Tuesday, October 13, 2009

Using cash incentives to encourage fertility

Japan has a birth rate of 1.37 children per woman and near zero immigration. The demographic math is simple -- Japan is going to have a rising percentage of its population aged 65 and older. With declining numbers of citizens in their prime working years, who will pay for the social security and medical care of a rapidly aging population? Also who will service the massive debt that Japan has accumulated?

WSJ reports Japan's new government has decided to provide economic incentives to parents: cash payments of $6000 at birth plus another $3300 a year through age 15 plus state-supported day care and tuition waivers. Japan is not the first country to go this route and, to date, the evidence of its effectiveness is mixed. Wonder why?

Results have been mixed, dividing researchers who study government enticements. They generally agree on one point: Money goes only so far. Other major factors governments need to consider, apart from a greater role for fathers at home, include the acceptance of working mothers and a supportive corporate culture.

Without other major changes such as shared responsibility for child rearing, "All the money in the world may not make a long-term difference," says David Coleman, a professor of demography at Oxford University.

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