Previously: On Car Seats as Contraception
[Editor’s Note: This post assumes the perspective that more people having more children is good, actually. I will not be engaging with any of the arguments against this, of any quality, whether they be ‘AI or climate change is going to kill everyone’ or ‘people are bad actually,’ other than to state here that I strongly disagree. AI content will continue later this week.]
A common theme in childhood roundups has been that existing efforts by governments, to increase the number of children born in various countries, have all been pathetically small in magnitude. The amounts spent and methods used pale in comparison to what is at stake. We reliably see signs that the policies work, even when poorly designed and implemented – the same way that when policies attempt to reduce the birth rate, those work as well.
The core problem is the dose is too low.
Yes. If you give parents money, more people choose to be parents.And the amount necessary to make this happen is, if you crunch the numbers, an amount rapidly aging societies can’t afford not to pay.
The other theme is, as I discuss in On Car Seats as Contraception, that there are lots of other government policies that have much bigger impacts on the felt costs of having and raising children, including the lifestyle and status impacts of raising children.
This is a roundup of related efforts that have crossed my desk recently, to illustrate that this is a highly solvable problem.
Childcare
Child care in America continues to be super expensive. People who understand economics understand that this is true because we combine large purchasing subsidies with onerous baseline requirements that drive up costs. Whereas you could (at least partly) solve this problem in the style of Vermont, by doing much less of both these things – removing price barriers for the bottom half and removing subsidizes for at least the top half, instead Giving Parents Money mostly in the form of lower taxes.
I also continue to think that it is madness to subsidize and massively favor professionally provided child care over family provided child care, where as far as I can tell most everyone agrees children are better off with family provided child care, which we are now essentially pricing out of the market. While in other contexts, of course, massively favoring family provided care via the tax code.
Alternatively, you could do what DC does (direct).
Requiring a college degree to provide child care is one of those places I fail the ITT.
Meanwhile Department of State proposes gutting the Au Pair program. They of course refer to this as things like ‘strengthening the educational component.’ By all reports I’ve seen the au pair program is insanely great as it is except it isn’t large enough. Win for everyone involved.
If prospective parents confidently knew they could participate in the Au Pair program, I would predict a substantial increase in the birth rate. This could be a full plan. Houses or apartments and locations could be chosen with this in mind, and life could be much easier to manage and predict.
A study in Finland finds that paying moms to stay home results in them staying home substantially more and working substantially less, including in the long term, whereas subsidizing child care and thus work (and by extension effectively taxing staying at home) has the opposite effect (although the paper’s results seem to not technically be ‘significant’, so salt as needed). You don’t say. You can either prefer to have mothers stay home or prefer to have mothers work, and people respond to incentives. You can get whatever change you want if you care enough. You do need to choose.
Parental Leave
At People’s Policy Project, Matt Bruenig complains that ‘all twelve state parental leave programs are awful’ because they impose backward-looking work requirements that render many women ineligible exactly when it makes sense to consider having children.
Some of these are rather hardcore work-your-ass-off requirements. Others, such as ‘earn $300’ are not that. It does not seem like a crazy or undue burden to ask someone to find a way to earn $300. Then again, if it is so trivial, what is the point of the requirement?
The whole philosophy and approach behind ‘parental leave’ makes no sense. The idea is that employers, who can’t discriminate based on things like pregnancy, should be legally required to fit the bill for a long paid vacation upon the birth of a child, with pay proportional to your salary. If you don’t have a job, then no ‘leave.’ In that context, there are obvious huge problems if you don’t impose a work requirement.
What is the thing we actually want to accomplish here, though? Presumably it is to give new parents paid time off to be with their children. If you want to support new parents and give them the freedom to do that, then someone who isn’t working at all seems like they need the money as much or more than those who have jobs. If you don’t want discrimination to be an issue and you want employers to welcome the choice to become a parent, why do you want employers fitting the bill, in a way that is effectively a tax anyway?
The whole thing is backwards. You do need, given other decisions already made, to require employers to give parents leave. If you want new parents to also have money, a proposal I fully support, then you give them money.
