berkeley fell from $121,551 in 2019 to $116,005 in 2021 – a drop of over 4% in two years. New York City saw a similar decline.

Elon Musk and Population Decline

Mr Musk is of course wrong and over-reacting to peak population predictions. He has it in his head that we will stop making babies altogether and go extinct, which is ludicrous. If his intention was to get the general problem noticed, he actually made things worse.

The media reached out to academics who take the most opposite stance, and the result is publicity suggesting there is nothing to worry about.

Here’s how CNN responded:

Elon Musk thinks the population will collapse. Demographers say it’s not happening

By 2080, the world’s population is expected to peak at 10.4 billion. Then there’s a 50% chance that the population will plateau or begin to decrease by 2100. More conservative models like the one published in 2020 in the Lancet anticipate the global population would be about 8.8 billion people by 2100.

The entire article flip-flops between scary numbers and nothing-to-worry-about, but the headline affects how people read it.

The most likely scenario (my opinion, based on the sensible predictions of others that consider social factors and not just a dumb linear progression of current numbers), is that peak population will be circa 2050.

Japan: Drink More Alcohol

One of the reasons given is that they want more revenue from liquor tax, because in 2020 it declined by 10% ($813M). However, considering that it is a “sin tax”, intended to moderate consumption, that is hard to accept.

The real reason is what everyone knows, young people are more likely to hook up if they get drunk. And Japan has a fertility and demographic crisis that no other measures have dented, along with a decline in socialising due to COVID. And a general decline in alcohol consumption has already been happening for decades, down by 1/3 since the mid-1990s.

As reported by the Washington Post:

“Sake Viva!” — a contest run by the nation’s tax agency — is calling on people ages 20 to 39 to come up with “business plans” to help revive Japan’s drinking culture, longan integral part of corporate life in the East Asian nation.

…A 2019 Health Ministry survey found that 29.4 percent of people in their 20s don’t drink alcohol at all, while 26.5 percent said they rarely drink.

Are We Really Having Less Kids?

Here are some very basic statistics, to give you an idea of why we are on a journey towards too few children, below the replacement rate of 2.1 per woman:

Globally the fertility rate has dropped from 5 to 2.4 (children per woman) between 1970 and 2016.

In high income countries it is already below replacement rate, on average, dropping from 3 to 1.7 in the same period of time.

China fell from 5.7 to 1.6. India went from 5.9 to 2.3.

Sub-Saharan Africa, dropped from 6.6 to 4.8.

How quickly Africa catches up will depend on how quickly we see female-empowerment, access to birth control, and reductions in poverty. These are big unknowns, and the outcome will help determine how quickly we have global population decline.

Source of data: World Bank

700 Million More Elderlies

Most people are aware of how declining fertility rates, and longer life spans, means that demographics of advanced economies is trending towards more older people. Japan is the common example of where it is currently a problem, but it will be a global issue to content with later this century.

A figure from a study published in Lancet really drives it home:

The number of people aged 80 and over, globally will increase from the present 141 million to an extraordinary 866 million in 2100.
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30677-2/fulltext

In a nutshell that means that younger people will have to work more to support the older people, directly or indirectly.

It also means that capitalist countries will have a system that doesn’t work with a decreasing population, and they population will have fewer workers and more people who don’t spend much money.

Japan Down 0.51% in One Year

That doesn’t sound like a lot, but there were 644,000 more deaths than births (assuming an immigration rate of zero).

Every prefecture on mainland Japan saw a decline, so even internal migration was not a help anywhere.

Elon Musk saw this news and his saying that Japan will disappear was widely spread. He seems to be unaware of how this will soon be a global issue.

45 of Japan’s 47 prefectures have more residents aged 75 or older than those under 15

Source: https://www.nippon.com/en/japan-data/h01317/japan%E2%80%99s-population-drops-in-every-prefecture-except-okinawa.html