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  • Where Have All the Children Gone?

    Tech Central Station, OH
    Jan 27 2005

    Where Have All the Children Gone?

    By Pavel Kohout Published 01/27/2005

    In the third century AD there was a prophet called Mani. He preached
    a doctrine of conflict between Good and Evil. He saw the material
    world as the devil's creation. Marriage and motherhood was a grave
    sin in his view, since by bearing children people multiply the works
    of Satan. The Manichean ideal was to move mankind to a
    superterrestrial realm of Good by way of gradual extinction.

    In the course of history, Manichaeism was ruthlessly eradicated as an
    heretical, ungodly doctrine. When looking at demographic statistics,
    however, one might think that the populations in developed countries
    have converted en masse to Manichaeism and decided to become extinct.
    The birth rate in most western countries has fallen bellow
    replacement level.

    In the so-called "New Europe", the situation is even gloomier.
    According to UN projections, Latvia will lose 44 percent of its
    population by 2050 as a result of demographic trends. In Estonia, the
    population is expected to shrink by 52 percent, in Bulgaria 36
    percent, in Ukraine 35 percent, and in Russia 30 percent. In
    comparison with these figures, the projected population decline in
    Italy (22 percent), the Czech Republic (17 percent), Poland (15
    percent) or Slovakia (8 percent) looks like a small decrease. France
    and Germany will lose relatively little population, and the
    population of the United Kingdom will even see a slight growth --
    thanks to immigrants.


    Why is the birth rate falling?

    The question of why fertility has been falling so dramatically in
    continental Europe has been food for thought for both demographers
    and economists. The answer must be looked for in several important
    factors, which, to further complicate matters, do not simply add up
    in their impact. Nevertheless, it can be said with a fair amount of
    certainty that the existence of pay-as-you-go pension systems has had
    a very negative impact on birth rate. The National Report on Family
    published by the Czech Ministry of Labor and Social Affairs in August
    2004 says:

    "In terms of intergenerational solidarity, the importance of the
    child as an investment for material support in old age has been
    limited by the social security and pension insurance system, which
    has eliminated people's immediate dependence on children. The
    importance of the child's role in relation to its parents has
    transferred to the emotional sphere, which reduced the direct
    material indispensability of children in a family, while also
    allowing for them being replaced with certain substitutes bringing
    emotional satisfaction."

    To put it straightforwardly, and perhaps a little cynically, in the
    past children used to be regarded as investments that provided their
    parents with means of subsistence in old age. In Czech the word
    "vejminek" (a place in a farmhouse reserved for the farmer's old
    parents) is actually derived from a verb meaning "to stipulate": in
    the deed of transfer, the old farmer stipulated the conditions on
    which the farm was to be transferred to his son. Instead of an
    "intergenerational" policy, there used to be direct dependence of
    parents on their children. This meant that people had immediate
    economic motivation to have a sufficiently numerous and well-bred
    offspring - whereas today's anonymous system makes all workers pay
    for the pensions of all retirees in an utterly depersonalized manner.

    This system enables huge numbers of "free riders" to receive more
    than what would correspond to their overall contribution in their
    productive life. Those with incomes way above the average, on the
    contrary, are penalized, as the system gives them less money than
    they contributed to it. This is referred to as the "solidarity
    principle". In terms of birth rate, this arrangement is discouraging
    for both the low-income group and the high-income one. The latter
    feel that they are not going to need children in the old age, while
    the former believe that they can't afford to have them.

    Today, children no longer represent investments; instead, they have
    become pets - objects of luxury consumption. However, the pet market
    segment is very competitive. It is characteristic that the birth rate
    decline in the 1980s, and especially in the 1990s, was accompanied by
    soaring numbers of dog-owners in cities. While in the past dog-owners
    were predominantly retirees, today there are many young couples that
    have consciously decided to have a dog instead of a baby. These are
    mainly young professionals who have come to a conclusion (whether
    right or wrong) that they lack either time or money to have a child.
    Thus, they invest their emotional surpluses into animals.



    Taxes are pivotal


    State pensions systems eliminated the natural economic incentive to
    have children. At the same time, the welfare state is an enormously
    costly luxury that has to be financed from taxes. High payroll-tax
    and social security contributions reduce the earning capacity of
    people in fertile age. Thus, they push down birth rates as well.

    A reader of the Wall Street Journal wrote in a letter on the issue:

    "I am the son of a Pittsburgh steelworks worker. I was born at the
    end of the Second World War. I have three sisters. Our mother never
    went to work. After the experience of the Great Depression, our
    parents were reluctant to borrow; yet they could afford to own a
    house, and our father used to buy a new car once every three or four
    years. My parents paid for my university education and bought me my
    first car when I was twenty. We were by all standards part of the
    middle class, and I was proud of my parents' achievement. (...) Today
    both my parents have to go to work in order to maintain a
    middle-class living standard, due to the increase in taxation that
    has occurred in the past half-century. (...) This has produced a
    generation of children carrying a key around their necks, city gangs,
    and aggressive brats brought up by after-school child-care centers."

