Late last month, The Economist published a survey on the Korean peninsula that, among other things, addressed the steep decline in South Korea’s fertility rate, which is among the lowest in the world:
Firms oblige men to work punishing hours; men then heap all the household duties they do not have time for on their wives. The arrangement suits employers, who prefer a longer working week to a higher headcount, argue Randall Jones and Satoshi Urasawa of the OECD. It may also suit some men, who find the office more congenial than the nursery. And even if it does not, most do not feel able to stand up to their employers’ unreasonable demands. Instead, they make unreasonable demands on their wives—who have responded by going on baby-strike.
The average South Korean woman now waits until after her 29th birthday to marry and after her 30th to start a family. Some women never do either. The chances of their never marrying have risen from 9% in 2000 to 15% today. And South Korea’s fertility rate, now at 1.3 children per woman, has remained stubbornly low.
Many South Koreans say they would like more children. According to a survey by the Hyundai Research Institute, 58% of adults want two children and 13.5% want three. If parents had their wish, South Korea’s fertility rate would be more like 1.8 than 1.3, but most of them could not afford that.
But as Anna Williams observes, the really surprising part of the article comes next:
The baby-strike has narrowed inequality between the sexes, giving women more freedom to pursue their careers. But it has set the stage for a different kind of social injustice between those with and without children. When the childless retire, they will rely on the labour of the next generation to provide for them. Even if they have saved for their own pension, most of what they buy with their retirement funds will be produced by the working generation of the day. But the childless will not have contributed much to the cost of raising that generation. Parents, by raising the next generation of workers, are helping to make everyone’s retirement more comfortable. The South Korean government has recognised this by promising more generous pensions to women with more than one child. [Emphasis added]
This notion that there is a “social injustice between those with and without children” has been advanced by a wide range of U.S. conservative thinkers, and it is encouraging to see a similar argument in The Economist. One of the reasons the U.S. has a somewhat higher fertility rate than South Korea is that it is much easier for American women to combine work and child-rearing, though one can make a strong case that there is more to be done on this front. Raising pension benefits for women with more than one child is one strategy for easing the economic burden facing parents; an expanded child credit is another.
Recently, Robert VerBruggen of RealClearPolicy argued that the Affordable Care Act’s new pregnacy coverage mandate should be viewed through this lens:
[A]n expanded credit is very popular with many on the right — and there’s a case to be made that these conservatives should support mandatory pregnancy coverage, too. To a small extent, it accomplishes through insurance coverage what the child credit accomplishes through the tax system.
When all health plans have to cover a specific thing, the plans basically serve as a way of socializing the costs of that thing. So who wins and who loses when we socialize the cost of pregnancy?
The most aggressive critics suggest that the policy subsidizes women at the cost of men, but this isn’t quite right. 60 percent of American children are born to a married couple — in these cases, men share in the added cost of pregnancy no matter what. Either these couples can pay a lot extra for the woman’s coverage (or pay for the pregnancy out of pocket), or they can pay a little extra for both parents’ coverage over the course of a lifetime. Certainly, unmarried fathers will end up paying for pregnancy when they might not have otherwise, but it’s hard to get too upset about that.
The major redistribution here, instead, is from the childless to parents of both genders. People who don’t have kids pay for pregnancy without ever benefiting from the coverage, and people who have more kids benefit more than people who have fewer kids.
Robert’s point is well taken, though I think there is a coherent case for objecting to the coverage mandate while favoring the child credit (or its expansion) — the latter policy is more transparent, and it gives parents more flexibility as to how resources are deployed. Moreover, Robert argues that conservative arguments for expanding the child credit are also arguments in favor of making the credit refundable:
If raising children counts as a tax contribution, and if someone’s required tax contribution is less than they contributed by raising kids, they should get the extra back, just as they’d get the extra back if they overpaid in any other way. (Though because some parents rely on government benefits to pay for childrearing, those benefits would need to be reduced or subtracted from the refundable amount.) Advocates of the credit sometimes get around this objection by saying some parents contribute to entitlement programs “twice” — through taxes and children — while parents who don’t pay taxes contribute only “once,” but tax contributions are typically measured in dollars, not in the number of taxes paid. Further, childless non-taxpayers don’t contribute at all, which creates the same disparity with non-taxpayer parents that the expanded credit seeks to address between taxpaying parents and taxpaying non-parents.
I’m sympathetic to Robert’s argument, yet as we’ve discussed earlier on, the fiscal cost of expanding the credit and making it fully refundable would be quite high. The Tax Policy Center has analyzed the revenue effects of various reforms of the child tax credit, and the results are sobering. But there is also a political objection: while Robert is right that a credit that does no more than offset income and payroll taxes doesn’t account for the disparity between childless non-taxpayers and non-taxpayer parents, transfers to parents with little or no labor income could be seen as encouraging non-participation in the formal labor market. One could argue that parenting is a job that merits some form of social compensation, even in the absence of market work, but it is easy to see why working parents might object to this idea on grounds of fairness.