Tech Central Station, OH
Jan 27 2005
Where Have All the Children Gone?
By Pavel Kohout Published 01/27/2005
In the third century AD there was a prophet called Mani. He preached
a doctrine of conflict between Good and Evil. He saw the material
world as the devil’s creation. Marriage and motherhood was a grave
sin in his view, since by bearing children people multiply the works
of Satan. The Manichean ideal was to move mankind to a
superterrestrial realm of Good by way of gradual extinction.
In the course of history, Manichaeism was ruthlessly eradicated as an
heretical, ungodly doctrine. When looking at demographic statistics,
however, one might think that the populations in developed countries
have converted en masse to Manichaeism and decided to become extinct.
The birth rate in most western countries has fallen bellow
replacement level.
In the so-called “New Europe”, the situation is even gloomier.
According to UN projections, Latvia will lose 44 percent of its
population by 2050 as a result of demographic trends. In Estonia, the
population is expected to shrink by 52 percent, in Bulgaria 36
percent, in Ukraine 35 percent, and in Russia 30 percent. In
comparison with these figures, the projected population decline in
Italy (22 percent), the Czech Republic (17 percent), Poland (15
percent) or Slovakia (8 percent) looks like a small decrease. France
and Germany will lose relatively little population, and the
population of the United Kingdom will even see a slight growth —
thanks to immigrants.
Why is the birth rate falling?
The question of why fertility has been falling so dramatically in
continental Europe has been food for thought for both demographers
and economists. The answer must be looked for in several important
factors, which, to further complicate matters, do not simply add up
in their impact. Nevertheless, it can be said with a fair amount of
certainty that the existence of pay-as-you-go pension systems has had
a very negative impact on birth rate. The National Report on Family
published by the Czech Ministry of Labor and Social Affairs in August
2004 says:
“In terms of intergenerational solidarity, the importance of the
child as an investment for material support in old age has been
limited by the social security and pension insurance system, which
has eliminated people’s immediate dependence on children. The
importance of the child’s role in relation to its parents has
transferred to the emotional sphere, which reduced the direct
material indispensability of children in a family, while also
allowing for them being replaced with certain substitutes bringing
emotional satisfaction.”
To put it straightforwardly, and perhaps a little cynically, in the
past children used to be regarded as investments that provided their
parents with means of subsistence in old age. In Czech the word
“vejminek” (a place in a farmhouse reserved for the farmer’s old
parents) is actually derived from a verb meaning “to stipulate”: in
the deed of transfer, the old farmer stipulated the conditions on
which the farm was to be transferred to his son. Instead of an
“intergenerational” policy, there used to be direct dependence of
parents on their children. This meant that people had immediate
economic motivation to have a sufficiently numerous and well-bred
offspring – whereas today’s anonymous system makes all workers pay
for the pensions of all retirees in an utterly depersonalized manner.
This system enables huge numbers of “free riders” to receive more
than what would correspond to their overall contribution in their
productive life. Those with incomes way above the average, on the
contrary, are penalized, as the system gives them less money than
they contributed to it. This is referred to as the “solidarity
principle”. In terms of birth rate, this arrangement is discouraging
for both the low-income group and the high-income one. The latter
feel that they are not going to need children in the old age, while
the former believe that they can’t afford to have them.
Today, children no longer represent investments; instead, they have
become pets – objects of luxury consumption. However, the pet market
segment is very competitive. It is characteristic that the birth rate
decline in the 1980s, and especially in the 1990s, was accompanied by
soaring numbers of dog-owners in cities. While in the past dog-owners
were predominantly retirees, today there are many young couples that
have consciously decided to have a dog instead of a baby. These are
mainly young professionals who have come to a conclusion (whether
right or wrong) that they lack either time or money to have a child.
Thus, they invest their emotional surpluses into animals.
Taxes are pivotal
State pensions systems eliminated the natural economic incentive to
have children. At the same time, the welfare state is an enormously
costly luxury that has to be financed from taxes. High payroll-tax
and social security contributions reduce the earning capacity of
people in fertile age. Thus, they push down birth rates as well.
A reader of the Wall Street Journal wrote in a letter on the issue:
“I am the son of a Pittsburgh steelworks worker. I was born at the
end of the Second World War. I have three sisters. Our mother never
went to work. After the experience of the Great Depression, our
parents were reluctant to borrow; yet they could afford to own a
house, and our father used to buy a new car once every three or four
years. My parents paid for my university education and bought me my
first car when I was twenty. We were by all standards part of the
middle class, and I was proud of my parents’ achievement. (…) Today
both my parents have to go to work in order to maintain a
middle-class living standard, due to the increase in taxation that
has occurred in the past half-century. (…) This has produced a
generation of children carrying a key around their necks, city gangs,
and aggressive brats brought up by after-school child-care centers.”
