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Britain suffers ‘baby gap’ of 90,000 each year

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19 February 2006

The ‘baby gap’ between the number of children Britons want and the number they actually have is over 90,000 a year, according to new research by the Institute for Public Policy Research (ippr) published this week.

ippr has calculated that if women in their 40s had been able to have as many children as they say they want in their 20s, there would be an extra 13 per cent more children born in Britain each year. The report shows that British women face a ‘fertility penalty’ if they have children earlier in life and that almost a third return to a less well paid job than before they give birth. The average woman forgoes £564,000 in earnings over her lifetime if she has her first child at 24 compared to a similarly educated childless woman; but if she waits until 28, she will forego £165,000.

ippr’s analysis shows that because Britons are having children later in life and more are remaining childless, the UK is facing a demographic ‘fork in the road’. Britain’s ageing population means that taxation will have to rise to keep public spending at current levels. But fertility rates make a difference: if fertility falls, the basic rate of income tax rate would need to be 2p higher within fifty years than if it rises, and 9p by 2074.

But the report warns against French style tax incentives to encourage women to have more children because they have acted as a disincentive for women to return to work. Instead, the report recommends improved family friendly entitlements, a tackling of the gender pay gap and more state supported childcare to enable people to have the number of children they want, without damaging their careers.

Nick Pearce, ippr Director, said:

“Britain is now at a demographic fork in the road and in danger of taking the wrong direction. Although our population is rising, a fall in fertility would have serious long-term consequences. It would make it harder to earn our way in the world and to pay for valued public services. Fertility patterns can take up to 40 years to change so politicians need to start taking action now.

“Governments worldwide have introduced pro-natalist, baby-bonus policies but in Britain this wouldn't work. Our approach should be to support choice, helping people to have children without sacrificing their career aspirations."

The reports shows:

Women are having children later in their lives: fertility at ages 20-24 fell by 55 per cent between 1971 and 2003, while fertility at ages 35-39 went up by 34 per cent. As each generation of women postpones childbirth by a little more, the gap between generations expands. Over time, fewer generations are born and overall fertility declines;
Britain is ageing, rapidly: every hour men’s life expectancy in Britain rises by another 16 minutes (between 1981 and 2004 period life expectancy at birth for men rose by 6 years from 70.9 to 76.9. For women, life expectancy rose from 76.9 to 81.1 in the same period – equivalent to 11 minutes an hour);
There is a 'fertility poverty trap' for low-skilled and low income couples: one child can cost up to £180,000 - 10 times the median disposable income for a childless couple in 2005 (£17, 456);
Demographic change has made Britain more unequal. It is likely that a fifth of the rise in inequality between 1979 and 2003/4 was due to demographic change. Had Britain’s demography had not altered as it did, inequality might have fallen under the Labour government since 1997; and,
Demographic change has made Britain poorer. If Britain had had the same household composition, fertility patterns and age structure in 2003/4 as it did in 1979, there would be 240,000 fewer households in poverty, 280,000 fewer pensioners in poverty and 70,000 fewer children in poverty.

The report recommends:

Broadening the portfolio of the Home Office Minister for Immigration, Citizenship and Nationality to include responsibility for Demographics;
Introducing pay for the current unpaid 13 weeks parental leave, including a 'daddy month' - at least four weeks specifically allocated to fathers on a ‘use it or lose it’ basis;
Free part-time childcare as an entitlement for all children and means tested full-time provision; and,
Increasing paternity leave pay from £106 per week to 90 per cent of average earnings and extending the period of paid leave from two to four weeks.

Population Politics by Julia Margo and Mike Dixon is available to order from www.ippr.org/publicationsandreports

Notes to Editors

Data including graphs and charts are available for reproduction from the ippr press office.

ippr’s modelling of the fiscal effects of demographic change is based on existing HM Treasury assumptions. It assumes that, for example, the state pension age remains unchanged.

