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The baby bonus failed to increase fertility - but we should still keep it

Although the introduction of the baby bonus in 2004 was designed to provide financial assistance to families, a clear pro-natalist intent was also apparent. Treasurer Peter Costello’s quip is now famous…

A prospective voter - will the Gillard government’s paid maternity leave scheme affect the birth rate? AAP

Although the introduction of the baby bonus in 2004 was designed to provide financial assistance to families, a clear pro-natalist intent was also apparent.

Treasurer Peter Costello’s quip is now famous: “If you can have children it’s a good thing to do - you should have one for the father, one for the mother and one for the country, if you want to fix the ageing demographic”.

Now the Gillard government has announced the baby bonus will be cut back by $400 from next September.

So did the baby bonus affect the birth rate? And would the abolition of this benefit have much effect? The answer to both is a resounding no.

Australia’s total fertility rate rose from 1.76 births per woman at the introduction of the baby bonus to 1.96 in 2008, before falling back to 1.89 in 2010. However, the beginning of the upward trend in the birth rate in 2001 predates this policy initiative. Most (79%) of the increase between 2004 and 2008 can be accounted for by increases in fertility rates among women aged over 30.

Peter Costello’s baby quip is now famous. AAP

Following the introduction of the baby bonus, birth rates for women under 30 initially decreased, then increased between 2006 and 2008, before falling back to pre-baby bonus levels in 2010. Australia’s increase in fertility has coincided with broadly similar patterns in the United Kingdom, Ireland and New Zealand. France, the Scandinavian countries and much of southern, central and eastern Europe also have experienced increases.

My research (with Ross Guest from Griffith University), recently published in the journal Demographic Research, shows the baby bonus and the other changes to family benefits contributed only a very minor increase to fertility rates.

Instead the evidence points to the influence of combination of demographic and economic changes.

One of these is the legacy of the past trend of postponing childbirth to later ages. Put simply, past decreases in fertility rates were exaggerated by the effects of fertility postponement, and more recently a replacement of previously postponed births has pushed the birth rate back up.

The prevailing strength of the economy also has contributed to the fertility rate increase (whether post GFC changes can explain the post-2008 fall in fertility is an intriguing question).

As well as increases to family benefits, the two main policy levers by which governments may attempt to increase birth rates are increasing assistance with child care costs and increasing parental leave. Given that the annual maximum payment is currently $7,500 and that its receipts to parents will cumulate over the child care using ages, the effect on birth rates of the child care rebate, introduced in 2005, has attracted surprisingly little attention.

The child care rebate may have had a greater effect than the baby bonus. AAP

The steepening of the fertility rate increase between 2006 and 2008 would appear to fit better with the plopping of child care rebate cheques into bank accounts than with the introduction of the baby bonus. My joint research with Professor Guest suggests the effect of the child care rebate on fertility probably has been greater than that of the baby bonus.

Clearly it is far too soon to assess what effect on fertility, if any, the introduction of the Government’s Paid Parental Leave Scheme in January this year has had. According to a review of the international literature by Anne Gauthier, some studies have found a small positive impact of such policies on fertility, and others no effect at all.

Costello’s playful “lie back and think of the ageing population” justification for introducing the baby bonus does raise the question of which birth rate and population growth trajectory is the best for Australia. This is a complex philosophical question requiring definition of what “population wellbeing” means.

Is it narrowly economically-defined or should wider environmental and social considerations be included? Whose “wellbeing’ should be considered? Is it just those people currently alive and in Australia or should consideration extend to future generations to come, or even to species other than humans? And how should we measure and weigh-up the complex effects of population change on "population wellbeing”?

The quote from Costello suggests concern over the effects of population ageing, a process which would be slowed if birth rates were to increase. However higher birth rates also increase population growth, and thus may fuel urban congestion, biodiversity loss, and carbon emissions.

The current fertility rate may be seen as consistent with a relatively satisfactory balance between the competing goals of maintaining a manageable population age structure and a manageable growth rate. In view of the very limited effects of public policies, in any case, those who see the birth rate level as undesirable will have to lump it.

The arrival of children leads to new financial pressures and an increased value to parents of time away from work. Since the demographic effects of either increasing or decreasing it will be negligible, it is the non-demographic arguments which justify maintaining the baby bonus.

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11 Comments sorted by

  1. John Nightingale

    logged in via Facebook

    "Since the demographic effects of either increasing or decreasing it will be negligible, it is the non-demographic arguments which justify maintaining the baby bonus."