    The tax burden in the United Stated has indeed grown significantly
    over the past 50 years. The birth rate has been falling
    proportionately, although not to the critical level that is now
    current in Europe. The birth rate in the US is nearing the
    replacement level -- about two children per woman. Even so, comparing
    to Europe, the United States still appears to be a confirmed and
    stable superpower.

    "Even if we include immigration, the population of the original EU-12
    will fall by 7.5 million over the next 45 years, according to the UN
    calculations. Since the times of the 'Black Death' epidemic in the
    fourteenth century, Europe has never seen such an extensive
    population decline," writes Niall Ferguson, a British historian. He
    also predicts that in 2000-2050, the US population will grow by 44
    percent. It seems that the European Union will have to forget for
    good about its ambitious dreams of becoming a "counterbalance" to
    America.

    The demographic trends in Europe are indeed worrying. In Italy, for
    instance, the birth rate has fallen to an average level of 1.2
    children per woman. Why? A journalist from the Daily Telegraph
    describes the life of young Italians in the following terms:

    "It is virtually impossible to make a living. Just take Rome. Life
    with a minimum of human dignity (a small rented apartment, occasional
    dinner in a restaurant) requires a monthly pay of 3,000 euros before
    taxation, which accounts for some 1,800 euros after tax. If in the
    Anglo-Saxon world a majority of adults is expected to live an
    independent life on their own salaries, in Italy this is often not
    the case. An incredible 70 percent of unmarried Italians aged between
    25 and 29 live with their parents, where they benefit from subsidized
    housing and where their poor incomes amount to a handsome pocket
    money."

    When a modern young European has to choose between setting up a
    family of his own and a comfortable life without children, he is very
    likely to pick the latter option -- unless he belongs to a social
    class which regards children chiefly as a source of social benefits.
    A high amount of taxation combined with ill-functioning labor and
    housing markets is a truly genocidal mix. That is the case of Italy,
    but also Bulgaria and the Czech Republic. Its impact cannot be
    corrected by all sorts of government subsidies paid out to young
    families. On the contrary, under certain circumstances the benefits
    for families may even lead to a drop in birth rate.

    The traditional model, which exists especially in Spain and Italy,
    but to a large extent also in East and Central Europe, emphasizes the
    successive steps in setting up a family. First, a young man graduates
    from a college or vocational school; then he secures his living,
    which is followed by marriage; and only then children are born. This
    succession not only conforms to social conventions but is also based
    on a profound economic logic: it is simply foolish to start having
    children before getting a living. The taboo of sex in Western
    cultures has profound economic reasons.

    The troubles start when one link of this chain breaks. In
    contemporary Europe, the main problem lies in the second link: making
    a living. Unemployment among young graduates tends to be much higher
    than the average of the working-age population as a whole. In
    countries such as France, Spain, Finland, Greece or Italy, 20 to 30
    percent of young people are unemployed. What birth rate can we
    expect, if a fifth or even a third of young population is unable to
    make a living due to a distorted labor market?

    But there is another problem. The payroll-tax and social security
    contributions are up, while investments in capital equipment are made
    tax-advantageous. The government support of the existing families
    comes at the cost of heavier tax burden for young people who have not
    yet founded a family. The so-called "support for families" thus
    hinders the creation of new families, and effectively reduces birth
    rate. If a young unmarried person is left with mere pocket money
    after his salary has been taxed, he will hardly be able to make
    sufficient savings to set up a family. The politicians of most
    European countries are living in a reality gap if they cannot see
    this trivial economic connection.

    The pay-as-you-go system and its inevitable collapse

    Some people believe that there is nothing wrong with a low birth
    rate, as the planet is at any rate overpopulated. Yes, one cannot set
    the "right" amount of population for a country or a continent by
    "scientific" means. What we can determine, however, is which age
    structure of population is favorable, and which is disastrous. In a
    few decades, a large part of Europe will be dominated by a very
    unfavorable age structure, typical with an enormous increase in the
    number of retirement-aged people.

    To be accurate, it is not yet clear at what age today's young people
    and children will retire -- if they retire at all. The pay-as-you-go
    pension systems will inevitably undergo a long and severe crisis, the
    result of which can, to a certain extent, be reckoned today. There
    are several scenarios, the most likely of which suggests that
    retirement age will gradually have to be raised. The most recent
    Insurance-Mathematic Report on Social Insurance produced by the
    Ministry of Labor and Social Affairs in 2004 suggests that "the
    gradual raising of the age limit for the eligibility for old-age
    pension could substantially eliminate the impact of the expected
    ageing of the Czech population. It is also clear that a freezing of
    this age limit would lead to a sharp growth in the level of elderly
    dependency."

