When Governments Pay People To Have Babies : Planet Money It's a strategy some countries have adopted to boost falling fertility rates. Here's why it often fails.

When Governments Pay People To Have Babies

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We've been reporting this week on the world population, which the United Nations now estimates at seven billion and growing. We've heard, of course, some problems of population growth but it's worth pointing out that many nations have the opposite problem. Rich nations in Europe and East Asia have such low birth rates that governments are paying people to have kids. Robert Smith of NPR's Planet Money team reports on birth rate economics.

ROBERT SMITH, BYLINE: What is a baby worth? Let's set aside for a moment all of those goo-goo feelings about the chubba-chubba – no, no. A baby is an economic investment. Businesses will eventually get a new worker and a new consumer for their products. Parents will get someone who will support them in their old age. Governments get a taxpayer - and a guarantee that the country will live on.

NICK EBERSTADT: For most of human history, the idea of elimination or extinction seemed like a pretty plausible danger.

SMITH: Nick Eberstadt studies population growth at the American Enterprise Institute. And he says that once the threat of extinction was removed in the last century - once we started to live longer - well, the return on that baby investment changed. People in rich countries started to invest in other things.

EBERSTADT: People have more of just about everything. They've got more money per capita, they've got more square feet of housing per capita. They've got more cars. They've got more music. They've got more vacation. They've got more leisure time. There's one thing they don't have more of - that's babies.

SMITH: Germany, Japan, Russia, Taiwan - I can go on - these countries aren't having enough children to replace themselves. The economic calculation shifted. Women found that they could earn far more money in the workplace. With free trade and immigration, businesses didn't need a captive population to survive. And indeed, even developing countries like Brazil and Iran had their birthrates drop. Now, this can be good for a little while. With a young workforce, fewer babies to take care of, a country can show enormous growth. But then people start to get old, and governments say: uh-oh.

PATRICIAN BOLING: Who's going to pay the bills? Who's going to pay for pensions? And in countries that have really low fertility rates, that's a very extreme problem. It makes what we have in the United States, with respect to generational inequity, look like peanuts.

SMITH: Patricia Boling is a professor at Purdue. She studies countries with shrinking populations. The problem, she says, is that many of them have set up their retirement systems just like here in the U.S. - they have the young workers pay for the older retirees. So fewer kids means fewer young workers to support everyone else. So Boling says around the world governments have intervened - they pay for babies. The techniques are different. In Australia, you get a baby bonus - an actual check of close to $1,000; in Germany it's paid maternity leave - up to $35,000 over the year. But Boling says it's not clear that money can buy you better fertility.

BOLING: And the basic reason is it's so expensive to raise a child that even if you were to offer a pretty substantial bonus, it's going to be used up in a heartbeat.

SMITH: And so far Germany's very generous paid maternity leave hasn't produced anything close to a baby boom. And Boling thinks she knows why. You can't pay women to stay away from work and have babies. Women want to work, and jobs pay more than any government fertility program.

BOLING: So policies that allow women to work and have kids and not treat it as an either-or tradeoff are the ones that are most likely to produce healthy fertility rates.

SMITH: Boling points to France and Scandinavia, where they have much better childcare and more flexible schedules, and their fertility rate is higher. But it doesn't work everywhere. Japan is shrinking even after the government has tried to ramp up their baby benefits. Same with Southern Europe. There's a theory that in those countries perhaps the biggest impediment isn't money. Perhaps it's the fathers. Boling says in some macho cultures, women may just be deciding this is not worth it.

BOLING: Deciding, look, if it's all on me - I'm doing all of the child rearing and maybe working outside the home as well - and you are just, you know, going off to drink with your buddies every night, forget it. I don't want to have kids. I don't want to have two kids. Or maybe I don't want to have any kids.

SMITH: And at that point governments may have to reconcile themselves to either a smaller country or growing only through immigration. The baby investment has gone broke. Robert Smith, NPR News, New York.

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