“Couldn’t we just have some birth control for a while? It would really help us”
This offhand comment, posing a possible solution to overcrowded schools, was made by Cathleen Black, the New York City Schools Chancellor. While she has issued an apology, I found the comment unamusing and shortsighted. When you’re in the public spotlight word choice is imperative. If Ms. Black would someday like to collect her pension it is in her best interest to embrace her overcrowded schools.
This post is going to tackle the complex issue of how demographic shifts affect public policy. At the forefront of this debate are the stability of welfare programs, in particular pensions. As usual, let’s enlist our neighbors across the Atlantic as policy consultants.
Overcrowded schools are never a good thing, in the U.S. or Europe. But, the point I would like to convey with the first part of the title is not that overcrowded schools are good, but high birth rates can be.
Promoting a high fertility rate (number of children per woman) seems contrary to Malthusian theory and Paul Ehrilch’s famous book Population Bomb; these theories, in my opinion, have largely been disproved, although still adhered to by some. A fertility rate at or above replacement level is vital if Europe and the U.S. are to sustain the welfare states they have constructed without substantial policy change (we’ll get to this later).
Fertility rates in Europe vary throughout the continent, but are on average below replacement level. This demographic trend, which has been occurring for over 30 years in Germany, has put a strain on labor markets, healthcare and pensions to name a few. In order to maintain its population, a country needs a fertility rate of 2.1. The figure is over two because of infant mortality rates. A rate of 1.5 is considered to be the “safety zone” because of high migration into developed countries. The U.S. has fallen below replacement level, but this is a recent phenomenon. Fertility rates of the largest EU countries are listed in the table below.
| Country | Fertility rate 2010-15 projected |
| U.S. | 1.85 |
| France | 1.85 |
| Germany | 1.34 |
| UK | 1.85 |
| Poland | 1.27 |
| Italy | 1.41 |
One, of many, cause of a decreasing fertility rate is the increased availability and reliability of modern contraceptives[i]. Modern contraceptives are widely available in both the U.S. and Europe, but where the two continents differ is the rate in which the pill is used. The pill has been available for over 50 years and is one of the most effective methods of family planning.
Source: United Nations Statistics Division
The Economist’s blog “Democracy in America” has posted figures, charged as “arresting,” showing use of the pill during first time sexual intercourse in The Netherlands and the U.S. In the U.S. 26 percent of females were using the pill the first time they had intercourse compared with 64 percent of Dutch women. The U.S. also has a teen pregnancy rate three to six times higher than Western Europe along with a higher abortion rate. Why do such differences exist?
“Democracy in America” cites that 70 percent of school health clinics are unable to distribute contraceptives. Remember, that many of us are decedents of prudes that left Europe (sarcasm). This is evident recently with advertisers pulling out (also a type of contraception most prevalent in Albania) of an adaptation of the British show “Skins” that depicts lewd teenage behavior. While schools may not be able to distribute contraceptives and a stigma still surrounds the pill, condoms can be obtained at any pharmacy or Wal-Mart.
In fact, looking at figures from the UN, which are rather out dated, contraceptive prevalence (all methods) is similar, if not higher, in the U.S. as in Europe. According to the CDC 70 percent of women used a condom the first them they had intercourse (usage of the pill was lower than the number cited in The Economist at 18 percent).
This shows that teens (average age of sexual debut is 17 in the U.S. and Europe) in the U.S. may avoid the pill because of the social stigma or accessibility, but most use a condom.
So why did the teen pregnancy rate rise in 2005-2006 by 3 percent in the U.S. when condoms are used most the time? Outside of the causes addressed in Rob Stein’s Washington Post article a likely reason is due to the difference in “typical” and “perfect” use. When a condom is put on incorrectly because of lack of education, overexcitement, or inebriation, its ineffectiveness in preventing pregnancy rises from 3 to 14 percent (all contraceptive effectiveness rates available here).
Teen pregnancy raises serious ethical questions about family planning and abortion that I am not going to address. But it is clear that accidents in the back of parked cars are aiding in keeping social security solvent.
| Country | % population aged 65+ 2010 |
| U.S. | 13 |
| France | 17 |
| Germany | 20.5 |
| UK | 16.6 |
| Poland | 13.5 |
| Italy | 20.4 |
Lastly, the U.S. does not have many geriatricians for two reasons. The first is because of the low compensation geriatricians receive due to Medicare (see American Medical Association article). The second is because relative to other developed countries, our geriatric population is lower. Focus on the latter.
The U.S. currently has a low percentage of its population over 65 but this will rise as the baby bomber generation enters retirement. The biggest worry is that this shift in population dynamics will destroy social security because there are not enough young people to pay into the system. Not to mention not enough young healthcare providers to take care of America's most famous generation.
So how do we keep our schools filled, women pregnant and elderly population low (percentage of population)?
This is where pronatalist policy can intervene. It is advocated for and practiced in many countries, but its effectiveness can be tricky to determine.
