WIREDGOV

While low fertility rates and aging populations can challenge government social safety nets, a new global study published in Science suggests that moderately lower birth rates like that in the UK can actually improve broader standards of living.

Research teams in 40 countries correlated birth rates with economic data and concluded that a moderately low birth rate—slightly less than the “replacement rate” of 2.1 children per woman—can actually boost a country’s overall standard of living.  Especially in rich countries, intergenerational transfers through the public and private sectors are very different; public transfers are predominantly to the elderly, while private transfers go mostly to children.  As a consequence, the age structure that favours public finances is much younger than the age structure that favours the combined finances of the public and private sectors.  So despite governments tending to favour higher birth rates so as to maintain the workforce tax base needed to fund pensions, health care and other government benefits for the elderly, the study finds that lower birth rates will tend to increase the standard of living of families as they principally bear the cost of raising children.

“While many in the UK have been concerned about the economic fallout of our declining fertility rate and ageing population, this study demonstrates that our birth rate of 1.88 births per woman is actually just about right to foster overall prosperity,” said David McCarthy of NIESR, a co-author of the study published in the leading U.S. journal Science.

The results of the study suggest that “instead of trying to get people to have more children, many governments should adjust their policies to accommodate inevitable population aging,” said University of California at Berkeley demographer Ronald Lee, one of the lead authors of the study.

Lee and University of Hawai’i’s East-West Center economist Andrew Mason co-direct theNational Transfer Accounts project, or NTA, which studies how population changes impact economies across generations. Working with NTA network co-authors worldwide, which includes David McCarthy of NIESR and James Sefton of Imperial College Business School in the UK, they based their calculations for the study on finding the birth rate and age distribution that strikes the best balance between the costs of raising children and of caring for the elderly.

Their results challenge previous assumptions about population growth. For example, they found that in UK, the U.S. and many other countries, the fertility rate is nearly ideal for overall standards of living. By contrast, birth rates in parts of Asia and Europe are so low that they reduce living standards when public and private costs are included.

"A more complete accounting of the costs of children shows that in only a few countries in East Asia and Europe should governments try to encourage people to have more children,” said  Andrew Mason, “In UK and many other high- and middle-income countries, people are having about the number of children that is best for overall standards of living.”

ENDS
For full copies of the report, please contact the NIESR Press Office:
Brooke Hollingshead on 0207 654 1923 / b.hollingshead@niesr.ac.uk

To discuss the research for interviews, please contact:

• David McCarthy, National Institute of Economic and Social Research:d.mccarthy@niesr.ac.uk
• James Sefton, Imperial College Business School: j.sefton@ic.ac.uk
• Andrew Mason, East-West Center: amason@hawaii.edu
• Ronald Lee, UC Berkeley: rlee@demog.berkeley.edu

NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.

Further details of NIESR’s activities can be seen on http://www.niesr.ac.uk or by contacting enquiries@niesr.ac.uk Switchboard Telephone Number: +44 (0) 207 222 7665