Instead, we give employers double financial motivation to (illegally) discriminate against potential new parents and to discourage having children. They have to bear the leave costs and keep a job open for when the new parent returns, and we are pressuring people who don’t otherwise want to work to secure jobs in order to get paid leave, which is even more reason to be wary.
Declining Fertility Around the World
Iran
ACX links to this post on Iran’s rapidly declining fertility as direct result of government intervention, which the government now wants to partly reverse. He says ‘good luck, Hungary knows how that turned out’ as an echo of the general despair that government could ever raise fertility much with interventions.
As usual, I find it highly, highly suspicious that you have great power to change people’s choices in one direction but are utterly helpless to go in the other direction. I understand why the situation is asymmetrical, but at a minimum one can obviously stop actively screwing things up, and also people respond to incentives.
China and Australia
The New York Times says China is looking to increase its birth rates, but it’s so hard for government policy to change birth rates, Chinese government policy doesn’t have a record of dramatically changing birth rates or anything, oh no. The pull shows these graphs:
The change in 2004 was to bump the payment from $3k to $4k. So it was a thousand dollars perc child. Birth rates went up about 6% before peaking four years later.
This payment was curtailed in 2014 to levels below where the bonus payments started. Then birth rates resumed their decline.
This looks like a fantastically successful program. The previous trend was declining births. At the cost of $1,000 per child in progressive transfer payments, Australia seemingly raised births by 6%. That’s about $17k per additional birth. Insanely cheap. I am confident China would be thrilled to pay quite a lot more than that. America would be insane not to, we would save more money than this on long term interest rates on our government debt alone.
Sweden
The Swedish policy change was to stop penalizing parental leave compensation on a second child for the time taken off after the birth of the first child.So essentially, Sweden was actively penalizing having a second child too quickly after the first via government policy. Then they stopped doing that, and the birth rate soared for over a decade. Consider how much this changed the rate of having two children in succession, if it raised birth by 31% (!) at the peak. It still has a 12% higher birth rate than Norway versus a slightly lower one before the speed premium. It was 4% higher than Finland before the speed premium, now it’s 21% higher.
This does not look to me like a temporary success. It looks like a temporary adjustment and also a permanent great success, from no longer penalizing exactly what we’d like to see, that has been overwhelmed by other larger factors. The paper linked above does a deeper dive, and agrees.
This also does not look like what I would call fully ‘trying.’
It is hard to estimate total cost of implementation of the policy, since behavior shifts in response and incomes vary as well, and the long term impact is confounded, but the only way to explain the data I can see is that families were quite sensibly mostly avoiding having children within the window where it would cost them tons of income, so we are mostly only paying new money for children that would not have otherwise been born, which means the average cost is the same parental leave we were paying other new parents anyway. The lunch, it at least kind of be free, and a decision already made.
A rough generous guess, based on median income, would be that Sweden’s parental leave policy costs about $65,000 per child when it is used. Given the impact and incentives here, where most people who would lose that kind of money before by not spacing their births would likely space births to avoid that happening, the cost per additional birth seems quite affordable.
Singapore
As a new experiment, Singapore is going to increase its baby bonus by S$3,000 starting in 2024, which is about $2,250 USD, in a very expensive city. They will also pay for an additional two weeks of paternity leave. What do we think will be the impact?
Singapore’s birth rate was at lifetime 1.1 child per woman in 2020. The Australian example suggests an increase in births of 5%-10%. I posted a market on whether they would get a 3% increase, and one that measures relative to Hong Kong.
A serious attempt would be something more like S$100k. Then we would know if the damn thing worked or not. Even if the S$3k plus extra leave is a very very good deal, the measurement is still too noisy to know for sure, barring a gigantic increase.
I have created prediction markets on Manifold.
Will the birth rate in Singapore be at least 3% higher in 2025 than in 2023 (56% at writing time)?
Same market for 2024 vs. 2023, confounded by Year of the Dragon, is at 80%.