    What are the non-demographic arguments? The article presents none!

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    1. Iain Murchland

      logged in via Twitter

      In reply to John Nightingale

      Completely agree, unless "new financial pressures and an increased value to parents of time away from work" count as non-demographic arguments. In which case, owning a horse (or a myriad other situations) should qualify for government assistance too, since the same arguments apply there. (And no, I'm not a horse-owner or even horse-lover!)

      Any consideration of non-demographic arguments also needs to consider the opportunity cost - ie what other policy initiatives that money (some $4bn if I recall correctly) could be directed towards and why they are less beneficial/worthy?

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  2. Dale Bloom

    Analyst

    A factor that could be overlooked is the birth rate of married women compared to the birth rate of unmarried women, or women living in de facto relationships.

    De facto relationships in this country are rarely studied, (and I believe that this is intentional), but as I understand it, married women have about twice the number of children as unmarried women. With a high number of de facto relationships occurring, a change in the number of de facto relationships, or a change in the divorce rate would…

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  3. John Smith

    writer

    Thank heavens the baby bonus failed to boost fertility. Now we need the baby bonus to be converted to an anti-baby bonus (a sum of money paid annually to women who do not have children) so as to bring the birth-rate even lower.

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    1. Dale Bloom

      Analyst

      In reply to John Smith

      Another system is not to pay women anything. The more they are paid taxpay funding, the more they want, and the less satisfied they become.

      Most important is to decrease the number of children born outside of marriage. Children born outside of marriage are highly likely to have the greatest cost to society than an aging population.

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  4. Trevor S

    Jack of all Trades

    Seems the entire legislation was a nonsense then, no surprise there. Might be nice to get rid of it and use the money saved to provide free family planning advice and free contraception to help curb population growth and reduce humanities carbon footprint at the same time. Changing the law so the Pill can be collected over the counter at the chemist would be another step in the right direction.

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  5. David Arthur

    resistance gnome

    Thanks for this, Professor Parr.

    There are too many people in the world already, the first thing we need to do is decrease fertility, not exacerbate the problem of a surplus of humans consuming ourselves out of the only life support system we'll ever have.

    If that results in a surplus of excessively aged people for a while, so be it. Given this necessity, what we need is public health measures to encourage people to not destroy their own health by lifestyle choices. That may sound like wowserism, but in fact it's only common sense.

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  6. Stable Population

    logged in via Facebook

    Proper research is required here.

    We need to drill down further into the demographics to fully assess whether the baby bonus has increased the total fertility rate.

    There is significant anecdotal evidence suggesting that it encouraged some of the most financially challenged in our society to have more children. $5k is more than many low income earners and unemployed Australians can save in a year (or two).

    Some socio economic groups may have reduced their TFR whilst others increased theirs, influenced by the BB.

    www.PopulationParty.com

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  7. Nick Parr

    Associate Professor in Demography at Macquarie University

    In response to some of the above comments:
    1.To Stable Population.
    In my research (the paper is available online via the link in the above article) I did examine whether the effect of the Baby Bonus differed with income level, and found there were no significant differences. The lack of effect of the Baby Bonus is across the population and is not as you suggest a zero sum of differing effects on higher and lower income groups. Some other people have suggested teenage fertility would rise due to…

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    1. John Nightingale

      logged in via Facebook

      In reply to Nick Parr

      Thanks for your response, Nick. There is likely to be a big difference in the effect of the one-off lump sum Baby Bonus and PPL. I suspect your colleague and mine, briefly a few years ago, Ross Guest, could quickly explain why removing the BB and replacing it with PPL is likely to be more cost effective in achieving the type of social benefits you list. So, I'd argue we should get rid of BB because it is an expensive way to attain the goals that PPL is designed for, ie, all the benefits you list.
      Cheers,
      John

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    2. Dale Bloom

      Analyst

      In reply to Nick Parr

      Thank you Nick,
      A part of the HILDA survey did find this:

      ”6 per cent of married men and 9 per cent of married women were no longer married in 2007 although they reported high levels of relationship satisfaction in 2002.

      ”roughly a quarter of both men and women who reported high levels of relationship satisfaction with their de facto relationship in 2002 were no longer in a relationship five years later.”
      http://www.livinginaustralia.org/Results_Family.htm

      It is a ratio of about 4 times, and…

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