Financial Times (London), June 11, 2004
Fewer Births Make Old Europe
Fear for Its Future
Many governments concerned by
slow population growth are hoping for a new
baby boom. But policies to bring about social
changes are expensive and controversial, writesStefan
BYLINE: By JO JOHNSON, MICHIYO NAKAMOTO and
Hospitals in Estonia are braced for a baby boom.
New maternity wards are being carved out of
space allocated to other departments as the
tiny Baltic state prepares itself for Europe's
biggest surge in births in decades.
"Our hospitals are ready. We will have enough
beds," says Eva Maria Niine, a 30-year-old
gynaecologist, who is expecting her first baby
The sudden rise in births follows a sharp increase
in maternity allowances on January 1, under
which the state pays most mothers their full
salary for up to 12 months. In the first three
months of 2004, births rose 15 per cent as
many couples anticipated the allowances. For
the year as a whole, doctors forecast an increase
of 20 per cent.
The baby boom has been welcomed by most Estonians,
who were afraid that recent very low birth
rates might lead to national extinction. Meelis
Atonen, the economy minister, says delightedly:
"If you look around Tallinn you can see
the benefits of our policies immediately -
there are pregnant women everywhere."
Estonia is the latest country to try to respond
to a challenge facing the whole developed world.
Since the 1970s, birth rates have been falling
in Europe, North America and Japan, as the
generation of people born in the post-1945
baby boom took advantage of the spread of contraception
to have fewer children than their parents.
At first, this produced big economic gains as
more women went to work, helping to boost the
labour force. But as the baby boomers move
towards retirement, a smaller generation will
take their place. Today there are 30 people
of pensionable age for every 100 working-age
adults in the developed world. By 2040, there
will be 70, according to projections based
on United Nations data.
That figure, though, masks big disparities around
the world. In the US, where the population
is rejuvenated by immigration, the figure will
be only 47, but in Japan, Italy, Spain and
much of eastern Europe it will be more than
100. Fewer births mean that in most developed
countries the average age will increase. The
Center for Strategic and International Studies,
a US think-tank, says in a report: "The
rapid ageing of the developed countries will
pose a major challenge for global prosperity
and stability during the first half the 21st
The problem is particularly acute in eastern
Europe, which has seen outflows of migrants
since the fall of communism, especially of
young people of working - and parenting - age.
Ukraine, for example, has suffered a population
drop of 4m to 48m. For economists such declines
may not matter, as the spaces can be filled
by immigrants. But most voters shudder at the
thought of their nations dying out. Gabriela
Vukovic, a demographer at Hungary's Central
Statistical Office, says: "It's a very
The population issue is creeping on to the European
political agenda. Italy last year published
a ground-breaking white paper on the welfare
state, giving priority to managing the demographic
transition and placing the family at the centre
of political action. Hungary is preparing a
white paper on the cost of ageing to its welfare
system. Almost everywhere the rising costs
of pensions are under discussion.
Odile Quintin, director-general of employment
and social affairs at the European Commission,
says: "We don't have a fertility policy
at the European Union level, but we are beginning
to address the effects of low fertility."
With the exception of Estonia, European governments
have approached the issue with caution because
the possible responses are controversial: postponing
retirement, cutting pensions, boosting immigration
and promoting births.
Europe has been falling short of babies for 30
years. According to UN data, the average European
woman of child-bearing age is likely to have
1.4 children, down sharply from 2.0 in the
early 1970s. The minimum needed for a stable
population is 2.1.
The decline is explained largely by many women
remaining in work and postponing child-bearing.
In the 15 countries that made up the EU before
enlargement, the average age of the mother
at the birth of the first child rose from 24
in 1980 to 27 over the next two decades. Professional
women often wait until their 30s, pushing up
Until recently, public opinion surveys suggested
couples wanted to have two children if they
could. However, in a study published last year,
the Austrian Institute for Family Studies showed
that in Germany and Austria the average ideal
family size had dropped to 1.7 children. The
authors argued that, since these two countries
had been among the first to see birth rates
drop in the 1970s, they might now be leading
the way to still lower norms. In other words,
memories of the two-child family were fading.
While all European states face the same challenges,
there are sharp differences in their handling
of the issue of falling birth rates.
In the UK, France and Scandinavia, birth rates
have fallen relatively little. In Britain,
a big contributor is a high rate of teenage
pregnancy, which stems population decline but
brings social problems and is something the
government wants to reduce.
In France, birth rates have been held up by pro-family
policies going back decades, including benefits
paid specifically to parents of three or more
children and extensive subsidised childcare
In the last 20 years, Scandinavian states, led
by Sweden, have boosted their fertility to
French levels with policies including generous
maternity and paternity benefits, job guarantees
for working parents and childcare.
In southern Europe, it is a different story.