The market for 2023 relative to Hong Kong is at 41%. Presumably Hong Kong will have the larger Year of the Dragon impact.
Taken together, this suggests that a 3% rise in births is a reasonable expectation, at the cost of $2,250 per birth. That would imply about a $75,000 cost in transfer payments per additional birth.
This is with a relatively good implementation. A flat out baby bonus is going to have the most impact on people’s decisions per dollar.
America
This paper, providing a ‘scoping review’ of unconditional cash transfers for families with children in America, mostly serves to highlight gaps in understanding and that we know little about the most obvious intervention, and we certainly haven’t studied its effect on birth rates.
My previous estimate of cost, from the car seat post, was that such non-optimized efforts would cost $275,000 per additional birth. The gap with the Singapore estimate likely represents the gains from good implementation.
South Korea
South Korea hit an all-time record low of 0.78 children per woman, down from 0.81. It is now ‘projected to have its population decline by 53% by 2100, up from a 43% decline projected in 2019, which strikes me as very similar to the solar power projections – why should one not expect further declines, under a baseline scenario?
What should we do about it? Give parents money?
Economists suggest Korea needs to do more to improve gender equality so that women feel less worried about losing their jobs by having children. High education and housing costs are among other factors putting pressure on fertility, data show.
Wait, what?
The solution to raising fertility is to promote gender equality so that women can worry less about losing their jobs?
This is Obvious Nonsense. It does not make sense. Gender equality is a good thing for many reasons. Raising the fertility rate is not one of them. Not all good things go together. Finding out how to get them all at the same time is the problem one must solve, the solution isn’t to pretend they cause each other. Nor is gender equality helpful in making women worry less about losing their jobs.
It’s actually even worse than that, if you click through there is talk about ESG concerns. These are not the concerns of someone attempting to raise fertility. They are the concerns of someone who has other, standard, respectable concerns.
High education and housing costs, yes, those are concerns. Once again, have you tried either building more houses where people want to live (Seoul here, presumably), or giving parents money? I hear those might help.
Hungary
For completeness, I looked at what’s going on in Hungary.
Hungary passed a law in 2019 exempting women with four children from income taxes, for life. This is the first effort that at least sounds somewhat like actually trying.
Yet when considered in detail, this was a rather terrible implementation. There is a mismatch here between what women and families want and what this is pushing them towards.
Even with a large income tax break, asking women to have four children is rather ambitious. The one-time payments for the first three children are not that different from zero, the main effect only kicks in if you have four. Then there is no substantial further benefit to having five.
The benefit then comes in the form of not paying income tax rather than a direct payment. That means that to get the benefit, the mother of four has to be working.
There are exceptions, but presumably if you choose to have four children in order to get financial benefits, what you want to do with that funding is stay home with your children. That’s not allowed here. The income tax benefits don’t even seem to pass to the father or husband, so they can support a family on their own. I do get it, given how easy that would be to game, but it doesn’t seem great. It also creates a very strange and huge incentive to have stay-at-home fathers, and to encourage various forms of tax fraud, I am sad I have not yet watched any movies about this.
All the incentives here are twisted and highly inefficient. Another problem is that most of the benefits paid are going, for a while, to go to women whose children were already born under the old regime.
Then early this year they extended the policy to all mothers under 30.If you have one child by 30, you are exempt from income taxes for life.
This essentially wipes out the four-child policy, other than retroactively. The number of women who are going to have zero children before 30, then have four or more later, is very small.
The new rule seems much more interesting. Hungary’s tax rate on personal income is 15%. So this is a permanent 17% boost in take-home pay if you have your first child before 30. That seems like a very strong incentive to have your first child before 30, even if you weren’t sure if you wanted one or not. Not as strong as a similar-expected-value one-time payment or guaranteed income steam. Still warping the tax incentives in very strange ways. Still pretty great.
Long term I am very curious to see what this does to tax rates. If the majority of Hungarian women do not pay income tax, that is going to require a substantial tax hike. It also will be very interesting to see the impact on earnings, and on the gender pay gap, and on norms of child care. If a couple gets married in their 20s, and knows that the women is permanently immune from income taxes and the man is not, so the women’s pay is worth at least 17% more, what happens?
