It's the economy, stupid!

More kids or just more expensive kids?

“We will be getting more expensive kids” writes Professor Davidson, and this is absolutely right. Furthermore, not just every additional child supported under the proposed new scheme will be more expensive, but all the children to be born to eligible mothers.

The questions, however, are whether this scheme will indeed, contribute to more births and whether it will also increase women’s participation in the economy.

Demographers know that with increase in (subsistence) consumption in developing nations, the birth rate increases. However, this happens only until a certain level of welfare beyond which the birth rate stabilises and then slides down. Applied to our wealthy nation, this empirically proven fact means that families in different income brackets will react to the proposed incentive differently. Additional money might not be a decisive factor for all families. Career and lifestyle considerations might be more important for women in higher income categories.

If the aim of the policy is to increase the number of births, then additional, very specific research is needed. For instance, before committing to this policy, we need to know what is the level of income beyond which families would not consider the proposed scheme as a reason for having a baby. Consequently, $150,000 per annum might be not the right cap, and some lower one might be economically and socially reasonable.

Then it comes the question about participation of women in the labour force. Will the half-year salary equivalent paid by the government be the actual reason for an aspirational professional woman deciding to return to work after six months of maternity leave?

Or she will come to work anyway, because she enjoys her career and lifestyle? Furthermore, a woman on a higher income has more flexibility in deciding on when to return to work and being able to afford premium childcare fee. Therefore, it is another reason for carefully substantiating the cut-off level of income.

As long as lower income bracket families are concerned, there is another question. Is the financial assistance during the first six months the right incentive for returning back to work; or considering all other factors equal, would those families prefer a different kind of benefit, such as additional help towards childcare expenses after the first six months?

Also, would the alternative of benefits after six months be fiscally neutral or more economical than the proposed six months leave paid from the public purse? Perhaps we should listen to the women themselves, in a statistically reliable manner?

Of course, all these questions leave aside the issues of affordability of the scheme and the sources of funding.