The tax burden in the United Stated has indeed grown significantly
over the past 50 years. The birth rate has been falling
proportionately, although not to the critical level that is now
current in Europe. The birth rate in the US is nearing the
replacement level — about two children per woman. Even so, comparing
to Europe, the United States still appears to be a confirmed and
stable superpower.
“Even if we include immigration, the population of the original EU-12
will fall by 7.5 million over the next 45 years, according to the UN
calculations. Since the times of the ‘Black Death’ epidemic in the
fourteenth century, Europe has never seen such an extensive
population decline,” writes Niall Ferguson, a British historian. He
also predicts that in 2000-2050, the US population will grow by 44
percent. It seems that the European Union will have to forget for
good about its ambitious dreams of becoming a “counterbalance” to
America.
The demographic trends in Europe are indeed worrying. In Italy, for
instance, the birth rate has fallen to an average level of 1.2
children per woman. Why? A journalist from the Daily Telegraph
describes the life of young Italians in the following terms:
“It is virtually impossible to make a living. Just take Rome. Life
with a minimum of human dignity (a small rented apartment, occasional
dinner in a restaurant) requires a monthly pay of 3,000 euros before
taxation, which accounts for some 1,800 euros after tax. If in the
Anglo-Saxon world a majority of adults is expected to live an
independent life on their own salaries, in Italy this is often not
the case. An incredible 70 percent of unmarried Italians aged between
25 and 29 live with their parents, where they benefit from subsidized
housing and where their poor incomes amount to a handsome pocket
money.”
When a modern young European has to choose between setting up a
family of his own and a comfortable life without children, he is very
likely to pick the latter option — unless he belongs to a social
class which regards children chiefly as a source of social benefits.
A high amount of taxation combined with ill-functioning labor and
housing markets is a truly genocidal mix. That is the case of Italy,
but also Bulgaria and the Czech Republic. Its impact cannot be
corrected by all sorts of government subsidies paid out to young
families. On the contrary, under certain circumstances the benefits
for families may even lead to a drop in birth rate.
The traditional model, which exists especially in Spain and Italy,
but to a large extent also in East and Central Europe, emphasizes the
successive steps in setting up a family. First, a young man graduates
from a college or vocational school; then he secures his living,
which is followed by marriage; and only then children are born. This
succession not only conforms to social conventions but is also based
on a profound economic logic: it is simply foolish to start having
children before getting a living. The taboo of sex in Western
cultures has profound economic reasons.
The troubles start when one link of this chain breaks. In
contemporary Europe, the main problem lies in the second link: making
a living. Unemployment among young graduates tends to be much higher
than the average of the working-age population as a whole. In
countries such as France, Spain, Finland, Greece or Italy, 20 to 30
percent of young people are unemployed. What birth rate can we
expect, if a fifth or even a third of young population is unable to
make a living due to a distorted labor market?
But there is another problem. The payroll-tax and social security
contributions are up, while investments in capital equipment are made
tax-advantageous. The government support of the existing families
comes at the cost of heavier tax burden for young people who have not
yet founded a family. The so-called “support for families” thus
hinders the creation of new families, and effectively reduces birth
rate. If a young unmarried person is left with mere pocket money
after his salary has been taxed, he will hardly be able to make
sufficient savings to set up a family. The politicians of most
European countries are living in a reality gap if they cannot see
this trivial economic connection.
The pay-as-you-go system and its inevitable collapse
Some people believe that there is nothing wrong with a low birth
rate, as the planet is at any rate overpopulated. Yes, one cannot set
the “right” amount of population for a country or a continent by
“scientific” means. What we can determine, however, is which age
structure of population is favorable, and which is disastrous. In a
few decades, a large part of Europe will be dominated by a very
unfavorable age structure, typical with an enormous increase in the
number of retirement-aged people.
To be accurate, it is not yet clear at what age today’s young people
and children will retire — if they retire at all. The pay-as-you-go
pension systems will inevitably undergo a long and severe crisis, the
result of which can, to a certain extent, be reckoned today. There
are several scenarios, the most likely of which suggests that
retirement age will gradually have to be raised. The most recent
Insurance-Mathematic Report on Social Insurance produced by the
Ministry of Labor and Social Affairs in 2004 suggests that “the
gradual raising of the age limit for the eligibility for old-age
pension could substantially eliminate the impact of the expected
ageing of the Czech population. It is also clear that a freezing of
this age limit would lead to a sharp growth in the level of elderly
dependency.”
Translated into a simple and straightforward language, this means
that retirement age will have to be constantly raised: at first to 65
years, then (sometime in the early 2030s) to 67, and so on. To stop
this growth would drag the system relatively quickly into a crisis.