It is too early to know what the new rule will do. What about the old rule, which had 4 years to work, together with other efforts? Those efforts include a maternity benefit of about $6k, marriage benefit of about $10k, a baby bond for each child, a super generous child care allowance, tax refunds and preferential mortgage rates for housing costs, extra vacation that scales with the number of children, you name it.
In Hungary the fertility rate has increased more than anywhere else in Europe, rising from 1.25 children per woman to 1.59 in 2021. According to demographic projections, this target is unrealistic, but some progress has nevertheless been made.
Most of that happened before 2019, and all of it before 2023. And there is a long way to go to get to 2.1. It still does show that some combination of efforts is having a real impact.
Still, this is an actual real start. Given the differences in costs and the weird implementation choices, it is difficult both to calculate the total cost and to translate this to an expected cost to do a similar thing in America.
One thing to notice about such costs is that they are transfers of resources rather than wasting or destroying resources. There is some additional deadweight loss here to account for, but in some real senses it does not ‘cost’ Hungary the full amounts involved.
The Quest for Kids
I assert that if we actually cared about there being more births, we have plenty of levers to make that happen. It is simply that no one has done anything remotely like the reverse of the one child policy in China, or Iran’s widespread push to discourage births. The Chinese effort and one child policy would fall into the ‘young adult dystopia’ book section if it was fictional.
Imagine for a second what the reversed version of those authoritarian and dystopian efforts would even look like. Realize that this too would be and is in the young adult dystopia book section. Also realize it has not happened, at least not in a long time.
What would the voluntary, freedom-and-gender-equality-compatible, non-dystopian and intelligent and efficient and sufficiently large version of such attempts look like?
The core effort would, like Hungary’s, focus on giving parents money. The more it was direct, immediate transfers, the higher the impact would be. The more it was forced to tie into work requirements and be gradual over time, the less impact. Even then, there is every reason to expect a roughly linear dose-effect curve in reasonable bounds, and for the price to be highly affordable.
Then comes the part that is harder to spell out, but even more efficient if it works, which is to make life better and easier, in both relative and absolute terms, for families in other ways. That starts with no longer forcing parents to live in fear of social retaliation or having their children taken away if their children are allowed to play outside on their own, and goes from there – the details here are beyond scope.
The core point here is merely to illustrate that yes, government policies absolutely can increase birth rates, and can do so at reasonable prices. Prospective parents choosing how many children to have, or whether to have children at all, very much respond to incentives about what their lives and finances would look like.
Don't Worry About the Vase 
Is there no insight to be had from the example of Israel?
I am sure there is, but one must limit scope. I hope to ask that question some time in the future.
I am surprised not to see Israel as a test case here, the only western country with above replacement birth levels, even if you look at secular only women.
Lets go over a bit on the benefits:
1) Free health care for children, including dental, up to 18.
2) Free Baby development checkups, somewhat mandatory.
3) Free Education & childcare from age 3.
4) Heavily subsidized childcare for the poor.
5) Direct transfer on Birth of about 600$, goes down with number of children.
6) Monthly pay of about 60$ per child, up to 18.
7) Paid parental leave for 3 months, job is secured up to a year.
8) Tax credits per child, up to 5 years of age, of about 2200$ a year, and above 5 up to 18 of about 1100$ per year.
All those benefits together are massive compared to anything you listed, except Hungary, which incentives are new and not well designed.
This is all fine and well. Just: very similar to Germany – and I suppose most wealthy EU-members. 6) monthly pay/kid 250€ – for at least 18 years, often 25 years. 7) gov paid leave is 12 to 14 months at 60%. Job secure, ofc.. 5) No birth-bonus, but no biggie. 3) childcare before 3 is hard to get, care from 3 or 4 is mostly free for low-income, and max out at maybe 3k a year for high-earners. – So, maybe it IS culture? A wish to have kids in one’s country and one’s nation? (We would cringe at that thought)
“I also continue to think that it is madness to subsidize and massively favor professionally provided child care over family provided child care, where as far as I can tell most everyone agrees children are better off with family provided child care, which we are now essentially pricing out of the market.”