    Translated into a simple and straightforward language, this means
    that retirement age will have to be constantly raised: at first to 65
    years, then (sometime in the early 2030s) to 67, and so on. To stop
    this growth would drag the system relatively quickly into a crisis.
    In other words: a pay-as-you-go system may work for another few
    decades, before being gradually marginalized by the rise in
    retirement age. The pay-as-you-go system was a huge political and
    economic experiment; and the generation of today's children will
    witness its failure.

    But perhaps people will just return to the 1880s, when in Bismarck's
    Germany the retirement age was 70 years -- with an average life
    expectancy of less than 50 years. If in 2050, for instance, the
    official retirement age becomes 90, with an average life expectancy
    around 80, then the pay-as-you-go system can be sustainable in the
    long term. But a good social security at an age of around 60 will be
    completely out of the question for those who are now children.

    On the other hand, if the retirement age remains unchanged, the tax
    burden could eventually rise up to 70-75 percent of gross wages. In
    such a case, however, the younger and more educated portion of
    working-age population would undoubtedly migrate to countries with
    lower taxes: particularly to Britain, Ireland, or the United States.
    These countries also have much less trouble with their demographic
    structure. Over the next 50 years, the United States may hugely
    benefit from accepting a wave of emigrants who will have been chased
    out of Europe by high taxes -- and maybe not only high taxes.

    The end of democracy in Europe?

    The prophet Mani is dead. But another prophet's teaching is still
    very much alive. In 2002 the most common first name given to newborn
    babies was Mohamed. The name Osama finished at a handsome 12th
    position.

    In the 1960s there were only about 350,000 North-African Muslims
    living in France, with some 1.25 million French living in North
    Africa. Since then, the notion of "colonialism" has completely
    reversed. There are almost no French living in North Africa, but the
    number of Muslims of African or Middle-Eastern origin in France is
    estimated at 4 to 10 million. The exact number of legal and illegal
    immigrants is unknown, for the sole reason that French statisticians
    are not allowed to collect information on ethnic and religious
    patterns of population.

    Nevertheless, some estimates suggest that one in three births in
    France occurs in a Muslim family. That would explain, among other
    things, why France has a much higher birth rate (about 1.7 children
    per woman) than Spain or Italy. Stripped of this influence, the
    French birth rate would be around 1.2 children per woman, which is a
    figure similar to those in the countries of South and East Europe.

    A Russian-Israeli journalist Shlomo Groman writes:

    "Go to any child-care store in Vienna. Its clients will be
    predominantly Arabic, Iranian, Pakistani, Turkish, Japanese, Korean,
    and Black African. Viennese women never bear children -- they cherish
    their figures and careers instead. The Western-European pension
    systems made the bringing up of children less advantageous than
    social climbing and maximization of income."

    Culture seems to play an even more crucial role than taxes or pension
    systems. The countries of the former Soviet Union are an interesting
    "demographic laboratory" in this respect. We have already mentioned
    Ukraine, Baltic States, and Russia. The situation in the Muslim
    republics -- Azerbaijan, Tajikistan, Uzbekistan, and Turkmenistan --
    is completely different: almost all of them are living a population
    explosion. The living standard in these countries is close to that of
    Georgia or Armenia, i.e. poor. But Georgia and Armenia suffer from
    the same demographic shock as, for instance, the Baltic States. The
    difference lies in the traditionally Christian character of the
    latter countries. The position of women in society is perhaps a
    little different from that of the rich European countries, but
    comparing to Muslim countries these differences do not count much. In
    terms of birth rate, they are almost negligible. Armenia will lose a
    quarter of its population by 2050, while the population of the
    neighboring Azerbaijan will surge by a third.

    The international demographic context will see huge changes: in 2050,
    Yemen will have more population than, for example, Germany. These
    people will quite understandably long for the standard of living that
    currently prevails in Europe. The immigration pressure on Europe will
    be immense. Given the European liberal laws on family reunification,
    the exodus from Middle East and North Africa will have enormous
    dimensions.

    Instead of integration of immigrants from the Middle East and North
    Africa into a majority European society, the opposite will occur: the
    immigrants will integrate the existing European culture into their
    own civilization. After some time, it will be their civilization that
    will become dominant. One does not have to be a supporter of
    Jean-Marie Le Pen to feel a little anxious about that. It is not a
    problem of ethnics and their mingling. It is a matter of society, its
    values, and democracy as such. European tolerance competes with
    Islam, which is not always a religion of peace, as many Europeans
    would like to believe. Radical Islamic preachers openly condemn
    democracy. They interpret it not as a social system but as a pagan
    cult, which prefers the voices of people to the voice of God. This
    and other theories of Sheikh Yusuf al-Qaradawi and his conservative
    fellow-believers are proclaimed in many mosques throughout Europe.

    If as a result of demographic trends a large part of future Europeans
    will have dark skin and go to mosque, why not? But if they become a
    threat to the European tradition of democracy and tolerance, it will
    be a tragedy.

    The author is an associate of the Center for Economics and Politics
    (CEP), Prague.
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