The Six Nooses Around the Family: Is Government Helping Cause the Birth Dearth?

The collapse in birth rates across the developed world has generated no shortage of explanations. Young people cannot afford houses. Women have careers. Men and women marry later. Contraception has separated sex from reproduction. Children have become enormously expensive. Secularisation has weakened the religious and cultural expectation of family formation. Dating apps have damaged relationships. Young adults are anxious about the future. Modern culture encourages individual fulfilment rather than sacrifice for future generations.

Felix Yang, writing for the Mises Institute, approaches the problem from a rather different direction. He asks whether the modern interventionist state itself has progressively destroyed the economic and institutional foundations upon which large families once depended. His argument is deliberately radical. Governments, in attempting to protect citizens from uncertainty, have gradually assumed functions previously performed by families and communities while simultaneously making family formation more expensive and less economically rational. The result, he argues, is a series of six "nooses" tightening around the family: fiat-money inflation, state pensions, government-dominated healthcare, public education, housing regulation and welfare.

It is an unusual argument and, taken as a complete explanation of the birth dearth, it goes too far. Fertility has collapsed across most advanced societies despite enormous differences in taxation, welfare provision, housing systems and government intervention. Highly interventionist Nordic welfare states have low fertility, but so do societies with very different institutional arrangements. Japan, South Korea, Italy, Spain, Canada, Australia, Germany and much of Eastern Europe have all confronted declining fertility through quite different economic systems.

Indeed, the OECD reaches a substantially more complicated conclusion. Housing costs matter, labour-market insecurity matters, the ability to combine employment and parenthood matters, and family policies can make a difference. Yet even countries such as Denmark, France, Norway and Sweden, which spend heavily on family support and provide extensive parental leave and childcare, have seen fertility fall towards the OECD average. The OECD consequently concludes that family policy by itself cannot explain international differences and is unlikely to restore replacement-level fertility because attitudes towards children and parenthood have themselves changed.

That qualification should not, however, cause us to dismiss Yang's argument. Several of his "nooses" identify genuine pressures upon family formation, and his broader free-market perspective exposes a paradox that deserves considerably more attention: governments increasingly worry about collapsing fertility while maintaining economic arrangements that make establishing and supporting a family extraordinarily difficult. Housing is the clearest example.

Young adults cannot easily have three or four children while living indefinitely in a small rented apartment. Family formation requires space, security and some confidence that next year's rent will not consume an ever-larger proportion of household income. Yet in many major Western cities, precisely the places containing the greatest concentrations of employment, housing has become astonishingly expensive.

Yang places much of the blame upon zoning and land-use regulation. He contrasts relatively lightly regulated Houston with heavily regulated San Francisco, arguing that restrictions upon construction manufacture scarcity and transfer wealth from younger prospective families towards established property owners. His particular comparison cannot prove that zoning explains the fertility difference between the two cities, because countless other variables differ as well. But the underlying mechanism is entirely plausible. Restrict the supply of housing while population and demand increase and prices will tend to rise.

On this point the supposedly radical Austrian economists find themselves with an unlikely ally in the OECD. Its cross-country analysis finds a clear negative relationship between housing expenditure and fertility. Larger families generally require larger homes, so rising housing costs increase the financial penalty associated with having additional children.

Australia provides an almost laboratory-quality illustration of the problem. Governments express concern about falling fertility while younger Australians confront house prices that previous generations would have found extraordinary relative to income. Planning restrictions, infrastructure constraints, taxation, population growth, investment incentives, construction costs and numerous other factors contribute. It would be simplistic to blame government regulation alone, but equally absurd to pretend government policy has nothing to do with the result.

A couple in their late twenties considering a second or third child does not perform a demographic calculation about Australia's future dependency ratio. They ask whether they can afford another bedroom. If the answer is no, national fertility statistics eventually record the consequence.

Yang's monetary argument is broader. He argues that fiat-money inflation undermines long-term planning by progressively reducing purchasing power. Childbearing, in the Austrian economic framework he employs, represents an extraordinarily long-term commitment. Parents accept costs now for benefits, many of them emotional rather than financial, that extend across decades and generations. An economic system characterised by monetary instability and declining purchasing power therefore increases uncertainty around precisely the kind of long-horizon decision that raising children represents.

