Despite the fact that the payments, $1,200 per adult and $500 per child, represented an odd sort of governmental arithmetic about the worth of American children, the stimulus checks Americans received in the midst of the coronavirus pandemic have reignited the long-smoldering conversation of universal basic income. Thanks to efforts by Andrew Yang and Bernie Sanders, the public opinion about some sort of direct governmental payment to citizens is, according to some polls, split. Roughly 50-percent of Americans think that a regular payment is necessary in the face of a fragile economy. That’s not an insignificant amount. Due to many factors, the scenario where this happens is unlikely. But, as there’s no more put-upon class economically than American parents, perhaps a different solution could work to aid the economy: government payouts to incentivize people to have children, also known as a baby bonus.
America is facing a serious baby shortage. Last month, the Centers for Disease Control announced that America’s 2019 fertility rate was 1.71, one percentage point lower than 2018. A single percentage point wouldn’t be a cause for alarm for most statistical records. But the modern American fertility rate, which reflects the average number of children women will have over their lifetimes, has eroded steadily for more than a decade. The previous rate, 2018’s 1.72, was a historic low. To maintain our population, the fertility rate needs to be 2.1. America hasn’t done that since the ‘70s.
The problem’s larger than a scarcity of cuteness and a drop in diaper sales. A baby bust today would cause the American population to skew far older in a few decades. As a result, when Generation X and millennials reach retirement age, America’s aging population would strain Social Security, Medicaid, and other governmental services beyond the capacity of the dwindling, younger workforce’s capacity to support them.
America’s fertility rate reached 3.77 during the baby boom that occurred in the wake of World War II, during a time of broadly shared economic prosperity. Broadly shared economic prosperity doesn’t really apply to America in 2020, tragically. Job uncertainty, student debt, gaps in health care coverage, and other economic obstacles stood in the way of pregnancy even before the COVD-19 Great Depression of 2020. And with America’s great cities literally on fire, it’s unlikely we’re turning the corner anytime soon.
But if money is causing America’s pregnancy woes, could money solve them as well? Our government could buy our way out of our underpopulated future by offering families a baby bonus. It’s unlikely, given American politics, but if we drew lessons about what people to target and how they should be paid, baby bonuses could have America’s delivery rooms humming in nine month’s time — and help parents shoulder the very high cost of raising children.
Before we dig too deep into baby bonuses, we should acknowledge that they don’t always work. Take Singapore. Despite offering a baby bonus since 2001, Singapore’s projected 2020 fertility rate is 1.22, trailing 56 other nations, including fertility-crisis embroiled Japan. Originally $6,000, about half of the country’s annual average yearly income, the bonus was boosted in 2019 to $8,000 for first and second children and $10,000 for third and fourth kids in 2019, plus additional government grants and investment accounts. But in light of Singapore’s cost of living, few married couples were persuaded to use the bonus to start a family. Singapore’s fertility rate declined each year the bonus was offered until rising in 2019.
It wasn’t just Singapore. Australia offered a $5,000 baby bonus from 2004 to 2008 that had little success boosting fertility rates.
A 2019 working paper by the United Nations Population Fund examined the effectiveness of government policies to low fertility rates, including baby baby bonuses. The UN’s sexual and reproductive health agency’s study found that public spending on families shows relatively close correlation with period fertility rates and family size. But the effectiveness of baby bonuses vary by country and social group, says Tomáš Sobotka, a demographics researcher with the Wittgenstein Centre for Demography and Global Human Capital and a co-author of the study.
“Cash transfers are more important in less affluent countries with a higher share of families struggling to make ends meet—such as Romania, Russia, or Ukraine — or among families with lower income and lower socio-economic status,” Sobotka says. “It is possible cash transfers will become more important during the emerging economic crisis in the post-Covid era.”
Sobotka says baby bonuses involving one-off payment to parents at birth usually only have a small effect on fertility rates. “More useful and more effective are monthly cash payments, if they are big enough to make a difference in reducing child-related costs for many families,” he says.
Baby bonuses offer a financial cushion at the onset of family life but don’t address the emerging economic and societal challenges driving declining fertility rates. The UNPF researchers stress the need for policies supporting gender equality and work-life balance.
“Investment in child care and early parental leave is more important,” Sobotka says, explaining that government-funded child care reduces expenses for families, boosts economies by keeping parents in the workforce and contributes to child development and socialisation, especially among disadvantaged children. Those benefits may not have an immediate effect on fertility rates but would support long-term reproductive plans and higher family size among women and men.
In the 1990s, Quebec’s baby bonus program found considerable success targeting parents who’d already had children. The French Canadian “bébé bonus” was scrapped in 1997 after not raising the raw number of births despite considerable expense. But in the 2001 study Subsidizing the Stork, Vancouver School of Economics Professor Kevin Milligan argued that the program increased fertility rates by 12 percent and brought Quebec births in line with other provinces. Milligan says the program was successful but the government’s analysis was flawed. “The birth rate went up, but the raw number of births did not,” he says.
Quebec’s baby bonus offered cash for all births but its strongest incentives were for families who’d had children already. Milligan says an interesting aspect was that it was $500 for the first kid, $1,000 for the second kid and many thousands of dollars for the third kid. “The evidence suggests that there was a pretty big boost to the number of families who had a third kid.”
But Quebec’s uniqueness could make its baby bonus success impossible to replicate.
“There’s a particular history in Quebec that underlies it,” Milligan says. In the 1700s, the British defeated the French but allowed Quebec to maintain its distinct culture and language. French Canadians countered with “the revenge of the cradle,” where Québécois families typically had 10 or 12 kids apiece, growing Quebec’s population from around 60,000 initial settlers to millions by the early 20th century.
When Quebec’s fertility rate dipped in the 1960s, it threatened French Canadians’ cultural influence.
“It’s always been a concern of Quebec within Canada that the relative population size of Quebec versus the English-speaking parts would mean that the security of the French language and the Quebec culture might diminish,” Milligan says.
Without Quebec’s homogeneity, established culture of large families and the urgent French Canadian drive to sustain cultural identity and influence, America might be hard pressed to follow its baby bonus model. But there could be an even bigger problem: the American government’s aversion to giving money directly to people.
The closest thing to a baby bonus proposal for modern America was a 2019 bipartisan Senate bill by Bill Cassidy and Kyrsten Sinema that would allow American parents to bank a $5,000 cash payout at birth, which they’d repay to the government through a reduced child tax credit benefit over time. The bill is nominally a paid parental leave measure, but with its flexibility about how parents can use the money they’re raiding from future tax refunds, it’s a baby bonus of a sort.
But with the average American cost of birth $11,000 and birth representing only a small part of the cost of raising kids, a $5,000 payout that increases your future tax liability seems unlikely to change anybody’s mind about having kids.
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