Zhao Wei is the Chief Economist of Guojin Securities and Director of the China Chief Economist ForumAbstractIn the face of the continuous decline in fertility rate, how can Europe get out of the ultra-low fertility rate? What is the experience of East Asia? This paper systematically reviews and provides reference. The region's transition from ultra-low fertility may be partly due to its well-developed system of fertility support policies, and the region's total fertility rate fell below 1.5 in 1995 and has since gradually rebounded out of ultra-low fertility. Since 1950, the total fertility rate in Europe has continued to decline, falling below the low fertility warning line of 1.5 to 1.46 in 1995. In 2014, the total fertility rate in Europe rebounded to a stage high of 1.62, an increase of 0.16 from 1995. The European region's exit from ultra-low fertility may be mainly due to its relatively well-established policies to boost fertility intentions and reduce the cost of childcare. Policies to boost fertility intentions mainly take the form of tax incentives, maternity leave and allowances, and Western European countries represented by Germany are the most typical. For example, Germany provides tax incentives for flexible employment of family second workers, reduces the burden of family taxes and fees through joint tax filing, and vigorously supports family parental leave and maternity economic subsidies. The policy of reducing the cost of childcare mainly takes measures such as subsidizing childcare costs and building public childcare institutions, and the Nordic countries represented by Sweden are the most typical. According to OECD data, in 2021, the public expenditure on early childhood education and care in Iceland, Sweden and other Nordic countries accounted for more than 1% of GDP, ranking among the highest in the world. South Korea's fertility boosting policy has yet to take effect, or partly due to the late introduction and insufficient support, the total fertility rate in East Asia has continued to decline since 1963, falling to the lowest fertility level in the world in 2021, with South Korea's fertility rate falling to 0.7 and Japan's fertility rate remaining at around 1.3. Compared with Europe, the total fertility rate in East Asia has declined at a significantly faster rate, falling by more than 5.3 in the past 60 years, which is more than that of other regions in the same period. In 2021, the total fertility rate in East Asia fell to 1.17, lower than 1.48 in Europe, the lowest in the world, and South Korea's fertility rate fell to 0.7, making it the lowest total fertility rate in the world. Compared with Japan's total fertility rate of about 1.3, South Korea's total fertility has not stabilized or is due to the late introduction of fertility policies and insufficient policy spending. In contrast to Japan, which introduced a fertility policy in 1994 when its total fertility rate was 1.49, in 2006 South Korea implemented the "Basic Plan for a Low Fertility and Aging Society" when its total fertility rate fell to 1.1. Compared with other OECD countries, South Korea's fertility policy support is low. In 2018, South Korea's public welfare support for dual-income families with children accounted for only 2.5% of household income, significantly lower than the average of 10% of other OECD countries, and in 2019, South Korea's public welfare expenditure as a proportion of GDP was 1.56%, significantly lower than the OECD average of 2.3%. In addition, South Korea's longer working hours and higher housing prices have not significantly improved or weakened the effectiveness of its fertility policy. OECD data shows that in 2021, South Korea's weekly working hours for men and women are among the top OECD countries, with an average of 78 hours per week for men and 60 hours for women, twice as long as Denmark, Norway and other European countries. At the same time, South Korea's housing price income is nearly 20, which is significantly higher than that of OECD countries such as Japan. The length of family work and the cost of living that need to be improved may weaken the effect of South Korea's fertility support policies, and to a certain extent, the total fertility in South Korea is still declining. The risk indicates that the economic recovery is less than expected, and the effect of policy implementation is less than expected.
The main body of the report
Demographic Transition: Overseas Experiences for Dealing with Ultra-Low Fertility
1.1. The total fertility rate in Europe fell below 1.5 in 1995 and then gradually rebounded out of the ultra-low fertility rate, perhaps partly due to its perfect fertility support policies. Since 1950, the total fertility rate in Europe has continued to decline, falling below the low fertility warning line of 1.5 to 1.46 in 1995. In 2014, the total fertility rate in Europe rebounded to a stage high of 1.62, an increase of 0.16 from 1995, during which the total fertility rate of Sweden, Norway and other northern European countries fluctuated between 1.5 and 2, and the total fertility rate of Germany and other Western European countries continued to rise.