In other words: a pay-as-you-go system may work for another few
decades, before being gradually marginalized by the rise in
retirement age. The pay-as-you-go system was a huge political and
economic experiment; and the generation of today’s children will
witness its failure.
But perhaps people will just return to the 1880s, when in Bismarck’s
Germany the retirement age was 70 years — with an average life
expectancy of less than 50 years. If in 2050, for instance, the
official retirement age becomes 90, with an average life expectancy
around 80, then the pay-as-you-go system can be sustainable in the
long term. But a good social security at an age of around 60 will be
completely out of the question for those who are now children.
On the other hand, if the retirement age remains unchanged, the tax
burden could eventually rise up to 70-75 percent of gross wages. In
such a case, however, the younger and more educated portion of
working-age population would undoubtedly migrate to countries with
lower taxes: particularly to Britain, Ireland, or the United States.
These countries also have much less trouble with their demographic
structure. Over the next 50 years, the United States may hugely
benefit from accepting a wave of emigrants who will have been chased
out of Europe by high taxes — and maybe not only high taxes.
The end of democracy in Europe?
The prophet Mani is dead. But another prophet’s teaching is still
very much alive. In 2002 the most common first name given to newborn
babies was Mohamed. The name Osama finished at a handsome 12th
position.
In the 1960s there were only about 350,000 North-African Muslims
living in France, with some 1.25 million French living in North
Africa. Since then, the notion of “colonialism” has completely
reversed. There are almost no French living in North Africa, but the
number of Muslims of African or Middle-Eastern origin in France is
estimated at 4 to 10 million. The exact number of legal and illegal
immigrants is unknown, for the sole reason that French statisticians
are not allowed to collect information on ethnic and religious
patterns of population.
Nevertheless, some estimates suggest that one in three births in
France occurs in a Muslim family. That would explain, among other
things, why France has a much higher birth rate (about 1.7 children
per woman) than Spain or Italy. Stripped of this influence, the
French birth rate would be around 1.2 children per woman, which is a
figure similar to those in the countries of South and East Europe.
A Russian-Israeli journalist Shlomo Groman writes:
“Go to any child-care store in Vienna. Its clients will be
predominantly Arabic, Iranian, Pakistani, Turkish, Japanese, Korean,
and Black African. Viennese women never bear children — they cherish
their figures and careers instead. The Western-European pension
systems made the bringing up of children less advantageous than
social climbing and maximization of income.”
Culture seems to play an even more crucial role than taxes or pension
systems. The countries of the former Soviet Union are an interesting
“demographic laboratory” in this respect. We have already mentioned
Ukraine, Baltic States, and Russia. The situation in the Muslim
republics — Azerbaijan, Tajikistan, Uzbekistan, and Turkmenistan —
is completely different: almost all of them are living a population
explosion. The living standard in these countries is close to that of
Georgia or Armenia, i.e. poor. But Georgia and Armenia suffer from
the same demographic shock as, for instance, the Baltic States. The
difference lies in the traditionally Christian character of the
latter countries. The position of women in society is perhaps a
little different from that of the rich European countries, but
comparing to Muslim countries these differences do not count much. In
terms of birth rate, they are almost negligible. Armenia will lose a
quarter of its population by 2050, while the population of the
neighboring Azerbaijan will surge by a third.
The international demographic context will see huge changes: in 2050,
Yemen will have more population than, for example, Germany. These
people will quite understandably long for the standard of living that
currently prevails in Europe. The immigration pressure on Europe will
be immense. Given the European liberal laws on family reunification,
the exodus from Middle East and North Africa will have enormous
dimensions.
Instead of integration of immigrants from the Middle East and North
Africa into a majority European society, the opposite will occur: the
immigrants will integrate the existing European culture into their
own civilization. After some time, it will be their civilization that
will become dominant. One does not have to be a supporter of
Jean-Marie Le Pen to feel a little anxious about that. It is not a
problem of ethnics and their mingling. It is a matter of society, its
values, and democracy as such. European tolerance competes with
Islam, which is not always a religion of peace, as many Europeans
would like to believe. Radical Islamic preachers openly condemn
democracy. They interpret it not as a social system but as a pagan
cult, which prefers the voices of people to the voice of God. This
and other theories of Sheikh Yusuf al-Qaradawi and his conservative
fellow-believers are proclaimed in many mosques throughout Europe.
If as a result of demographic trends a large part of future Europeans
will have dark skin and go to mosque, why not? But if they become a
threat to the European tradition of democracy and tolerance, it will
be a tragedy.
The author is an associate of the Center for Economics and Politics
(CEP), Prague.