Imagine, in Europe’s not so distant future, Italian civil servants nefariously poking pinholes in the condoms for sale at famarcie around the country. When I began examining pronatal policy, this is the image that leaped into my mind.
Peter McDonald (2006) argues for pronatal policies that will reduce the financial burden that child bearing has come to represent. McDonald cites two reasons for falling fertility rates: social liberalism and new capitalism (deregulation). Both of these forces have increased individual aspirations of economic well-being. Social liberalism has presented women with career choices outside of solely raising a family. New capitalism has increased risks in labor markets. Think outsourcing or the structural change in the U.S.’s economy from manufacturing to services. Men and women are delay having children so they can establish economic security.
These two forces have not altered peoples’ preference to have children and start a family but have caused a situation where preferences are not aligned with economic feasibility.
Phillip Longman (2006), in a controversial article in Foreign Policy entitled “The Return of Patriarchy," argues that pronatal policies failed when implemented in the Roman empire and are bound to fail now. McDonald admits that pronatal policies in Japan and Singapore have failed (the most interesting policy is government subsidized speed dating in Singapore). But he believes that these policies have not addressed the root cause of the problem: modern institutions (liberalism/capitalism).
Because it is unclear whether pronatal policies will work, we will first address the solvency of pensions, the most contentious policies affected by demographics. For the sake of this argument we are going to consider social security a pension and which, later, we'll see why it is more of an insurance system.
For answers we’ll look to Sweden. From Ikea and Volvos to Swedish meatballs and Skype, the Swedes just seem to do it right.
James Capretta (2006) wrote a great article for The Brookings Institution explaining German and Swedish policy innovations in their pension systems.
Here’s a breakdown of Capretta’s insight…
In 1998 Sweden changed its pension system from a defined-benefit approach to a notional defined contribution (NDC) in order to keep the system solvent at a fixed tax rate of 16 percent. A defined-benefit approach is similar to social security, where your monthly payments at retirement are based on what you put in.
A Swede, through payroll taxes, will build up a notional fund that factors in average wage increases (social security also does this through an average wage index). Automatic solvency has been built in when the annuity (payment per month) is calculated using a divisor that takes into account changes in life expectancy and mortality rates every year. The annuity a Swede will receive will be more or less depending on when his retiring cohort is expected to die.
Capretta also points out how the Swedish pension system is not American social security. This is an important point to reiterate. Social security has many different functions that make it more like an insurance organization than a pure pension system. On average social security only provides retirees with 40 percent of their preretirement income and includes benefits for disabled people and children whose parents die. Sweden is also relatively small, geographically and in total population, and ethnically homogenous.
The U.S. is not Sweden, but that doesn’t mean we can’t learn from their policy innovations. Building solvency into social security would be one step in the right direction as we face down demographic shifts. But it is not a cure all for all the issues that are bound to rise from declining populations.
It is unclear that a simple pronatal policy alone could address these colossal issues. I believe that a “cash for kids” incentive would drive people into the bedroom, but Longman shows that historically this hasn’t worked. Tax breaks exist, but they are not enough to offset the huge costs that parents must bear when they decide to procreate (I’m convinced a contributing factor is the increase in higher education costs). This debate will also raise such quarrelsome issues as abortion and gay couples’ ability to have children.
To solve this issue I’m going to step outside what I usually advocate (simple policies that address the specific problem at hand) and support exactly what President Obama called for in his recent State of the Union address.
Once upon a time, humans had children to ensure that they would be taken care of in their old age. Modern forces, like social liberalism and capitalism, have destroyed this incentive. Men and women can rely on the state and the money accumulated because of greater economic opportunity rather than have a child who would provide for them. Rolling back these institutions, which now define Western civilization, is not the answer.
The answer is education. Educating our youth so that future generations are the most dynamic, competitive and productive in the world will alleviate the burden of a shrinking population. Insight again lies to the north, but this time in Finland. Finland’s top notch education system consistently pumps out students who overachieve given the country’s location, small population and resources. Building a similar "Nokia economy" should be a priority of the U.S. and all European states.
Because of the current political climate, budget cuts are inevitable. Education systems can and should be reformed for the better, but taking an ax to their budgets without substantially improving them can only lead to one thing: a less productive generation that cannot afford to pay for Ms. Black’s pension.
References
Brookings Institution, The. 2006. “Building Automatic Solvency into U.S. Social Security: Insights from Sweden and Germany.” Capretta, James. Brookings Policy Brief Series 151.
Longman, Phillip. 2006. “The Return of Patriarchy.” Foreign Policy 153: 56-65.
McDonald, Peter. 2006. “Low fertility and the State: the efficacy of policy.” Population and Development Review 32 (3): 485-510.
[i] Modern contraceptives include: male and female sterilization, IUDs, the pill, injectible hormonal contraceptives, condoms and female barrier methods (diaphragm, cervical cap, spermicidal foams, creams, jellies and sponges).
