Thursday, June 11, 2009

False Alarm

By Marian Starkey

The Korea Herald and The Yomiuri Shimbun (Japan) both have editorials today about the perils of low birthrates. According to the Korea Herald, South Korea had the lowest fertility rate in the world last year at 1.19 children per woman. The editors warn that shrinking economic growth and a burdensome elderly population are inevitable.

Contrary to the claims of the Korea Herald, population decline doesn't have to be "scary" for the economy.

In fact, there is a very strong argument that countries like the Republic of Korea have been able to develop quickly because of the fact that family size shrunk from 6.33 children per woman in 1955-1960 to 1.6 in 1985-1990. Couples with fewer children are able to afford higher education for the kid(s) they do have and are able to save more, contributing to individual and nation-wide economic growth.

Couples who claim to be abstaining from having children because of the cost are probably not being entirely truthful in their survey responses. Poor couples the world over have children (often very many children) and find ways to make ends meet. Shocking as it may seem, some people find other activities more rewarding than child rearing and may be using the financial burden as an excuse for not having a baby in the face of social pressure.

Raising the sales tax in Japan to pay for child rearing subsidies (as the editors of Yomiuri suggest) and increasing the "cradle-to-university" subsidies that the South Korean government already provide will not raise birthrates for the right reasons. And they will certainly not solve any impending economic problems due to demographics. Why dump more money into baby incentives when that money could be used to accommodate the aging population that already exists?

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