What is the madness here? If the typical relevant household doesn’t contain a retiree (stereotypically, grandparent) and doesn’t desire a number of children that would be uncommon even under a ~2.5 TFR scenario, the total cost to society of the incremental birth can be reduced by clumping childcare in kindergarten and school. The stay-at-home parent-of-(1-2) option is “naturally” priced out by its inefficiency. And to the extent the subsidy is only a subsidy, it is doing exactly the correct job (lowering parents’ marginal cost). (I think the existence of publicly-funded kindergarten&school creates/reinforces a Schelling point in metaphorical “quality” that nobody is allowed to undershoot. I don’t know whether it would still exist in the absence of public childcare. Costly signaling games would, but those aren’t universally normative, people are allowed to not play.)
“Requiring a college degree to provide child care is one of those places I fail the ITT.”
1. College (like school) teaches useful knowledge and skills.
2. Nurture dominates nature, if the latter is even a thing. Model generalizing beyond education: people are pliable like blobs of clay, self-propagating social institutions (incl. racism) train/mold people into roles they assign to them. (Reductio ad absurdum: until last week, the US had a caste system with sumptuary laws. Everyone simultaneously forgot about it, so now the US doesn’t have it, thus people aren’t shamed/shunned/beaten for not dressing for their caste.) People reinforcement-learn whether they are smart or dumb.
1+2. Therefore it is very valuable to expose young children to the influence of smart (which is identical to well-educated) adults, because they can acquire by osmosis some general cognitive skills (thus getting a competitive “head start” over other children who lacked such exposure) and because hopefully this influences which social institutions get propagated to the next generation. Indeed if this compounds in the straightforward way, then making the future smarter and more moral is possibly the best use of today’s smartest people, depending on what one thinks about technological economic/productivity growth. (See the Finnish education system.)
“Nurture dominates nature, if the latter is even a thing.” There is a book called “The Blank Slate.” It’s a bit old and not written by the most numerate of scholars, but it’s basically correct on this issue and you are basically incorrect.
Basil is doing an ITT – intellectual turing test – exercise here. I thought he “failed” pretending to be a blank slater, because he overdid. You show: he did not too bad. ;) Only one scholar is the most numerate. Neuroscientist Steven Pinker – specialising in language acquisition – never claimed to be that one. His wife thought on reading his books: Best since Hume. I agree (Pinker does not), and I do not consider Hume to be the most numerate.
Yes, I was had.
Pinker is very eloquent. Hume had some original ideas, giving him the edge in my book. Neither can quite maintain philosophical consistency, which might be related to their lack of logical and mathematical training. For the verbally gifted it’s also much less *fun* to submit to the restraints of logical rigor, it impedes the free flow of words and ideas. That sounds frivolous, but I think it’s a factor.
> The solution to raising fertility is to promote gender equality so that women can worry less about losing their jobs?
Of course. Nothing about this is surprising. Women who want to work face a serious problem that having a child, or even taking steps in that direction as mild as “get engaged”, gets them fired, demoted, and passed over for promotions, salary bumps, and resposibility. They are forced to choose between work and motherhood as a binary with no compromise positions possible. Since we do not want to reverse the social trends that made many women want to be professionals in their own right (and probably *couldn’t* reverse them if we tried), the only way out is through.
This is also why parental leave is an important priority. The goal is not ‘give them money’, it is to make the *compromise options* as attractive as possible.
I think you should not continue this series. You fail the ITT on basically everything mentioned.
On the other hand, maybe this series is not for you.
Father of 5 (born in Ukraine/Russia/Riyadh/Germany resp.). No kid born cuz of incentives, no kid born without being aware of those. Caplan-reader. – That said:
1. “Good life” ( jobs/housing/schools) seems the way to go. So: “build, baby, build”. And do vouchers. Big families do not belong in Manhattan, anyways.
