China offers new subsidy to promote fertility, but money can only solve part of the problem. Here’s why | Explained News

The population of China, the world’s second most populous country (after India), has been contracting in recent years. There have been fewer Chinese births than deaths for three consecutive years since 2022. In fact, most parts of the world are grappling with declining Total Fertility Rates (TFR), which is the average number of children a woman is likely to bear in her lifetime.

China’s neighbours South Korea and Japan have some of the lowest fertility rates globally, and Elon Musk, the world’s richest man, has frequently sounded the alarm for the United States.

What is the problem with declining fertility rates?

The Global Burden of Disease, Injuries and Risk Factors Study (GBD)-2021 estimated that globally, TFR more than halved from around 5 in 1950 to 2.2 in 2021.

This signals better education and financial independence for more women, and greater agency in making reproductive choices. Infant mortality rates have come down drastically during this period, women are living increasingly healthier lives, and couples are able to give their children a higher quality of life.

However, an extremely low TFR can have long-term consequences for societies.

These include increasingly unsustainable proportions of people in the above-60 age group and a shrinking of the working-age (15-59 years) population, leading to labour shortages, higher dependency ratios, higher taxation to fund the cost of healthcare for the large numbers of the elderly, and changes in social structures and relationships. Individuals like Musk believe that collapsing birth rates can lead to the disappearance of entire populations, and present a bigger threat to civilisation than climate change.

India’s overall TFR stood at 1.91 in 2021. This is less than the ‘replacement level’ of 2.1, or the number of children that a woman would need to have to replace herself and her partner in the next generation. This figure assumes there will be no in- or out-migration, which is not the case in reality.

India’s lowered TFR is the result of decades of government investment in family planning, changing social attitudes about family sizes, rising costs of raising children, and improvements in the education of women.

Many of these factors are common to other countries that have seen a decline in TFR. The only major region in the world with a high TFR today is sub-Saharan Africa, where medical advances have reduced child mortality, but fertility remains high due to cultural reasons, poverty, and the lack of decision-making powers for women.

To what extent have subsidies and tax credits helped fertility rates?

As countries around the world grapple with declining fertility rates, many, like China, have introduced subsidies and tax incentives to encourage couples to have more children.

One reason for this is the understanding that the rising cost of living is a major deterrent to parenthood. Almost 4 in 10 respondents in an online survey of more than 14,000 adults in 14 countries carried out by the United Nations Population Fund and YouGov in June said financial limitations were stopping them from having the families they wanted.

However, these measures have had only a limited impact. The think tank Center for Strategic and International Studies noted in a 2023 article that “Representative studies on the expansion of financial assistance show that the effects are positive but limited.” The article cited a 2013 study that reported that child allowances, even if doubled, lead to the probability of childbirth increasing by only 19.2%.

In 2006, demographer Peter McDonald identified two reasons for the decline in TFRs.

One, rising social liberalism, in which individuals in modern societies were re-examining social norms and institutions, and increasingly focusing on individual aspirations.

Two, the withdrawal of the welfare state in major Western economies in the 1980s and 1990s, which led to “loss of trust in others, loss of a sense of the value of service (altruism), decline of community…and fear of failure or of being left behind”.

Both processes deprioritised having children as a mandate for living a good life, McDonald concluded.

“The solution to low fertility…lies in providing a greater sense of assurance to young women and young men that, if they marry and have children, they will be supported by the society in this socially and individually important decision,” he wrote.

McDonald also argued that incentivising policies have failed in countries like Japan and Singapore because they targeted particular types of women (like high earners) rather than reforming societal institutions.

What more can governments do to address the situation?

Guo Yanhong, deputy head of China’s National Health Commission, said the new childcare subsidy “works in tandem with related policies regarding childcare, education, employment, taxation and housing”, Xinhua reported.

Supporting childbirth requires a comprehensive policy package, including financial support, parental leave, and cultural measures, Guo said.

Also, cultural shifts happen over a long time, and are often intangible and difficult to detect. Monetary support is something governments can directly control.

Anne Gauthier, professor of comparative family studies at the University of Groningen in the Netherlands, told the BBC that behind the higher-than-European-average TFR of France could be the generous social policies followed by the French Ministry of Families over the decades.

However, countries such as Finland, which have some of the most progressive policies for parental leave after childbirth, as well as subsidies, continue to see low TFRs.

While the specific context may be different in each country, it would seem that throwing money at the problem of falling TFRs can only do so much. Accompanying changes in how society treats the raising of children, and how people see work and fulfilment, are important as well.