Policy Responses To Low Fertility: How Effective Are They?

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Policy responses to low fertility:How effective are they?Working Paper No. 1May 2019Technical DivisionWorking Paper SeriesPopulation & Development Branch

Tomáš SobotkaVienna Institute of Demography (Austrian Academy of Sciences) / WittgensteinCentre for Population and Global Human Capital, Vienna, AustriaAnna MatysiakVienna Institute of Demography (Austrian Academy of Sciences) / WittgensteinCentre for Population and Global Human Capital, Vienna, AustriaFaculty of Economic Sciences, University of Warsaw, Poland (since October2019)Zuzanna BrzozowskaVienna University of Economics and Business (WU) / Wittgenstein Centre forPopulation and Global Human Capital, Vienna, AustriaFaculty of Social Studies, Masaryk University, Brno, CzechiaComplete draft updated and revised, 27 May 2019. Final corrections made on 7 February20202

Table of ContentsExecutive summary, main findings . 51. Introduction . 72. Low and very low fertility: regional contrasts and main driving forces . 92.1 Low fertility and reproductive preferences . 102.2 What explains very low fertility? . 15Economic and labor market uncertainty . 16Conflicts between career and family life . 16Persistent gender inequalities in the division of housework and childcare . 17Intensive parenting . 18Unaffordable housing . 19Rapid family changes incompatible with long-standing norms, values and expectations . 19Societal upheavals. 193. Policy responses to low fertility: analytical and methodological issues . 203.1 What are the main aims of national family policies?. 21Box 1.Explicit and implicit fertility targets in policy documents and initiatives. 233.2 Key issues in assessing policy effects on fertility and fertility change . 25Challenges in measuring fertility. 25Difficulties in measuring and comparing policies: policy packages vs. individual policies . 28Assessing the impact of policies. 294. Policy effects on fertility: Review and illustrations . 324.1 Major differences between countries in policy orientation and policy spending . 324.2 Childcare coverage, availability and costs . 36Box 2.Pre-school childcare in Norway: High quality, close-to-full coverage and supporting fertility394.3 Parental leave systems. 40Box 3.Swedish ‘speed premium’: a long-term success? . 43Box 4.Designing comprehensive, universal and generous parental leave: the case of Estonia . 45Box 5.Flexibility in parental leave use . 484.4 Supporting shared parental leave among both parents . 494.5 Financial incentives . 50Box 6.“Maternity capital” and fertility in Russian Federation . 534.6 Labor market conditions . 55Box 7. The strong push for family policies with ambiguous fertility impact: the case of Japan andRepublic of Korea . 574.7 Assisted reproduction . 613

Box 8. Pronatalist policies and fertility in state-socialist countries of Central and Eastern Europe,1960s-1980s . 654.8 Policy bundles: evaluating the overall impact of family policy “packages” on fertility . 70Box 9.A long path to modern family policy package in Sweden and France . 72Box 10. A journey to modern family policy in Germany . 745. Policy effects on fertility: Concluding discussion and future research agenda . 775.1 What makes family policies (un)successful: Key considerations . 77Policy instability and fiscal sustainability . 77Explicit fertility policies might not be the most influential ones . 77Policy (in)compatibility. 78Policy (mis)targeting . 78Ethical considerations: Family policy reflecting family diversity and reproductive rights. 79References . 804

Executive summary, main findingsLow fertility and policy responsesIn the last three decades sub-replacement fertility has spread around the world. One-halfof the global population today lives in countries where the period Total Fertility Rate isbelow 2.1 births per woman. East Asia, Southern Europe and parts of Central, Eastern andSouth-eastern Europe reached “ultra-low” fertility rates, with the period Total Fertility at1.0-1.4 and family size at 1.4-1.6 births per woman born in the mid-1970s.Such low period fertility rates are not explained by very low fertility preferences. Women,men and couples in countries with very low fertility typically desire to have two children andtheir average intended family size is around or above two births. Very low fertility ratessignal that there is a wide gap between fertility aspirations and actual family size. This gaptends to be larger for highly educated women, who find it more difficult to combine theircareer with their family life and aspirations.Consequently, fertility increase is becoming a frequently declared family policy aim:between 1986 and 2015 the number of governments intending to raise their country’s birthrates jumped from 19 to 55. Pronatalist motivation is just one among many goals of familypolicies, alongside compensating parents for the economic costs of children, fosteringparents’ employment, supporting early childhood development, and reducing genderinequalities.Among the main drivers of low fertility is the incompatibility between professional careerand family life. In times of women’s massive post-secondary education and labor forceparticipation on the one hand and rising individualistic aspirations on the other hand, theinability to combine paid work with childrearing often results in childlessness or having onechild only. This is closely connected with persistent gender inequalities in houseworkdivision: for decades, societies with strong traditional gender role norms have beencontinuously witnessing very low fertility. More recent factors contributing to fertilitydecline include the trend towards intensive parenting as well as labor market uncertaintyand instability coupled with soaring housing prices.The effects of family policies on fertilityComparing and evaluating the policy responses to low fertility present numerouschallenges because of the problematic nature of period fertility measurement and ofindividual policies being embedded in a wider institutional and cultural context. Besides theoverall level of policy support, many criteria influence the usefulness and effectiveness offamily policies. These include policy coherence (how well are different policy instrumentsmutually compatible and geared towards the existing labor market and education systems),policy stability and predictability, as well as the degree of flexibility policies have inresponding to the needs and aspirations of different families.5

