Sure You Can Pay People To Have More Kids. But, Is It A Good Idea?

Daniel Gross at Slate had this to say about birth rates:

“But for developed nations, the birthrates may have dropped too far. Europe and Japan face a shortage of children that endangers pensioners and undermines economic dynamism. Even China is facing a labor shortage, thanks to its one-child policy.

Can the market fix this? Extremists on the left (Marxists) and right (supply-siders) believe firmly in the power of economic incentives to change behavior. But the sums involved are generally rather small. According to the CIA, Russia’s gross domestic product per capita in 2005 was $10,700, compared with $42,000 in the United States. So giving a Russian $9,200 in cash is like giving an American $36,112. Would that be enough to convince lots of Americans to assume the financial responsibilities associated with an additional child? For most, probably not. The U.S. Department of Agriculture has data on the price of human husbandry. According to the latest estimates, depending on your income, it costs anywhere from $139,110 to $279,450 to raise a child to age 17. And that doesn’t include college, or graduate school, or help with the down payment for a starter home. Phillip Longman argues that these are lowball estimates, because they don’t account for the forgone wages of a mother. “For a middle-class couple in which the wife works, but takes some time off, I came up with a total per-child cost of $1 million in direct and indirect costs.

Obviously, it costs much less to raise a child in Russia. But just as a one-time payment of $36,000 would be unlikely to prod many Americans to have an extra child, a one-time payment of $9,200 is unlikely to do the same in Russia. (Putin is also pledging to increase child-support payments and provide more funding for nursery school.) In evaluating such incentives, potential parents have to weigh the tightly defined incentive against a responsibility that is open-ended.”

This isn’t my main point, but this is a really puzzling sentence:

“Extremists on the left (Marxists) and right (supply-siders) believe firmly in the power of economic incentives to change behavior.”

Setting aside the fact that only ultra-libs would think supply siders are extremists, does using Marxists as an example make a lot of sense? When you’re talking about Commies, you’re talking about people who believe that making a doctor’s wage exactly the same as that of a ditch digger won’t dramatically cut into the number of people who’ll become doctors. If anything, they seem to have minimal faith in the power of economic incentives to motivate people. Of course, you have to wonder if Gross believes this, too, because the implication of his sentence is that only “extremists” “believe firmly in the power of economic incentives to change behavior.” I thought just about everybody believed that was the case these days? Apparently not.

Anyway, I don’t want to get bogged down in that tangled sentence.

The real question is whether offering people a lump sum payment can influence people to have children. It definitely can. We here in the United States can tell you that from experience because we’ve been doing it for decades with programs like Welfare, Food Stamps, Public Housing, and Medicaid. Granted that’s not the same thing as a lump sum payment and we’re, in an indirect way, paying them to have kids out of wedlock, rather than to just have more children, but we’ve proven, regrettably, that it works.

At one time, unmarried mothers were very rare in this country. Then we began to heavily subsidize that behavior with government goodies and guess what? The number of unmarried mothers exploded. For example, back in 1960, before Lyndon Johnson’s Great Society dramatically expanded government services, the rate of illegitimate births for all Americans was 5.3%, up only 1.3% from 1950 and 1.5% from the rate in 1940. So, the numbers seemed to be relatively stable. Then, after the Federal Government started serving up the dole, the illegitimacy rate went through the roof. In 1970, it was 10.7%. In 1980, it was up 18.4%. In 1990, it had skyrocketed to 28%. In 2000, we actually got it up to 33.2%.

Are the government payouts entirely responsible for that change? No, there have been cultural and demographic changes that have had an impact as well, but the money the government paid out was undoubtedly a huge factor — and studies have proven that to be the case:

“…Mark Rosenzweig…found that a 10 percent increase in welfare benefits made the chances that a poor young woman would have a baby out of wedlock before the age of 22 go up by 12 percent. And this was true for whites as well as blacks. Soon other scholars were confirming Rosenzweig’s findings. Welfare made a difference.”

So, is it entirely possible that Russia’s lump sum payments will work? Sure, but are the sort of people who are willing to pop out a kid for $9,200 the same sort of people you want raising more kids? There’s an old saying the Russians should keep in mind: be careful what you ask for, because you might get it.

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