Birth rates fell late, held back by traditional
and religious values, but having fallen they
are among the world's lowest, at 1.2 for Spain
and Italy. In the past, Mediterranean women
typically stopped work to get married and lived
in extended families where they often cared
for the old as well as children. Today, many
stay single to avoid these responsibilities
and "enjoy their freedom" - in the
words of the Italian government's welfare white
paper. The white paper urges changes, such
as better maternity pay and childcare services,
to allow women to continue working while bringing
up children. Italy spends just 3.8 per cent
of its gross domestic product on child-related
social spending compared with an EU average
of 8.5 per cent, the white paper says.
Governments have often been reluctant to try
to boost fertility rates as they fear being
seen to interfere in people's lives. Demographers
see France is as a hard act to follow, given
that its programmes took decades to develop.
However, Sweden's recent success has raised
hopes that it can serve as a model, especially
as its policies are associated with a modern
view of women as active participants in the
work force. But such policies are expensive
and require considerable social change.
Steven Sinding, director-general of the International
Planned Parenthood Federation, the world's
largest family planning charity, says: "The
question is not whether European states can
boost their fertility. It's whether they really
want to do so."
Even if governments bite the bullet, the results
may be modest. Few demographers expect any
European state to return to the replacement
fertility level of 2.1. Estonia's current performance
is unlikely to last. But Francesco Billari,
a demographer at Italy's Igier economic institute,
says that small improvements are worthwhile
because they slow the ageing of the population
even if they do not prevent it.
Immigration can also help to some degree. Since
1989, inward migration has been the biggest
contributor to population growth in the pre-enlargement
EU, including large numbers from eastern Europe.
The United Nations forecasts that migration
will continue at current levels of 600,000
net a year to those 15 European countries.
But this cannot begin to close the gap left
by ageing, especially as most immigrants adopt
the low-fertility habits of other Europeans.
In the UK, David Willetts, the Conservative
party spokesman on work pensions, estimated
in a report last year that to keep its population
young the EU would need 700m immigrants by
2050 - an unattainable total.
Nor will the east European states provide the
answer, as they are also beginning to suffer
population decline. The only high-fertility
states near Europe are the Muslim countries
of North Africa and Turkey. It is unlikely
that politicians will open the doors soon to
these states because of public concerns about
immigration. If Turkey is accepted as a future
EU member, it will not join for many years.
Given that changes in fertility and immigration
will, at most, slow the changes in Europe's
population, the further ageing of the continent
seems inevitable. The biggest immediate impact
is on pensions and health costs. CSIS, the
US think-tank, estimates that with no big policy
change the UK's public benefits to the elderly
as a percentage of GDP will rise from 12 per
cent in 2000 to 18 per cent in 2040, and from
13 per cent to 33 per cent in Spain.
Meanwhile, as older people retire, a bigger economic
burden falls on remaining workers, which reduces
productivity growth and limits the economy's
capacity to finance welfare spending. Employers
have aggravated the position by pushing for
early retirement schemes. In France, just 38.5
per cent of men aged 55-64 worked in 2000,
compared with 65.3 per cent in 1980.
Ageing tends to make people more cautious about
spending, reducing consumption in the economy,
and more risk-averse, limiting their entrepreneurial
Part of the answer lies in encouraging older
people to work - and pay taxes - longer and
to begin drawing pensions later. At the European
Commission, Ms Quintin says this is an important
element in the Lisbon Agenda, the EU's productivity-raising
programme. She points to success in Finland
where the percentage of older people working
rose in the 1990s because of policy changes
and a surge in economic growth. The Commission
estimates that, if retirement ages rose by
five years, the cost of publicly-funded pensions
would not rise.
Governments have tried to encourage later retirement
and have even nibbled at the cost of public
pensions by reducing benefits for future pensioners.
In the UK, private pension funds have closed
generous defined-benefit schemes to new entrants
and replaced them with more modest defined-contribution
However, these reforms have barely scratched
the surface. People who have worked a lifetime
expecting to retire reasonably early on good
terms are unlikely to volunteer for anything
less. But Oswald Metzger, a population expert
and Green party politician in Germany, belives
the public would be ready to confront the reality
if politicians were more forthright on the
issue. "Political leaders lack courage
to act. They say that people do not want to
accept what is happening in their societies.
But they are wrong. People realise what is
happening and are ready for change," he
Politicians are wary of the political power of
the growing army of pensioners. In some countries,
pensioners have formed pensioner parties, as
in Slovenia, or are working through institutions
such as trade unions. Nico van Nimwegen, deputy
director of the Netherlands Interdisciplinary
Demographic Institute, says: "Growing
grey-power means that political parties will
become more responsive to the needs of the
This means that with every year, radical cuts
in pensioners' benefits will become more difficult.
There are some radical answers, such as reducing
the voting age to 16 or giving the parents
of school-age children extra votes.
But a Europe that struggles to persuade 60-year-olds
to keep working, will struggle to persuade
them to give their grandchildren votes.