There is something to this argument, although again it should not be pushed too far. People had enormous families during historical periods characterised by poverty, inflation, war and insecurity. Wealth and stability do not mechanically produce children. Indeed, one of the central demographic paradoxes is that some of the world's poorest populations historically had the highest fertility while wealthy societies experienced dramatic decline. Money therefore cannot be the whole explanation.

But expectations matter. People do not compare their prospective children with nineteenth-century peasants. They compare the cost of parenthood with the standard of living they expect for themselves and their children. Modern parents believe children require bedrooms, computers, organised activities, extensive education and often financial support well into adulthood. As expectations rise, the perceived cost of producing a "properly" raised child rises with them.

The OECD identifies exactly this cultural change. Expectations surrounding what constitutes good parenting have become more demanding, while young adults increasingly find meaning and identity outside parenthood. Having children consequently competes against a much wider range of alternative uses of time and money than it once did.

Yang's argument about pensions is more provocative. Before modern welfare states, children performed an important economic function. They contributed labour while young and supported parents in old age. Family formation was consequently not merely an emotional or biological act but an intergenerational economic institution.

Modern pension systems substantially socialised that function. Workers pay taxes or compulsory contributions and expect retirement income from governments, superannuation systems and financial assets rather than relying primarily upon adult children.

Yang argues that this changes the economic calculation. Parents still bear the enormous private cost of producing the next generation, but some of the economic benefits produced by that generation are socialised. The child grows up, becomes a taxpayer and helps finance pensions and healthcare for the entire elderly population rather than principally supporting his own parents.

There is a genuine economic paradox here. Pay-as-you-go welfare states depend upon future workers while simultaneously reducing the economic incentive for individual families to produce those workers.

This does not mean abolishing pensions would suddenly produce a baby boom. Few modern couples decide whether to have a third child after calculating the expected return from that child's support when they are eighty. Family relationships have changed too profoundly for that. But the broader historical point remains important: children have moved from being partly economic assets within a household to being overwhelmingly private economic costs. Education reinforces the transition.

Yang argues that compulsory mass education increased the period during which children remain economically dependent upon their parents. Whatever one thinks of his broader criticism of government schooling, the economic transformation is undeniable. In agricultural societies children could become productive contributors relatively early. In advanced economies they may remain in education into their twenties.

A modern middle-class family can spend enormous resources educating children who do not become fully economically independent until their mid-twenties or later. University education, housing assistance and delayed entry into stable employment can extend parental financial responsibilities further still.

Once again, however, government intervention is only part of the explanation. Advanced technological economies require extensive education regardless of whether schools are publicly or privately operated. A society built around engineering, medicine, computing and sophisticated services cannot send twelve-year-olds into the fields and expect to remain prosperous. The transformation is structural as much as political.

Yang's healthcare argument is probably the least convincing as a major explanation for fertility decline. He argues that government intervention produces scarcity, queues and uncertainty within medical systems. Poorly functioning healthcare certainly can discourage confidence in the future, but fertility has declined in countries possessing radically different combinations of public and private healthcare. It is difficult to see healthcare intervention as one of the principal global causes when the demographic phenomenon crosses those institutional boundaries so readily.

Welfare presents a more complicated case. Yang argues that government assistance can weaken the economic interdependence that once held families and communities together and that some welfare structures create incentives against marriage. Economists have debated these incentive effects for decades, and badly designed benefits certainly can produce marriage penalties or other unintended consequences. But welfare can also reduce the cost of having children.

This is where a rigid anti-government theory runs into awkward evidence. Paid parental leave, childcare support and other family benefits can make employment and parenthood easier to combine. OECD analysis finds positive associations between fertility and some forms of parental-leave and early-childhood support.

Government intervention can therefore push in opposite directions. A planning system that makes a family-sized house unaffordable can suppress fertility, while parental leave makes having a child easier. A tax system can penalise single-income families while child benefits subsidise them. Immigration can increase housing demand while governments simultaneously spend billions trying to improve housing affordability.

The state is not one coherent actor pulling a single demographic lever. It is frequently one department attempting to repair a problem another department helped create. This may be the most valuable insight to salvage from the Mises argument.

Governments tend to treat falling fertility as another discrete policy problem requiring another intervention. Introduce a baby bonus. Expand childcare. Offer a tax credit. Create a government fertility strategy. Establish another department and commission another report.

