Birthrates Followup: All About the Social Insurance?

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"Birthrates Followup: All About the Social Insurance?"

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One popular response to yesterday’s question of why should we worry about low birthrates comes from James Robertson and James Gary namely that high birthrates are necessary to sustain generous public sector benefits for retirees.

This seems a bit strange to me, however, since the people urging us to panic about low birthrates are almost always conservatives who oppose the existence of such programs. Certainly, the two commenters I was citing seemed to feel this way. What’s more, it’s not entirely clear to me how true this really is. After all, children are a significant—and legitimate—claim on the public purse. And high birthrates seem likely to lead to low workforce participation on the part of women, which makes sustaining your retirement benefits more difficult. Conceivably you could get around that by making public spending on child care and preschool and after school programs even more generous, but that just gets you back around to where we started. It actually strikes me as more plausible to argue that generous public sector retirement programs encourage low birthrates than that low birthrates discourage generous public sector retirement programs.

But without denying that the effect is real, this strikes even a lover of Social Security such as myself as a pretty unpersuasive reason to explicitly target higher birthrates as a policy objective. If it’s true—as I’m inclined to think it is—that slower population growth rates are likely to increase average living standards then people could still be made better off even with smaller transfer payments. Alternatively, a developed country that did find itself in desperate need of additional workers can always let more immigrants in.

I think part of what drives these anxieties is the intuition that if birth rates fall and fall eventually the human race will dwindle to nothing. But in practice, if you take a country with low birthrates that chooses not to compensate with immigrants—Japan, in other words—I think the situation will stabilize. Right now housing in Japan is incredibly expensive. But if the Japanese population were to fall, density would fall and space would get cheaper. And the availability of cheap, relatively spacious housing is an important determinant of people’s decision-making about having children and family size.

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