The European region has emerged from the ultra-low fertility rate or mainly because of its relatively perfect childbirth and parenting support policies, including child-rearing families, working parents, early childhood care and early education, and children's in-class and extracurricular education. Through the OECD disclosure of family welfare public expenditure (government subsidies in the form of cash benefits, tax subsidies and social services), education public expenditure (government spending on childcare and education), family cash benefits (cash support for family childcare), tax incentives (based on one-child and multi-child family tax discounts, etc.) to observe their fertility and parenting policy system and support, it can be found that European countries in the childbearing, There are different emphases in terms of parenting support policies, but the support is relatively large.
Policies related to boosting fertility in Europe can be summarized into two aspects: boosting fertility intention and reducing the cost of childcare. In terms of boosting fertility intentions, relevant policies mainly take the form of tax incentives, maternity leave and allowances, and Western European countries represented by Germany are the most typical. For example, Germany provides tax incentives for flexible second-hand workers and reduces the tax burden on families through consolidated tax filing. At the same time, Germany strongly supports family parental leave and maternity financial subsidies, in addition to the statutory minimum vacation time and public holidays, Germany provides working parents with 30 days of collectively agreed leave, and for parental and maternity leave, Germany also provides 100% income subsidy, which is higher than the European and OECD average.
In terms of reducing the cost of childcare, the relevant policies mainly take measures such as subsidizing childcare costs and building public childcare institutions, and the Nordic countries represented by Sweden are the most typical. OECD data shows that in 2021, the public expenditure on early childhood education and care in Iceland, Sweden and other Nordic countries accounted for more than 1% of GDP, ranking among the highest in the world.
1.2. South Korea's fertility boosting policy has yet to be effective, or partly due to the late launch and insufficient support, the total fertility rate in East Asia has continued to decline since 1963, and will fall to the lowest fertility level in the world in 2021, of which the fertility rate in South Korea has fallen to 0.7 and the fertility rate in Japan has remained at about 1.3. Compared with Europe, the total fertility rate in East Asia has declined at a significantly faster rate, falling by more than 5.3 in the past 60 years, which is more than that of other regions in the same period. In 2021, the total fertility rate in East Asia fell to 1.17, lower than 1.48 in Europe, the lowest in the world, among which South Korea's fertility rate fell to 0.7, becoming the lowest in the world, and Japan's total fertility rate remained around 1.3, but still below the warning level of 1.5.
In 1994, Japan has introduced policies to boost the fertility rate in response to declining fertility rates and declining birthrates, including support for childcare and education, support for families with children, and employment support for parents with children. In 1994, when Japan's fertility rate fell to 1.49, policies to boost fertility continued to be introduced. So far, Japan's policies to boost the fertility rate have covered childcare education, child-rearing families, and employment policies for parents with children, such as the addition of the Childcare and Family Leave Act, the revision of the Child and Child-Rearing Support Act, the establishment of the "Plus One Plan" and the "Childcare Peace of Mind Plan", and the promulgation of the Basic Law of a Declining Birthrate Society.
Compared with Europe, Japan's public spending on fertility promotion policies is low, and it is mostly skewed towards social and public services, with limited support in terms of cash incentives and tax incentives. According to OECD data, the proportion of public expenditure on household welfare in Japan to GDP in 2019 was 1.94%, significantly lower than the average of 2.56% in Europe and the average of 2.3% in the OECD. [1] The OECD's expenditure on social services mainly includes investment or subsidies for childcare and early education facilities, employment and housing support for childcare age groups, and childcare and counseling services for families with children. https://www.oecd.org/els/soc/PF1_1_Public_spending_on_family_benefits.pdf
Since 2006, the Republic of Korea has formally proposed a fertility incentive policy, and has proposed four basic plans for "low fertility". In 1985, the total fertility rate of the Republic of Korea fell below 1.5 for the first time, and in 2006, the total fertility rate of the Republic of Korea accelerated to 1.1. The third and fourth five-year plans focus on the introduction of child-rear-friendly employment policies and the strengthening of work-life balance policies.
