RUTH SUNDERLAND: Pregnant pause for financial development
- Babies, or the lack of them, are becoming an obsession in economic circles
- Fewer babies coupled with increased longevity is an ugly fiscal picture
- Meaning bigger tax bills to fund healthcare and pensions
To an economist, children used to be an income-producing asset, but now they have turned into an expensive luxury item. No wonder they call it the dismal science.
Babies, or the lack of them, are becoming something of an obsession in economic circles.
In the past, children in many families were expected to contribute financially from an early age. Now, middle class kids are on the parental payroll for decades.
Women in Britain and most of the developed world are having fewer of them.
Pope Francis said last month that declining birth rates show Europe is ‘losing its hope in tomorrow’.
Declining birth rates: Babies, or the lack of them, are becoming something of an obsession in economic circles
He is not the only one to be concerned.
The Economist magazine – whose editor Zanny Minton Beddoes is a mother of four – recently devoted a leader column to the subject. And commentator Martin Wolf turned his formidable mind to the ‘baby bust’ in the Financial Times last week. Why the concern? On the current trajectory in the UK, the total fertility rate – the typical number of children per woman – could drop below one by the end of the 2030s.
This implies the population would then halve over a generation if nothing changes, according to economists at HSBC.
Not that long ago, people fretted that the world was overpopulated. Even the Chinese government, which for years imposed a cruel one-child limit, is trying to incentivise women to have more babies, to little avail.
In the UK, fewer babies coupled with increased longevity means a shrinking working age population and an ugly fiscal picture, with bigger tax bills to fund healthcare and pensions. Governments will be under pressure to borrow more, which is a tax on the future.
The prospect of Britain becoming a giant old people’s home is not imminent.
But the median age in the UK is over forty, making us a middle-aged nation, if not yet an elderly one.
The young do not have a monopoly on innovation and creativity, but might an ageing population mean we are less growth oriented and more risk averse?
If the baby bust continues, we are likely to see more conflict between parents and non-parents, already a big theme on social media.
Expect more office warfare about holidays, flexible working and the like as the childless and the childfree by choice become more numerous and assertive.
It’s easy to identify likely causes for the baby bust, including the high cost of housing and exorbitant childcare. But solutions are harder to find.
Attempts by governments to incentivise women into motherhood with subsidised childcare or cash payments are expensive and don’t seem to work.
In South Korea, the government has spent £212bn since 2006, but the baby bust persists.
Immigration is one obvious answer, but that is politically difficult.
There may be hope from an unlikely direction: Artificial Intelligence.
I’m not suggesting bot-babies to replace bouncing bundles of joy.
However, AI could conceivably – pun intended – take the edge off labour shortages by carrying out tasks currently done by humans.
Technology could also help older people carry on working for longer, which is part of the answer.
Better, more affordable childcare would certainly help. But whatever women’s reasons for wanting children – or not – boosting the national economy is unlikely to be high up the list.
