Here’s What’s Needed to Boost China’s Falling Birth Rate

China’s decision to relax birth rules by allowing all families to have three children was met with skepticism from economists who doubt it’ll make much of a difference.

While the government promised a variety of support policies from developing a universal childcare service system to tax measures and improving maternity benefits, there were no details on when the three-child rule will take effect and these policies implemented.

Here’s What’s Needed to Boost China’s Falling Birth Rate

Here are some of the key steps needed to encourage more births and reverse the shrinking workforce:

Tax Breaks

A common reaction on social media to the announcement was that having a child was just too expensive, with the cost of childcare and education cited frequently.

Here’s What’s Needed to Boost China’s Falling Birth Rate

China offered tax breaks to parents in 2019 to encourage them to have a second child, allowing them to deduct education fees and other costs from their personal income. Yet those measures likely won’t have a large impact on easing the childcare burden, especially when considering a third child, according to Zhao Wen, a researcher at the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences.

“Cash handouts and that sort of thing don’t usually have immediate effects in enhancing a country’s birth rate,” he said, adding that some local governments already have budget pressures, which means they won’t be able to be very generous.

It’s also unclear how many families actually want three children. Two children was seen as the ideal number by about 60% of respondents in a survey of more than 6,000 people by Fudan University in 2020. The average number of intended children was 1.59, well below the replacement rate.

Better Childcare

When considering whether or not to have another child, women of childbearing age are most concerned with their career development, the lack of childcare services for toddlers under three and the financial burden for the family, according to a 2016 survey by the former family planning administration and other government agencies.

The United Nations said in a 2019 report that “providing widely available, accessible, and high-quality childcare which starts immediately after parental leave finishes and whose opening hours are aligned with parents’ working hours is indispensable to sustaining higher fertility rates.”

However, the effect may be limited or take a while to appear. Japan made childcare free for children three years or older from late in 2019, but births still fell in 2020, as they did in many nations during the pandemic.

Workplace Discrimination

Tackling widespread gender discrimination at work is another way the government can encourage more women to have children. In a 2019 national survey, families cited the expected decline in womens’ salary after childbirth as one of the most important reasons for not having children, after the heavy financial burden and a lack of childcare, a National Health Commission official said in an interview with Xinhua News Agency Tuesday.

Retirement Age

The changes to birth policies are aimed at fixing the problem of China’s shrinking labor force. According to the census conducted last year, the share of the working population -- those aged 15-to-59 -- slumped to 63.4% in 2020 from more than 70% a decade prior.

The fastest way to boost the size of the workforce would be to raise the legal retirement ages in China. These are currently among the lowest in the world at 60 years for men and as low as 50 for women and haven’t changed for decades, even as life expectancy has risen to nearly 77 years, according to the World Bank.

The average person retires before 55 now, and an extension of 3 years could add more than 60 million people to the country’s labor force, estimates Wang Tao, chief China economist at UBS AG. Other economists have suggested raising the age to 65 for both men and women, which would boost the workforce even more.

Here’s What’s Needed to Boost China’s Falling Birth Rate

Japan, where the total population started shrinking in 2011, shows how successful this can be. The total labor force there continued to grow through early 2020, partly driven by people working past the official retirement age.

Single Mothers

One thing the government won’t do is stop controlling people’s fertility decisions. The government still bans families from having four or more children, even though that might assist in their goals and some government officials, including researchers at China’s central bank, have called for birth limits to be abolished entirely.

And there’s no sign it will extend various benefits to single mothers -- the statement Monday is all about families and promoting marriage.

©2021 Bloomberg L.P.

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