Highly developed countries spend between 1% and 4% of their Gross Domestic Product onsupporting families. The level of public spending on families shows relatively closecorrelation with period fertility rates as well as with cohort family size.Providing widely available, accessible, and high-quality childcare which starts immediatelyafter parental leave finishes and whose opening hours are aligned with parents’ workinghours is indispensable to sustaining higher fertility rates. Nordic countries, Belgium andFrance are among the countries offering such a comprehensive childcare provision andallocating a high share of their family-related spending on public childcare.The effects of other family policies are less unequivocal. Parental leaves are needed tobridge the gap between the birth of a child and its entry into formal childcare. They are mostlikely to have a positive effect on fertility when they are well paid. If they aim to nurturemore gender equal division of childcare, they should have a certain proportion allocated toeach parent on a ‘use it or lose it’ basis (non-transferrable between parents). One-timefinancial incentives can have a modest positive effect on fertility, which is usually shortlived. Labor markets with flexible working hours seem to be more family friendly than thosewith rigid “nine-to-five” work arrangements. Finally, subsidized and widely accessibleprovision of assisted reproduction tends to have a small positive effect of fertility rates.Large-scale expansions of family policies often have considerable short-term effects onfertility, leading to temporary baby booms and giving time-limited boost to period TotalFertility Rate. They frequently affect trends in fertility timing, supporting earlier timing ofparenthood and shorter birth intervals. Their long-term impact on fertility is often limited.However, examples from Estonia, Japan, Germany, Russian Federation and other countriessuggest that they contribute to halting or even reversing cohort fertility decline, paving theway to a long-term stabilization in family size.Policies are most effective in supporting women’s and men’s fertility choices if they respondto various needs of individuals in diverse life situations. They should foster reconciliationbetween paid work and childrearing, but they also need to provide financial support tofamilies with limited income. Such comprehensive policy packages have been implementedand consistently developed in the Nordic countries, France or Belgium, with other countriesincluding Germany and Republic of Korea striving to develop their package.Future policy challengesFuture family policies need to reflect changing families and emerging economic andsocietal challenges. They need to reckon with high family instability and reflect the needs ofincreasingly diverse families, including single parents, unmarried couples, same-sex families,and “blended” families. They need to reflect rising economic inequalities, new unstableforms of employment, changing gender roles, increasing economic roles of mothers, andunaffordable housing costs for many families. They also need to cater to diverse preferencespeople have regarding the timing and the number of children and their perceivedpreconditions for parenthood. In short, family policies should help creating family-friendlyand child-friendly societies focused on health, education and well-being of children andfamilies at large.6