Yet prospective parents make decisions within the total environment governments have helped construct. A $5,000 baby bonus means very little to a couple who need another $300,000 to buy a house large enough for the additional child. Subsidised childcare helps, but perhaps not enough to offset taxes, housing costs, education expenses and the loss of income associated with raising children. Governments can therefore find themselves subsidising parenthood with one hand while making it more difficult with the other.

Yang's free-market challenge is useful precisely because it reverses the conventional question. Instead of asking, "What should government give people to persuade them to have children?", he asks, in effect, "What has government done that makes people less willing or able to have them?"

That question deserves to be asked. But it still cannot explain the whole birth dearth. The demographic decline is simply too widespread. Fertility has fallen across societies with generous welfare states and relatively lean ones, expensive housing markets and cheaper ones, different healthcare systems and dramatically different cultures. South Korea's fertility collapse cannot simply be mapped onto the American welfare state, just as Italy's demographic decline cannot be explained by San Francisco zoning.

Something deeper has changed throughout advanced civilisation. Children were once central to adult identity. Marriage and parenthood represented the expected trajectory of life rather than one lifestyle option among many. Religion strongly reinforced marriage and reproduction. Communities celebrated large families. Sex, marriage and childbearing were culturally linked in ways that contraception and the sexual revolution subsequently weakened.

Women gained educational and professional opportunities that earlier generations did not possess. Men and women began marrying later. Urbanisation changed the economics of children. Contraception made fertility increasingly voluntary. Individual autonomy became one of the highest values of Western culture. Travel, careers, consumption and personal development competed increasingly successfully against parenthood for the limited years of early adulthood.

None of these developments can be reduced to government intervention. Indeed, some are consequences of freedom itself, and women's lib. This creates an uncomfortable problem for conservatives and libertarians alike. A genuinely free society cannot order people to marry young and produce three children. If men and women freely decide that they prefer careers, travel, consumption, pets or simply a quieter life without children, there is a limit to what either government or free-market reform can accomplish.

The OECD acknowledges this directly. Younger people increasingly find meaning outside parenthood, childlessness has become more socially acceptable, and changing preferences are part of the explanation for falling fertility. For that reason, even extensive family-support policies are unlikely by themselves to restore replacement fertility.

The birth dearth is therefore simultaneously economic, institutional and cultural. Yang is strongest where he shows how government policy can increase the economic burden upon families while weakening some of the institutions that historically made family formation easier. Housing regulation is a particularly strong example. Taxation, monetary instability and poorly designed welfare incentives deserve examination as well. He is weakest when interventionism becomes a universal explanatory key. There are too many countries, too many institutional arrangements and too many cultural changes for one theory to explain everything.

Yet the Mises perspective supplies an important corrective to the standard political response. Before governments spend still more money trying to purchase babies through subsidies, they might examine whether existing policy has helped construct a society in which young adults cannot afford houses, struggle to accumulate capital and face extraordinary economic penalties for raising several children.

The solution to every government-created problem cannot indefinitely be another government program. At the same time, free markets alone cannot manufacture a culture that values children. Make housing cheaper, reduce taxes and increase economic freedom and there is still no guarantee that people will choose parenthood. A civilisation must also possess some conception of why producing and raising the next generation is worth the sacrifice. That may ultimately be the deepest part of the birth dearth.

For most of history, having children was simultaneously biological, economic, religious and cultural. Modernity has progressively weakened all four connections. Contraception made reproduction optional, welfare reduced some of its economic necessity, secularisation weakened its religious imperative and individualism challenged its cultural centrality. Government intervention forms part of that story, but only part.

The six nooses identified by the Mises Institute therefore deserve examination, particularly where governments have made housing, saving and family independence unnecessarily difficult. Cutting some of those ropes could make family formation considerably easier. But even if every one of them were cut tomorrow, the demographic crisis might remain.

The West has not merely made children expensive. It has increasingly ceased convincing young people that having children is one of the great purposes of adult life. Economics can explain why people find parenthood difficult. It cannot completely explain why growing numbers no longer desire it. Solving the birth dearth, if it can be solved at all, will require confronting both sides of that equation.

https://mises.org/mises-wire/six-nooses-how-interventionism-strangling-familys-will-reproduce