Compared with Japan, the total fertility rate remains at about 1.3, while South Korea's total fertility rate is still declining, which may be due to the late introduction of fertility policies and insufficient policy spending. In contrast to Japan, which began to introduce a fertility policy when its total fertility rate was 1.49 in 1994, South Korea implemented the "Basic Plan for a Low Fertility and Aging Society" in 2006 when its total fertility rate fell to 1.1. At the same time, compared with other OECD countries such as Japan, South Korea's fertility policy support is low. According to OECD data, in 2018, South Korea's public welfare support for dual-income families with children accounted for only 2.5% of household income, lower than the average of 10% in other OECD countries, and in 2019, South Korea's public welfare expenditure accounted for 1.56% of GDP, significantly lower than the OECD national average of 2.3%.
In addition, South Korea's longer working hours and higher housing prices have not significantly improved or weakened the effectiveness of its fertility policy. OECD data shows that in 2021, South Korea's weekly working hours for men and women are among the top OECD countries, with an average of 78 hours per week for men and 60 hours for women, twice as long as Denmark, Norway and other European countries. At the same time, South Korea's housing price income is nearly 20, which is significantly higher than that of OECD countries such as Japan. The length of family work and the cost of living that need to be improved may weaken the effect of South Korea's fertility support policies, and to a certain extent, the total fertility in South Korea is still declining. (See "Behind the "Low Fertility" in East Asia?)
After research, we found that: (1) The total fertility rate in Europe fell below 1.5 in 1995, and then gradually rebounded out of ultra-low fertility. The European region's exit from ultra-low fertility may be mainly due to its relatively well-established policies to boost fertility intentions and reduce the cost of childcare. Policies to boost fertility intentions mainly take the form of tax incentives, maternity leave and allowances, and Western European countries represented by Germany are the most typical. For example, Germany provides tax incentives for flexible employment of family second workers, reduces the burden of family taxes and fees through joint tax filing, and vigorously supports family parental leave and maternity economic subsidies. (2) The policy of reducing the cost of childcare mainly adopts measures such as subsidizing childcare costs and building public childcare institutions, and the Nordic countries represented by Sweden are the most typical. According to OECD data, in 2021, the public expenditure on early childhood education and care in Iceland, Sweden and other Nordic countries accounted for more than 1% of GDP, ranking among the highest in the world. (3) In the face of the decline in the total fertility rate and the declining birthrate, Japan has introduced policies to boost the fertility rate since 1994, including support for childcare and education, support for families with children, and employment support for parents with children. Compared with Europe, Japan's public spending on fertility promotion policies is low, and it is mostly skewed towards social and public services, with limited support in terms of cash incentives and tax incentives. Japan's total fertility rate remains at around 1.3, but it is still below the warning level of 1.5. (4) Compared with Japan, the total fertility rate remains at about 1.3, while the total fertility rate in South Korea is still declining, which may be due to the late introduction of the fertility policy and the lack of policy expenditure. In 2006, when the total fertility rate fell to 1.1, the Republic of Korea implemented the Basic Plan for a Low Fertility and Aging Society. At the same time, compared with other OECD countries such as Japan, South Korea's fertility policy support is low. In addition, South Korea's longer working hours and higher housing prices have not significantly improved or weakened the effectiveness of its fertility policy. Risk Warning 1: The economic recovery is less than expected. Changes in the overseas situation have increased the drag on exports, and real estate has weakened more than expected. 2. The effect of policy implementation is not as expected. Debt suppression, project quality and other drags down the implementation of policies, and funds are stranded in the financial system.