1. IntroductionFertility decline to a small family size has spread around the world during the last threedecades (UNFPA 2018). One half of the global population now lives in countries whereperiod Total Fertility Rate (TFR) fell below the replacement level threshold of around 2.1births per woman—implying that in the absence of future fertility increases, mortalityimprovements or immigration, these populations would eventually start shrinking (Wilson2004, United Nations 2017). Until the 1980s low fertility rates were found only in the highlydeveloped countries. More recently, low fertility has become a global phenomenon, with arising number of countries in Asia, Latin America and the Caribbean reporting subreplacement fertility. However, the picture of low fertility is far from uniform. Typically,fertility decline does not stop when reaching replacement level and a number of countries inSouthern, South-Eastern and Eastern Europe and East Asia saw their fertility rates falling tovery low levels with a TFR at or below 1.5 births per woman.This emerging phenomenon of “very low” (with a TFR below 1.5), “lowest-low”, or “ultralow” (with a TFR below 1.3) fertility is an unexpected path of the global fertility transition,which makes many policymakers and public at large worried about its potentialconsequences (Stark and Kohler 2002; Westley et al. 2010; Hakkert 2014; Poston et al.2018). These concerns include the long-term sustainability of population trends (includingactual or expected population declines, either of the whole national population or of specificregions and population groups) and accelerated pace of population aging which will putincreased pressure on public finances, pension systems, social security and care provision.They also relate to the prospects of stalling economic growth, declining labor force, and theneed to implement rapid reforms of the social security system, healthcare or labor market.In some countries, especially in South-Eastern and Eastern Europe, low fertility isaccompanied by long-term outmigration to richer countries in Europe, which furtheraccelerates population and labor force shrinking. Across Europe 18 countries experiencedpopulation losses between 1990 and 2017, with several of them (Bosnia and Herzegovina,Bulgaria, Moldova, Ukraine) losing 18% or more of their population size since 1990(European Demographic Data Sheet; VID 2018). In addition, populations of 51 countries andareas globally are projected to experience population decline between 2017 and 2050, withthe largest losses projected in South-Eastern and Eastern Europe. China, the most populouscountry today, is expected to start losing population since 2030 (United Nations 2017).Faced with these prospects, many governments started implementing policies aiming tosupport families. These family policies have become indispensable part of modern welfarestate as they support health and wellbeing of families and successful development ofchildren, and they reduce income inequalities and poverty among families. For instance,working mothers and fathers are now entitled to paid leaves after the birth of their child inall high-income countries except the United States. Many governments facing low fertilityare increasingly turning to family policies in order to stimulate birth rates. The history ofpronatalist policies is as long as the experience of low fertility: for instance, Franceimplemented a Family Quotient System of extra taxes for the childless and tax deductions fortaxpayers with children to stimulate fertility already a century ago, in 1919 (Chen 2004). Butit is only during the last 30 years that pronatalism has spread globally. The number of7

countries whose governments report their aim is to increase fertility jumped from 19 to 52between 1986 and 2011. In 2015, governments of 55 countries and territories surveyed bythe World Population Policies Database compiled by the United Nations (2015) reportedthey aim to raise fertility; this represents over a quarter (28%) of all countries in thedatabase. Of this, 27 countries were from Europe (representing 60% European countries)and 18 from Asia (representing 38% Asian countries; see Figure 1).Figure 1 Number of countries whose governments declare that their goal is to raise fertilityNo. of countries aiming to frica10019761986199620052015Source: World Population Policies Database (United Nations 2015)In a growing number of countries including Hungary, Japan, Republic of Korea and RussianFederation, fertility-stimulating efforts take a prominent position on government agendaand receive extensive media coverage (Box 1). It is therefore of key importance to study thepremises, aims and targets of these pronatalist interventions and to analyze their impact. Anexpanding literature analyzes fertility effects of specific policy interventions, helping togenerate a broader knowledge about the outcomes and effectiveness of family policies. Atthe same time, our knowledge remains patchy at best. The task of measuring fertility effectsof family policies is tricky and fraught with misconceptions, ethical issues, poorly definedaims, measurement difficulties, and data limitations (Neyer and Andersson 2008; OECD2011; Thévenon and Gauthier 2011; Luci-Greulich and Thévenon 2013; Hakkert 2014; Lutz2014; Matysiak and Węziak-Białowolska 2016; see also Section 2). Many policies are poorlyjustified or financially unsustainable in the long term, driven more by ideologicalconsiderations than by scientific evidence. Frequent and potentially confusing changes makeit difficult to evaluate policy effects.Many policies ignore current family diversity or target only some population groups, such asmarried couples or low-income families. Fertility rates are typically assessed on the basis ofperiod Total Fertility Rates, which are unstable and can be strongly affected by the shifts inthe timing of births. Period TFR may, in particular, provide a deceptive picture of fertilitytrends in countries where policies undergo frequent changes and where individuals maydecide to have children sooner (rather than to have more of them) in order to benefit from a8