Britainis older than ever before:there were 9.5 million people aged 65 or over in the UK in 2001 and this is projected to rise to 12.8 million by 2021, and to 16.7 million by 2044 – when there will be more than twice as many octogenarians. The picture is radically different to that of 30 years ago. In 2001 there were 21 per cent fewer children under the age of 16 and 23 per cent more people aged 65 or older than in 1971; by 2044 these figures will have spiralled to 31 per cent and 56 per cent respectively. The number of people of working age for every ‘dependent’ rose from 1.6 in 1971 to 1.8 in 2001 as the ‘baby boom’ generations of the late 1940s and mid 1960s entered the labour force, but it will fall to 1.4 by 2044 as these cohorts enter retirement.

In Japanthe fertility rate has fell to a record low of in 2004 and the population is ageing rapidly: in 2000, there were 1.64 people aged 15-59 for every person aged 0-15 or 60+, but by 2050 there will be just 0.82 on current trends. The government has attempted to raise fertility and encourage marriage through a range of policies, including more child-care facilities, cash benefits for working mothers, sponsored dating games and hiking trips and cruises for single people. One town mayor has introduced cash benefits of up to 500,000 yen (£2,400) for a third child and a promise of 50,000 yen (£240) a year for ten years.

In Italythe population could shrink by one-third by 2050. Italy’s population is also ageing rapidly: in 2000, there were 1.61 people aged 15-59 for every person aged 0-15 or 60+, but by 2050 there will be just 0.86 on current trends. The Italian government offers a one-time payment of 1,000 euros (£685) to couples who have a second child, and officials in the town of Laviano offer couples £7,800 over five years for the birth of a child. Late last year a proposal that mooted paying women not to have abortions gained popular support in Parliament.

In Germany, where childlessness has reached 30%, recent proposals aim to offer parents 67% of their previous incomes while staying at home to look after children. It would be limited to a year, up to a monthly maximum of 1,800 euros (£1,234). Working parents would also be able to offset 3,000 euros a year of childcare costs against tax, encouraging women to have more children. The proposals are based on schemes in Scandinavia, where birth rates are higher than in Germany.

In Francepoliticians have been quick to detail the economic implications of low fertility and an ageing population and consequently a range of pro-natalist policies have been implemented. French politicians have been able to appeal to their citizens’ patriotism – by talking about demography as a ‘source of vitality’ for the country. Recently the government announced it will increase cash incentives paid to parents who put their jobs on hold to raise a second or third child. The new grant will be available only for a third baby, and limited to one year. But it will be tied to the parent's salary, with an expected ceiling of 1,000 euros (£685). The French minimum wage is 1,200 euros (£820) a month.

In Australiapoliticians of all parties stress the importance of planning social policies around demography and strengthening the regions. Australia already has a pro-immigration and pro-natalist policy and the Population Summit of Australia is currently debating the adoption of a fully-fledged population policy.

Swedenand the Nordic countries have a long history of social policies aimed at the family, and a long-running consensus that the state has a responsibility for helping people balance their work and family life. However these countries do not have an explicit population policy. Instead the Nordic governments employ a range of policies – including high quality childcare and extensive parental leave – which they hope will act together to create an environment which is conducive to higher fertility. This is an indirect population policy: while politicians swiftly acknowledge the demographic benefits of their policies, the impact on fertility is secondary to the goal of allowing parents to combine work and family formation.

In Singapore, families who have a second child within marriage before the age of 28 or a third or fourth child at any age receive a $20,0000 (£6,900) tax rebate.

In Austria, there was serious political debate last year about giving parents with children extra voting rights to counterbalance the increased political weight of pensioners – the worry was that an ageing electorate would happily exchange the policy incentives promoting fertility for increased spending on older people.

Contacts

Richard Darlington, ippr Media Manager, 020 7470 6177 / 07738 320 645 / r.darlington@ippr.org

Matt Jackson, ippr Senior Media Officer, 020 7339 0007 / 07753 719 289 / m.jackson@ippr.org