2. Except in places like Singapore. Which is either 1 place / or 80+ (cities over 5 million) / or 500+ (over 1 million). Jobs and life too exciting, housing too dear. What then? Indeed, the best is as much as possible of big, clear, easy-to-get payouts esp. at the beginning + free hospital +free child-care + free schools(vouchers) +free college. Which is what we have in Germany, at least if you are low income (I am on “Elterngeld” right, now. Useful, but capped at 22k€ for 1 year only – 4k if you were on the dole). Trouble is: all the subsidies really feel relevant when you are poor. So you raise the birth-rate of the “underclass”. And in a meritocratic society this are mostly not the kids you really wanted. To be brutally honest. As we are unable to be that honest, we should better go the “good life”-route.
The “honest” route would say sth. like: First year 1k per month, tax-free. Vouchers for childcare/school. Hard “Exams” in g/IQ/achievements every 5 years or so (ending with age 15? or 20?). On passing (IQ 100? 110? 120?) an”education-premium” of 10 k. On passing in the top 20% a bonus of 30k. Or so. Maybe Singapore can do?
Btw: what’s “ITT”? (in this thread / in total truth / I think that /I’d tap that – none really seems to fit – I am old enough to associate ITT with Chile …)
ITT – on checking the 21 substack-comments: “Intellectual Turing Test. It’s a stronger version of steelman – can you create an argument for the other side that would pass as written by someone who actually believed in that position” . Oh, now I see: that’s what Basil was trying to do (though he failed, deliberately). JiSK did it very well. I got half-afraid, he might actually believe it. ;)
New concept needed.
ITT: solitaire test, useless as explanatory/argumentative tool if there are unshared assumptions that are unlikely to be mentioned (or spotted, realistically). (There are more than enough irritatingly incomprehensible originals on the ‘net, and infinite turmix from the new chatbots.)
Steelman: writer’s best case by their own assumptions.
Ceramicman: the assumptions and reasoning that the writer thinks is going on. “Raw material for” the ITT; if it works, the reader can pass the ITT. At risk of being adobe and containing a lot of straw. Corrections of parts you think are straw are welcome.
If the inferential distance is small, the three are effectively the same. (See discussion last time.)
Your ITT content seemed ok, afaiu, – now that I know what ITT means. (I did not really get some of the “caste”-parts, but no need to elaborate). – You “failed” with expressions as “people are pliable like blobs of clay” – ppl who actually do believe that will usu. not put it that way; they avoid the nature-issue mostly and just write about how important nurture is, because “people do adapt, they do learn the language of their surroundings”, q.e.d.. – Anyways: Zed could surely do the ITT in those cases; those ppl do write up “reasons” for their proposals. It would just be so obviously and ridiculously untrue and dishonest. Vain. Waste. Truly spoke James Stephens: “a lie is very terrible” (The Crock of Gold)
Trying again.
Since human nature is a blank slate that is the same for everyone, any observed difference between groups (strong version: people caring about the groups at all, e.g. historical anti-Irish prejudice) must be due to social effects. And since stereotypes can be learned by all means that memes can propagate, not just observation, the stereotypes are more fundamental than the behavior and outcomes that they influence/create. The historical reasons why these memes rather than others came to exist (i.e. who, if anyone, should be blamed) is of secondary importance; if by some miracle everyone simultaneously forgot the stereotype and the socialization, it is very unlikely that a similar meme would reemerge.
ITT: it is obvious that the causal structure behind requiring college degrees for childcare largely overlaps with that behind housing size&quality regulation leading to Las Vegas demolishes homes built by a charity on private property to house homelessness, because they are only 50 square feet. So, 0 square feet, then. But that doesn’t make an ITT, e.g. I can’t quite pass it for the housing regulations. Yes, I’ve read enough “irritatingly incomprehensible” originals to copy them, but that doesn’t count for the spirit of the exercise.