newly introduced policy which may soon be withdrawn. We discuss these issues in the nextsection, which outlines the challenges involved in assessing the effects of family policies.This report aims to summarize the available evidence on the effects of family policies onfertility. We combine literature review with empirical illustrations for selected countries andpolicy interventions. In addition, we also discuss the complexity of the policy-fertility links.The key questions addressed in our review are the following: What are the aims national family policies are designed to pursue?What are the targets, range and scope of policies aiming to halt or reverse fertilitydeclines?What are the main difficulties and challenges in analyzing policy effects on fertility?Is there a good alignment between the determinants of low fertility identified in theliterature and the policies addressing low fertility?What is the evidence on the effects of policies on fertility? Are some countries moresuccessful than others in addressing low fertility?What are the main reasons for the mixed and ambiguous effects of policies onfertility? What can governments do better?Given the broad scope of our study, our review has to be selective and cannot providecomprehensive evidence on all these questions. We direct our attention to national policiesin low-fertility countries with high-quality data on fertility rates. Most of them have arelatively long history of low fertility as well as welfare policies and government policyinterventions. This narrows our focus to Europe, Australia and New Zealand, East Asia, theUnited States and Canada, and Israel. We provide more detailed examples of family policiesthat have been vastly expanded and policies that constitute specific, well-definedinterventions that can be seen as case studies. Our work builds upon a large body ofevidence, including the review of population policies in low-fertility countries by Hakkert(2014), comparative OECD publications (especially OECD 2006a, 2011, 2017a and 2019) anda wide array of studies on family policies and their effects published in the last two decades.2. Low and very low fertility: regional contrasts and main driving forcesBefore we discuss family policies, their diversity and measurement challenges we firstprovide a brief overview of contemporary low fertility, focusing especially on very lowfertility rates recorded in many countries and regions, including Southern Europe and EastAsia. We highlight different approaches to measuring fertility and show huge contrastsbetween period indicators and those pertaining to the family size achieved by women bornin different years (birth cohorts). We also discuss the gap between reproductive preferencesand actual fertility and the strong two-child family norm prevalent in most of the highlydeveloped countries. Finally, we discuss the key forces behind low fertility, focusingespecially on the factors contributing to fertility declines to very low levels. A more detailedreview of the determinants of low fertility is provided in a companion UNFPA report byWilkins (2019).9

2.1 Low fertility and reproductive preferencesChanges in fertility rates and their variation across highly developed countries have beenextensively covered in the literature (Basten et al. 2014; Billari 2018; Bongaarts 2002; Frejkaet al. 2008; Jalovaara et al. 2018; Kohler et al. 2002; Rindfuss and Choe 2015 and 2016;Sobotka 2008 and 2017; UNFPA 2018; Wilkins 2019). Here we give a brief outline of the keyfeatures of contemporary low fertility.In a nutshell, period fertility is low and unstable, showing frequent ups and downs (Frejkaand Sobotka 2008). Moreover, parenthood has been continuously shifting to ever laterreproductive ages (Sobotka and Beaujouan 2018; Beaujouan and Sobotka 2019) and familieshave become more diverse and less stable, with increasingly complex partnershipbiographies and living arrangements.At present, all highly developed countries except Israel have low period fertility rates1. Thekey difference is between countries where fertility rates fell to very low levels and thosewhere fertility remained at moderately low levels (Billari 2018). For the women born in the1970s, who have now almost completed their childbearing, the boundary betweenmoderately low and very low levels can be drawn with the completed fertility rates ataround 1.6. Women in Western and Northern Europe, Australia, New Zealand, and theUnited States have retained a higher completed fertility at around 2 births per woman(Myrskylä et al. 2013; UNFPA 2018, VID 2018). Some countries are just around or slightlyabove the 1.6 threshold (e.g., China, Republic of Korea, Austria and Hungary). In contrast,Southern European countries (Greece, Italy, Malta, Portugal, and Spain), parts of Central andEastern Europe (Romania, Belarus, Russian Federation, Ukraine), Germany, Japan andSingapore are below the threshold (UNFPA 2018). In most of these countries, fertility ratesare even lower when measured with the period TFR. At the extreme low level, Republic ofKorea reached the lowest TFR level globally, 0.98, in 2018. Singapore, China Hong KongSpecial Administrative Region (subsequently referred to as Hong Kong SAR) and TaiwanProvince of China had a TFR of 1.06-1.14 in 2018 and Southern European countries had a TFRat 1.25-1.4 (Figure 2).Whether fertility rates are close to two births per woman or one birth per woman mattersgreatly, especially in countries without significant immigration and in countries losingpopulation due to outmigration. In the absence of migration and mortality improvements, along-term prevalence of a TFR at 1.8 would result in an annual population decline by 0.4%,inducing a faster population ageing. Such a moderate decline can arguably be tackled viagradual adjustments in the labor market, pension systems, health care and social security, orit can be offset by accepting moderate levels of immigration. In contrast, a long-term TFR of1.0 would result in a population shrinking by 2.4% annually and drastic population ageing.Such a pace of population decline is challenging even for the governments accepting largenumbers of immigrants or willing to implement radical reforms to their social security andpension systems.1 Israel is an important exception which maintains high fertility rates (period TFR as well as completed cohortfertility around 3 births per woman) due to a combination of high fertility among some ethnic and religiousgroups (Okun 2013, Anson and Ajayi 2018) and high family-supporting attitudes rooted in religious and culturaltraditions and the history of the country (Della Pergola 2009).10

