Nate Clark's Writing

It’s hard not to notice population decline in pretty much all western nations. I recently came across an article stating Japan’s birthrate fell 5.7% in just one year marking the 16th straight year of decline and the lowest on rate since records began in 1899 (that includes during World War II!). And Japan is far from alone.

This got me very curious: are there any proven way to reverse population decline?

Who Cares?

A quick reminder on why this matters. Low population growth leads to…

• Slow economic growth: People typically only work between the ages of 18 – 65. Unless there are offsetting productivity gains, lower population in that working age group means less stuff gets done, ergo everyone’s worse off.
• Fiscal pressure: Non-working elderly consume a lot of pension and health-care resources. Without a large base of younger people to replenish those resources the system becomes much more strained, i.e., everyone gets less.
• Political conflicts: different generations have different priorities, so when the older generations begin to wield relatively more power, it can lead to short-term policy decisions that are bad for the collective.

So that’s… bad. The techno-optimist might argue that AI and robotics will solve those problems and lead us to a utopia with infinite labor and wealth, but until my UBI checks start flowing in I will continue to think people will be important.

Governments think people will be important too, so to avoid the above problems they have tried all sorts of programs to increase birth rates.

So What Works?

What does the research say on reversing population decline? The tl;dr answer is that no policy has restored low fertility back to replacement levels in modern high-income societies. All the large-scale reviews of the evidence have all reached that same conclusion.

That doesn’t mean policy is completely irrelevant, but just that policies’ effects have never managed to get a country back to break-even.

What’s been tried?

• Increasing Childcare Availability and Affordability – Seems like a no-brainer: improving access to childcare shows a significant impact on fertility rates. This holds true in every country I ran across in the research, e.g., this example in Germany. A broad meta-analysis cited above also highlights childcare expansion as one of the more effective policy levers.
  
• Paid Parental Leave – Paid leave can raise fertility when it is well paid, predictable, and easily accessible. Longer but poorly compensated leave tends to show weak or null effects. Broad meta-analyses emphasize that wage replacement rates and job protection matter far more than the length of leave. A well-known natural experiment on Austria’s leave reforms found that policy definitely had an affect on both fertility and birth spacing.
  
• Cash Payouts, aka “Baby Bonuses” – The literature says that cash can increase fertility rates, at least temporarily.
  A study of Québec’s birth allowance found a clear fertility response among eligible families. Similarly, Spain’s universal €2,500 baby bonus increased births during its short lifetime.
  
  However, broader reviews conclude that cash benefits often 1. produce short-run (not long-term) increases, 2. have high cost per additional birth, and 3. produce fertility “increases” that largely reflect timing shifts rather than increases in lifetime fertility.

In a rather obvious finding, policy packages outperform single interventions, and stable, long-term policy bundles combining childcare, paid leave, and job protection work the best. Even so, these packages typically raise fertility from very low to moderately low, not back to replacement.

Migration is another lever that some countries use to ameliorate declining populations. That’s a whole different approach to the problem, with its own pros and cons, but needless to say it merely shifts the problem from one country to another (and certainly hasn’t been terribly popular option in the zeitgeist recently).

Yikes.

What Can Be Done?

I’m far from an expert on this, but some of the (completely untested) proposals in the literature make a lot of sense:

• Universally available, affordable childcare
• Affordable housing supply aimed primarily at families
• Long-term career and pension insurance to reduce the financial hit from having children

However these policies are very expensive, politically fraught, and would take a long time to pay off. I.e., I won’t hold my breath waiting for them to be implemented.

On the bright side, with less competition it will be a whole lot easier to get that dinner reservation you’ve been dying for!