Personally I don’t care because I don’t think havings kids is morally important. (Though in a practical sense I wish people I knew wouldn’t, since it makes it difficult to do things with them and frequently makes it unpleasant to visit.) But this is an entirely reasonable set of priorities, and if you are in favor of kids you should support them.
So here in Canada we get guaranteed parental leave (with a few conditions) in which the government pays you most of your salary (if you don’t work then you are expected to just get regular Employment Insurance benefits). You employer MUST give you the time off and can’t fire you over it – though it does happen. Furthermore, many employers will pay you a top up during your leave as a benefit.
After kids, we get a small cash payment from the government (we call it Baby Bonus, no idea what the real name is). It’s not enough, but it’s something.
Cliffs and accelerators might be important features of pro-natal policies. My view of child-rearing psychology is that the first child is the most costly while the second one has much lower marginal costs, and that many people (women in particular) learn that they like having children more than they thought they would (and find their careers less rewarding than they hoped they would), and many of those mistakenly wouldn’t’ve had any children, so moving them into the 1-child bracket helps them a lot. The acceleration itself has benefits. Even if there is no increase in TFR and you simply shuffle births around, you are pulling people from the future to the present, which can be a good deal in making up for problems now & being wealthier/better-at-raising-TFR later on; you are also encouraging people to become parents when they are physically/mentally most resilient & fertile, and perhaps more importantly, the earlier the birth the more likely their parents will be hale enough to provide childcare & backup. (If people have kids in your 20s, your parents are usually in good shape because they will be in their 40s-50s; if you have kids in your 40s, your parents will often be too crippled or dead to help or travel because now that spacing produces parents in the 70s-80s.)
It’s even worse because you have to help your aging parents at the same time as you have young children. I actually wonder how much of an effect longevity has because of that.
In Hungary, mothers under 30 don’t get tax exemption for life, only until their 30th birthday. This is very clear from Hungarian sources (I am Hungarian), but it’s also how most of the English language media reports it. https://www.hungarianconservative.com/articles/current/hungarian-family-policy-in-action-no-income-tax-for-young-mothers/
Business Insider just misunderstood one of their sources, if you click on their linked source, there is an ambiguous sentence about mother under 30 and mothers with 4 children, which the journalist apparently misunderstood.
This makes this policy much less of a big deal than the post suggests, changing many of the conclusions.
On the other hand, the preferential mortgages are under-emphasized in the post, anecdotally this seems to be maybe the biggest deal for people, and the mechanism is pretty interesting.
https://www.euronews.com/2019/07/29/hungary-offers-30-000-to-married-couples-who-can-produce-three-children
Married couples can apply for $30,000 mortgage, which they don’t have to repay at all if they have 3 children in the next 10 years. If they have 1 or 2 children, they get favorable interest rates, but if they don’t have any children, they have to repay it in full with worse than the market interest rates on loans. Couples who already have 3 children they are currently raising can also apply and just get the $30,000 for buying a new home. The bad part is that this mortgage can only be used for newly-built apartments (with 3 children, you can also get a $7,000 subsidy for buying any apartment, but that’s much less money). This is partially probably because of the lobbying of the construction industry, and partially for excluding poor people (a subsidy that can be interpreted as subsidizing the Roma to reproduce would be unpopular), as a newly-built apartment is expensive, so a poor couple can’t buy one even with the subsidy. Unfortunately, newly-built apartments are often really expensive, so this implementation of the mortgage often exclude middle-class people too and creates various perverse incentives, also driving up apartment-prices (I can’t assess how bad Hungary is in NIMBYism, but it’s not particularly good).
For simplicity, let the standard income tax deduction scale to all nuclear family members in household under 25.
So mother, father, three kids equals about $70000 in 2023. Let them decide how to allocate work from there.
It’s sort of an employment test but a very simple one, easy to administer, and could get political support. This would be on top of child tax credit.
I’d also be willing to go several fold higher.
This is what we already had, during the Baby Boom. Effectively married couples were paying no income tax, if they were having and raising kids.
Seems reasonable since the point of the deduction is to cover basic expenses. So our system now seems to assume you have no additional expenses with children.