France devotes a higher percentage of its gross
domestic product - nearly 4.5 per cent - to
family policy than any other country in Europe.
Family allowances were first introduced at
the beginning of the 20th century for familles
nombreuses - big families - to improve the
Since the 1970s, France has shifted the focus
towards redistribution of resources to low-income
families and lone parents: family policy now
has more social than demographic overtones.
But pronatalism remains a cornerstone of much
French social policy and there is a consensus
that such initiatives remain worthwhile.
Underlying this philosophy is the longstanding
obsession of what was once Europe's most populous
country with the "hard" military
and "soft" cultural power of its
larger historical rivals - Germany, with a
population of more than 81m, and the worldwide
From conception to the age of 20, children in
France entitle their parents to a welter of
subsidies, allowances and tax breaks. Breeding
for France is also one of the free leisure
activities that has benefited most from the
35-hour working week and high youth unemployment.
Families with incomes of more than Euros 125,000
can reduce their tax bill by around Euros 2,000
per child and by more for a third child, who
takes the size of the family above the replacement
Furthermore, anyone living with at least two
dependent children under 20 is eligible for
family benefits of Euros 1,351 per year, rising
to Euros 3,082 for three children. There is
no means testing.
But making it easier to have children starts
much earlier. During pregnancy the state will
pay for Aids tests for both parents, a medical
examination for the future father, seven pre-natal
examinations and eight birthing classes. Nor
is it a coincidence that French hospitals are
so inclined to recommend epidurals. Pain-free
birth is taken as a right, symbolic of the
desire to limit the stresses of producing and
Mothers can take 16 weeks paid maternity leave
for the first child, rising to 26 weeks for
the third child. During this time, the state
will pay the average of the woman's salary
over the previous three months, less 20 per
cent in social security charges, up to a monthly
maximum of Euros 2,476. It is illegal to fire
a woman who is pregnant or on maternity leave,
except for "grave error" or if her
contract can no longer be honoured for financial
reasons unrelated to the pregnancy.
Last but not least, the government heavily subsidises
childcare costs. On top of a cash payment that
ranges from Euros 500-Euros 1,500, the state
will allow 50 per cent of the cost of nannies,
au pairs and special tutors to be tax-deductible.
So get breeding.
Japan's birth rate is falling much faster than
previously expected, raising concerns about
the impact that the low number of births will
have on the country's future economic vitality.
The Japanese government yesterday released its
latest findings on the fertility rate of Japanese
women, which show that the average number of
children a woman will have during her lifetime
has dropped from 1.32 in 2002 to 1.29. This
is a much faster decline than the government
had been expecting and is bound to affect Japan's
newly enacted controversial pension scheme,
which is based on a fertility rate of 1.39.
The government's report expresses alarm at the
lower statistic and states that "the speed
with which the birth rate is falling is creating
a situation that undermines the very foundations
of society, the economy and the sustainability
of local communities".
But the Japanese government has been reluctant
to increase immigration to address the problem,
despite a recent white paper which noted that
Japan would have to accept "massive numbers
of foreigners and immigrant workers" or
face negative economic growth. Instead it has
launched programmes aimed at reducing the burden
on working mothers.
In 1994, it adopted the "Angel Plan",
which focused on building and expanding facilities,
including childcare centres and family support
centres. It also called for higher pay for
working women on maternity leave, shorter working
hours for men to allow them to participate
in childcare and subsidies for women receiving
The first Angel Plan was followed by more of
the same in the "New Angel Plan"
of 1999, which is soon to be succeeded by a
third programme dubbed the "New, New Angel
At a provincial level, since the late 1990s several
of Japan's prefectural governments have organised
group dates, such as hiking trips and cruises,
for single people in the hope of spurring more
marriages and by extension babies.
But judging from the latest findings, the government's
measures over the past decade may have been
too little, too late. "The figures do
not show whether these measures have had an
effect," says Sumiko Iwao, professor at
Musashai Kogyo University. Nonetheless, Prof
Iwao believes that Japan's birth rate would
have fallen even further, "if the government
had not adopted those measures".
The fundamental problem is that fewer people
get married and those that do marry, do so
much later in life, reducing the number of
children they are likely to have, she says.
"This is a private matter so it is difficult
for the government to do anything about it."
<< Financial Times -- 6/11/04 >>
FAIR USE NOTICE
site contains copyrighted material the
use of which has not always been specifically
authorized by the copyright owner. We
are making such material available in
our efforts to advance understanding of
environmental, political, human rights,
economic, democracy, scientific, and social
justice issues, etc. We believe this constitutes
a 'fair use' of any such copyrighted material
as provided for in section 107 of the
US Copyright Law. In accordance with Title
17 U.S.C. Section 107, the material on
this site is distributed without profit
to those who have expressed a prior interest
in receiving the included information
for research and educational purposes.
For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.
If you wish to use copyrighted material
from this site for purposes of your own
that go beyond 'fair use', you must obtain
permission from the copyright owner.