Figure 2 Countries and territories with lowest period total fertility rate (TFR) in 2018 and withlowest completed cohort fertility rate among women born in 1976Period Total Fertility Rate (2018)Republic of KoreaPuerto RicoTaiwan, Provice of ChinaHong Kong, China 5European Union (28)United States1.561.730.001.002.00Completed fertility (children per woman born in 1976)Hong Kong, China SARSpainJapanSingaporeItalyTaiwan, Provice of an UnionUnited States1.692.19012Notes: Data exclude countries and territories with population below 100 thousand. TFR data for Cyprus, Maltaand Greece refer to 2017. The table does not include data for Bosnia and Herzegovina and the Republic ofMoldova due to their lower reliability. Data for Ukraine cover the territory under government control.Sources: Eurostat (2018), Human Fertility Database (2019), European Demographic Data Sheet (VID 2018) andnational statistical offices.Low fertility rates imply that relatively few women have larger family size with three or morechildren. Larger families have become least common in East Asian countries, Eastern Europe,and in Southern Europe. For instance, in Belarus, Japan, Republic of Korea, Portugal, RussianFederation and Ukraine only 12-15% of women born in the early 1970s had at least threechildren and only 2-4% had four or more children (Human Fertility Database 2019; CFE11

database 2019; Figure 3). In Spain, fewer than one in ten women born in the early 1970s hadthree or more children. By contrast, many countries with moderately low fertility, includingNorway, Sweden, United Kingdom and the United States, have much higher proportion ofwomen (25%-36%) with three or more children (Figure 3). Another difference betweencountries with very low and moderately low fertility pertains to the share of women withone child, which is often much higher in the former group. One-child families are mostcommon in Southern and Eastern European countries, with four out of ten women inPortugal, Russian Federation and Ukraine having one child (Figure 3). These numbers arealso relevant when designing and evaluating policies: policies aiming to encourage womenand couples to have larger families may be ineffective in countries where many women facedifficulties in planning their first or second child and the “pool” of women with two or morechildren targeted by these policies is relatively small.12

Figure 3 Women by number of children ever born (%) and completed fertility rate (in brackets),selected low-fertility countries and territories; women born in 1971-75a) countries and territories with very low fertilityEAST ASIAChildlessJapan (1.42)1 child29Taiwan, PoC (1.64)2 children20173 children3622164317EASTERN EUROPEBelarus (1.57)133540Russian Federation (1.56)1040Ukraine (1.53)10431237133810CENTRAL EUROPEAustria (1.63)21223819SOUTHERN EUROPEPortugal (1.61)839Spain (1.35)41240282012394060980100b) countries with moderately low fertilityChildlessCzechia (1.80)10Netherlands (1.76)Norway (2.02)12Sweden (1.94)13110164215224315304718253719203 children521918United States (2.19)2 children2217UK/ England & Wales (1.89)1 child273440366080100Notes: The data show number of children women reached by age 42 (45 in the United Kingdom). This is closeto the completed fertility at the end of their reproductive lives as only a very small fraction of childbearing(about 1% of less) takes place after age 42. Numbers in brackets show the completed cohort fertility (familysize) at age 42. Data pertain to women born in the following years: 1971 for Ukraine, 1972 for Taiwan, Provinceof China (denoted as Taiwan, PoC), Russian Federation, Norway, United Kingdom, 1973 for Portugal, 1974 forJapan, Belarus, Spain, Czechia, the Netherlands, Sweden and the United States and 1975 for Austria.Sources: Huma

their average intended family size is around or above two births. Very low fertility rates signal that there is a wide gap between fertility aspirations and actual family size. This gap tends to be larger for highly educated women, who find it more difficult to combine their career with their family life and aspirations.

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