I agree that the current birth rate in the first and second world nations is lower than ideal, in terms of maximizing human flourishing. It’s also true that very few of these nations are at risk of returning to their population levels circa 1900 by 2100. From an historical perspective the situation does not seem urgent. The only way I would consider this issue a priority: if quality of children were given at least equal weight with quantity. On a global scale, after all, there is no fertility rate problem. The global population is 8 billion (4x what it was 100 years ago) and TFR remains >2.1. It’s cheaper to bribe poor people than rich people. Shouldn’t a libertarian analysis lead to the conclusion that we ought to seek the cheapest marginal bribes globally? For example, Kenya has a TFR of 3.3 and a per capita income of $2,300. Its neighbors’ TFRs run from 4.2 to 6.9. Bringing Kenya’s TFR up to the regional midpoint of 5.5 ought to be cheap ($5-10k/child). By the same logic, incentives ought to be reduced in places like the US, Singapore, Switzerland, Norway. If the U.N. started a financial incentive program for increased fertility, giving equal financial incentives to all parents, at the cost of $100 billion/year, we can readily estimate how extra births would be distributed geographically. If one believes in open borders, why would one disfavor this type of U.N. plan?
A free way of altering fertility: alter the culture. I suspect (religious) culture is the secret to Israel’s fertility situation, which seems to be unique in the world. I’m very skeptical that clever financial incentives can overcome the massive psychological power of a nihilistic, monolithic cultural environment, especially as this culture pervades the political system that determines any incentive structure. Hollywood, TV, popular magazines, social media, and let’s not forget that low status cultural power, pornography, all provide entertainment which does not mirror the social world. It attempts to remap the social world. It’s a mix of art and activism, activism being driven by political ideologies, which are (poor) substitutes for religions. If I ran these institutions, they would not portray barren old women in high corporate/gov’t positions as heroines with fulfilling lives. They would not denigrate the contributions of husbands and fathers. They would not pretend that men and women have identical directions and kinds and intensities of ambition or accomplishment. They would not minimize extended family interactions. By default, they would be portrayed as having faith in real religions, which I consider the only healthy foundation for culture. Of course, it’s possible that this approach would do more for quantity than for quality. We will not know this until it is tried in various forms and places. I don’t know enough about Israeli demographics to analyze them confidently, though some relevant numbers are out there.
Given the current divorce rate (especially in countries with fertility below replacement), any serious analysis should consider (maybe consider fist) what happen to both parents in case of separation.
Because in practice, incentive working for couples are not enough if one (or both) of the parents would loose the advantage once separated. If rational, the parent(s) who would be worse of with children than without after a separation should think twice before being convinced by incentives that work for a couple….
It’s a lot like the prisoner dilemna: The full payoff matrix for separated/children, separated/no children, couple/children and couple/no children needs to be considered, because the decision to have a child is a common one, while decision to divorce is unilateral: even if couple+children is the best average option, it may not be the equilibrium one
A significant problem is that another word for “woman that is paid by the government to stay at home and take care of her children” is “welfare queen”. The desired effect of pro-fertility policies is to increase the number of children who become *productive* adults; total adult population is an imperfect proxy for this. If (people believe that) the daughters of paid mothers also become paid mothers and the sons of paid mothers do not become productive workers, then the pro-fertility policy will be net negative.
As for Hungary – if the exemption from income tax also applies to the income of *both* parents as long as they’re married, then it actually is a reasonably powerful incentive; one parent can be a stay-at-home parent, and the other can be a breadwinner that pays no income tax.
Okay, I just misread the section on Hungary. Oops.
Another pro-natal Hungarian policy: if you have a child while you’re in college or up to two years after you graduate, the government pays off your student loans.
Source: https://www.hungarianconservative.com/articles/current/hungarian-family-policy-in-action-no-income-tax-for-young-mothers/
The one obvious problem I see with persuasive subsidies for births is the hazard that people will have children with the goal of turning a profit on the interaction, such that the child receives only the standard of care necessary to not have the child seized by protective services and not a single penny more.