The economic arguments for paying parents

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Sooner or later, this demographic decline will cause problems in the United States and around the world. Countries depend on stable or growing populations to maintain their tax bases, workforce, and senior support programs. How can governments avoid low fertility and its attendant problems? Politicians such as President Joe Biden and Senator Mitt Romney want to follow Eastman’s lead and encourage children’s education by providing financial support to parents. But experiences from other countries suggest that as people get used to having two or fewer children, even large financial support may not be enough to get them to have more. If policymakers want to ensure a stable population in the future, they must now offer more support to parents.

Tit is important to have a stable or the population growth of human economies is easy to ignore. Most measures of economic activity consider the money parents spend on their children as a form of consumption, and ignore the unpaid time parents spend in child care. Indeed, many economists view children as a commodity that parents “buy”. Since 1970sHowever, feminist economists have criticized this framework for failing to properly account for the economic relevance of parenthood. Although children bring value to their parents, classifying them as commodities underestimates their economic and social importance, argued Nancy Folbre in her speech. 1994 paper “Children as public goods”. Spending on children is a form of “investing in demographic infrastructure,” Folbre recently told me.

Taxes are the most concrete example of this phenomenon. Children grow up to be adults and pay taxes that exceed the value of what was spent on them. Although parents pay slightly less tax than non-parents over the course of their lives, the net taxes their offspring will pay more than will make up the difference, of around $ 217,000 per parent, according to one. 2011 estimate.

A generation that does not reproduce risks overloading a shrinking workforce with the demands of the elderly. Fewer children means fewer buyers for homes and inventory that seniors have invested in to build a retirement nest egg, a smaller tax base to pay their pensions and outsized hospital bills, and fewer people around to look after their care. The demands of the elderly will represent an ever increasing share of economic activity and public expenditure. The cost of living may fall as house prices fall, but the the economy could stagnate, especially if the shrinking number of young people is slowing innovation. The higher tax rates needed to cover Social Security and Medicare, because fewer young people pay there, can worsen this effect.

As a wealthy nation, the United States will likely have the option of relying on immigration to delay some of these problems – if it can maintain the political will to accept it. People born abroad represent a lot more significant share of the population in Australia (29 percent), Canada (21 percent), Switzerland (30 percent), Austria (19 percent) and Sweden (18 percent) than in the United States (14 percent). But even immigration is not a permanent solution to the problems of low fertility. The forces that make people have fewer children are not unique to the United States. Countries in Europe and East Asia have experienced low fertility for decades, and now the rest of the world is following suit. In 2019, about half of the world’s population lived in areas where fertility was below the replacement rate. Fertility stay high in sub-Saharan Africa and parts of Asia and Oceania, but is declining and is expected to continue to do so, for all the same reasons he fell elsewhere: urbanization, the importance of education in industrialized economies and the increasing access of women to employment and birth control.



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