What’s needed to encourage larger families?

Many countries are concerned about an approaching demographic crisis of shrinking populations and rising ages. The decline in fertility across many parts of the world is an important topic, but there are few easy answers as to what to do about it. To date, to motivate families to have more children, governments have introduced generous monthly allowances, tax breaks and cash benefits, free or highly subsidized childcare, longer paid maternity leave, paternity leave, subsidies for fertility treatments, and other measures.

These policies have largely been ineffective. The interventions in the Czech Republic, Poland, Singapore, and other countries ultimately failed to reverse the trend of population decline and aging. Finland’s fertility rate fell to 1.26 children per woman in 2023, casting doubt on the hypothesis that a strong social welfare system could produce higher fertility rates. Despite spending about 1.5% of GDP on family policies, the Republic of Korea saw fertility rates drop to 0.72 in 2023, the lowest rate ever recorded.

These policies and many economic papers that discuss the effectiveness of government interventions to boost fertility operate in an (often implicit) Beckerian framework that assumes that all families want to have children, but some cannot afford to do so. Reducing the costs of raising children would, therefore, tilt the equilibrium toward higher fertility. The failure of previous attempts to increase birth rates is attributed to insufficient incentives, leading to a belief that more generous, better-targeted, and better-designed interventions would make a difference. However, such reasoning could be misleading.

Today’s young adults may not want to have children, regardless of the cost. Child-free and DINK (Dual Income No Kids) movements in the United States, Europe, and Brazil and their Chinese analog (“lying flat”) are gaining popularity. In the United States, less than half of childless women 18–34 say they are interested in having children, and not mainly because of the high costs of having kids. Among Americans under 50 who do not plan to have children, 57% say they just do not want to, 44% say they want to focus on other things, and 38% say they are concerned about the state of the world. In Japan, 52% of young people report that they do not have and do not ever want to have children. In Finland, the proportion of 25-year-old men who report not wanting children jumped from 4% among men born in 1975–79 to 25% among men born just a decade later; the corresponding numbers for women are 2 and 22%. The difference among cohorts persists even after controlling for socioeconomic characteristics, including income.

If too few people consider having children, policies aimed at reducing the costs of raising children will have limited effect. In such a segmented market, traditional government measures will influence only a shrinking group that sees utility in children or is forced by societal norms to have them.

The trend of declining shares of people wanting to have children could also lead to a low-fertility trap. Some researchers suggest that once the fertility rates cross the threshold of 1.5 children per woman, a self-enforcing mechanism pushes societies onto a trajectory of continuing fertility decline: Low fertility rates lead to fewer women entering reproductive age, resulting in fewer births even if individual fertility rates increase. Growing up in societies dominated by small or childless families changes young people’s perceptions about ideal family size, which could drop below the replacement rate. Slowing economic growth caused by population decline and aging widens the gap between young people’s consumption aspirations and expected incomes. Postponing childbirth to the later stages of their careers reduces fertility rates further.

There is empirical evidence for the existence of this trap. No country in which the total fertility rate dropped below 1.5 managed to raise it above that level for a sustained period. In Japan, for example, despite decades of pro-natalist policies and over $30 billion in annual spending on family support programs, fertility rates continue to decline.

When societies age, and families with children stop being the norm, all aspects of life become less conducive to raising children. With fewer children, funding for child-specific infrastructure declines; the number of childcare facilities and playgrounds falls; informal parent groups become less common; the size of new homes shrinks; and restaurants, shopping centers, public spaces, and transportation become less accommodating to families with children. Should such dynamic and self-reinforcing mechanisms emerge as a dominating force in determining the future level of fertility, it may be very difficult, if not impossible, to reverse.

The framework that emphasizes economic incentives as determinants of fertility also assumes linear fertility trends, leading to gradual changes in its consequences. Alternative theories propose nonlinear fertility responses that, in the presence of self-enforcing feedback loops, result in tipping points at low fertility rates that trigger irreversible population decline.

If these models are correct, the cultural norms of young people regarding children become the most important determinant of population growth. These would include shifts in expectations of balancing work and family and of the division of labor within the household. No countries have yet demonstrated how to do this. In many places, populations are likely to continue to shrink and age.