The Corner

The Welfare State vs. Kids

In a recent essay for NR I talked about one of the less-discussed effects of entitlements: Besides bankrupting us, they’re also reducing the average size of families.

 

Incentives tend to change when activities are socialized, and provision for old age is no exception. Now it is possible to enjoy a free ride, as the economists say: Don’t raise children yourself, but benefit in old age from the fact that others have done so. Looking at it from the other direction: Parents contribute more to the programs than non-parents who pay the same amount of tax, but they get the same benefits. One ancient motivation for having children dramatically shrinks (although it does not vanish; many elderly people still get a lot of help from their kids). One might therefore expect that the introduction and expansion of old-age programs would lead people to have fewer children. One might further expect people to marry later in life, and fewer people to marry at all, as they envision lives with fewer, or no, children. . . .

 

A 2005 paper for the National Bureau of Economic Research by economists Michele Boldrin, Mariacristina De Nardi, and Larry E. Jones points out that “the size and timing of the growth in government pension systems” matches up nicely with fertility trends in the U.S. and Europe. They expanded on both sides of the Atlantic Ocean, and fertility fell on both sides, after World War II; and they expanded more in Europe, where fertility fell further. In their model, entitlements account for roughly half of the decline in fertility, and 60 percent of the difference between European and American fertility. 

The whole article is now online.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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