Political communities need people in order to exist. One particular biblical proverb is pertinent, here: “In a multitude of people is the glory of a king, but without people a prince is ruined.” (Proverbs 14:28, ESV) People are what make a city, a state, and a nation.
People are also needed to work, make things, clean things, create things, start businesses, grow food, eat food, make TV shows, and so on. This is just a normal course of nature. Governments need people, and societies need people.
This is why demographic projections should give us pause. Overall, the world’s population has been growing. But projections point in a different direction. By 2064, the world’s population is set to peak, and then decline. As the number of babies being born declines, so the number of women of child-bearing age declines. It is something of a vicious cycle.
Two examples illustrate this worldwide problem: Japan and South Korea. In the latter, the fertility rate was 0.81 in 2021, meaning that the average woman has less than 1 child across her life. Replacement fertility is 2.1. In Japan, it is slightly better, at 1.3. But Japan has had three decades of steep decline with no sign of recovery.
For anyone who thinks that lower populations are a good thing, population decline seems like a good news story. But the problem for policy-makers isn’t quite that simple. This kind of decline in fertility and population equals economic disaster – fewer people will be working, paying taxes, and providing for those who need assistance and care, and economies and nations will suffer and shrink. Livings standards will plummet, and this can lead to even bigger problems like civil unrest and even war.
The other issue is that of culture and language – if populations don’t replace themselves and pass on their cultural legacy to a new generation, their people will die out and their cultural traditions will be lost. This is a real possibility for much of the west, where population decline is usually accompanied by mass immigration, meaning that people from different cultures and language groups are replacing the native population.
One approach to fixing this problem is encouraging fertility through family policies. The Fidesz government in Hungary has a multi-pronged approach to arrest this trend, seeking to encourage marriages, discourage divorces, and incentivize child-bearing, with the aim of a positive birth rate by 2030.
The Fidesz government spends the equivalent of 5% of Hungary’s GDP on family benefits to try and encourage fertility to avoid relying on immigration for sustaining the population. A range of measures have been implemented by the government, to get Hungary’s fertility rate (currently 1.6) up to replacement level (2.1).
Some of these policies include payments for couples getting married for the first time, tax allowances for married couples with children, significant income tax exemptions for families of four or more children, and similar exemptions for women who have children before they turn 30.
The Hungarian government also recognizes the reality of “car-seat economics,” that is, that the barriers to having children are not merely financial, but also practical. To address this, there have been programs (e.g. the so-called CSOK program) that support housing purchases and extensions, cheap or interest-free loans for the same, and payments for families purchasing a larger car.
Finally, the Fidesz government has also instituted many measures that support children’s education, including free meals at schools, free textbooks, and many extra nursery, kindergarten, and school places. Mothers and fathers who want to have children are also financially supported to care for their children and then return to work.
The results of these policies are somewhat ambiguous, although they appear to have encouraged marriages and family stability, and increased the birth rate. Since 2010, the number of divorces has reduced significantly, and the number of marriages has more than doubled. The birth rate in Hungary is up from 1.3 in 2010 to 1.6. But is it enough? I regularly see news headlines stating that deaths are outpacing births.
Australia’s fertility rate increased between 2000 and 2008, getting close to replacement levels. It is now plummeting, to the point where Hungary and Australia’s fertility rates are almost the same.
What caused the spike after 2000? The conservative Australian coalition government, led by John Howard, introduced what was known as the “Baby Bonus” in 2002. The Baby Bonus was a large cash payment of around AU$ 3,000, paid upon the birth of a child (an amount in the vicinity of 720,000 HUF or €1850).
This payment was increased under the leftist Labor Gillard government to AU$5,000 for the first baby, and AU$3,000 for each baby after that one. But this scheme was scrapped entirely in 2013 and has not since been reintroduced. Fertility rates decreased in line with this. Further, studies have shown that there was a link between the Baby Bonus policy and increases in fertility in Australia.
If we compare the two countries and their family policies, Hungary’s are much more robust. There are a variety of incentives built into the tax system to have more children, payments to support growing families beyond two children, and the statistics show that there has been a nominal increase in family stability and a relative increase in the number of children being born since their implementation.
In Australia, the system currently in place is entrenched. Low- and middle-income families get very generous family payments in the form of tax benefits, although there is no longer any “baby bonus.” These payments do not seem to be encouraging higher fertility in the way the baby bonus did.
It seems that the main family policy that encourages people to have more children is the Baby Bonus style payment, which has been successful in Hungary as well. Cash payments which can be deployed for setting up for a new baby, or almost anything else, are popular and tangible.
Whether these kinds of policies can overcome an overall fertility malaise is yet to be properly tested. The problem may be too great to overcome with family policies. As it stands, it might be that no amount of money from any government will solve the demographic crisis.