The UK is facing a fertility crisis. Since 1979, women’s intended fertility has remained relatively stable, at around 2.2 children. In 2023, the total fertility rate hit a record low of 1.44 children per woman.
There is a widening gap between the number of children women want to have, and how many they actually have.
Falling fertility means fewer workers, fewer innovators and crucially, fewer taxpayers to support the ageing population. With the unaffordable size of the welfare state, and the growing reliance on intergenerational economic redistribution, the fact that we are having children at a lower level than the population replacement rate is an existential problem.
If people say they want more children, why aren’t they having them?
As Clara Piano argues in a new IEA discussion paper, government policy may be part of the problem. When panic ensues about declining birth rates, politicians tend to reach for the chequebook: baby bonuses, childcare subsidies, tax credits and sometimes, direct cash handouts. These government-led interventions are incredibly expensive, and yet often have limited impact on fertility. France, for example, spends nearly 3.5% of its GDP on family benefits, and yet its birth rate is only modestly higher than Britain’s.
Interestingly, economic freedom shows strong associations with smaller fertility gaps.
The UK has exceptionally high housing and childcare costs. Easing stringent regulations in those sectors would almost certainly make life easier for many parents, and by extension, lead to more people becoming parents in the first place.
According to state-level data in the United States, housing and land use regulation significantly impacts family formation. A 2017 study found ‘a significant negative relationship between land use restrictions and fertility rates across all measures and geographies’.
Britain’s suffocating planning system has made homes smaller, scarcer and far more expensive. It is no coincidence that the average age of first-time buyers, and of first-time parents, continues to creep up together. Restrictive housing rules directly correlate with lower fertility. Families need space, both literally and economically, to grow.
Rigid labour markets may also correlate to lower fertility. Financial readiness and flexible work schedules are the second and third most important factors for men and women in terms of their willingness to wait for these to be true before starting a family.
In countries with dysfunctional labour markets, often due to stringent employment regulations, it is harder to reach a position where starting a family is financially feasible. Occupational licensing, minimum wage laws and regulations on the hiring and firing of employees (which disproportionately punish younger and less experienced workers), reduces the options available to young couples.
Here in Britain, almost one in four working-age people are out of work, and thousands of young people are being signed off on long-term sickness benefits. The hike in employer’s National Insurance Contributions earlier this year – which made employing someone more expensive – has contributed to the decline in vacancies.
To make matters even worse, the Government’s proposed Employment Rights Bill will make hiring younger and less-experienced people a riskier thing to do. According to the data, these new regulations could also inadvertently contribute to women having fewer children.
Piano’s research has shown that, in the United States, states with greater economic freedom have smaller fertility gaps. Where there are free and dynamic labour markets, economic growth and where young people can make their own choices, people are much more likely to achieve their family goals.
Ultimately, the fertility crisis is a symptom of deeper economic malaise. A world where young people feel too financially constrained, and too overregulated, to start families. Government spending can’t buy more babies. But economic freedom can remove the barriers that stop people from having them.
That means liberalising planning rules so families can afford homes. Deregulating childcare so new parents can find affordable options that suit them. Making work more flexible, so careers and children don’t have to compete.
Britain needs to get the government out of the way of family life. We need to start letting people have the children they already want, and the freedom to create Britain’s future.
Read the ‘Mind the Fertilty Gap’ report here.
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