Declining Fertility Rates in the EU: Policy Reactions in France and
Germany
Joe Berkhout (10257136)
Bachelor Thesis Economics
Specialization Economics
Faculty of Economics and Business
University of Amsterdam
Supervisor: Ieva Rozentale
Table of Contents
1.Introduction...1
2. Literature review...3
2.1. Explaining fertility rates in current-day EU………3
2.2. Why is low fertility a problem?...8
2.3. Which policy measures can be used to stimulate fertility?...11
3. Methodology...14
4. Case studies...16
4.1. France………..16
4.1.1. Historical review………16
4.1.2. Current family policy measures………..…16
4.1.3. Analysis of effectiveness of family policy………….………17
4.2. Germany………19
4.2.1. Historical review………19
4.2.2. Current family policy measures………..20
4.2.3. Analysis of effectiveness of family policy……….21
5. Comparison of French and German policies………23
6. Discussion...24
7. Conclusion...25
I. Bibliography...27
II. Appendix...29
1. Introduction
Declining fertility rates in industrialized countries have been troubling policy makers for many years. As life expectancy continues to rise, many EU countries predict skewed population trees, with the percentage of retirees growing dramatically. This development will put greater pressure on the shrinking working population, who will bear the increasing costs of the large elderly demographic. Many European countries have reacted by putting in place policies to promote larger families; these measures range from direct cash
transfers to families to high levels of investment in childcare services. Family formation behaviour is affected by a large number of social and economic factors in a country; by manipulating these variables policymakers seek to reduce welfare losses resulting from childbirth. Research has shown that fertility preferences remain higher than realized rates in many EU countries (Sleebos, 2003). For this reason, it is believed that given the correct environment, fertility rates would grow to levels more desirable for both the state and the individual.
Fertility is measured in terms of Total Fertility Rate (TFR), which is defined by the number of children a woman would be expected to give birth to if she were to live until the end of her reproductive period. If a country is to maintain a stable working population - with two working adults raising two children who will go on to take their place in the labour market - TFR must be at replacement level. Replacement level is always above two, as some children die before reaching adulthood. In most Western countries it is considered to be around 2.1. However in developing countries it can be much higher, due to high levels of child
mortality.
Sweeping social changes beginning in the 1960s caused fertility to drop below replacement level in many European states (Eurostat, 2013). The response to this widespread problem varied enormously across EU nations. France, for example, had already suffered from low birth rates in the early 20th century, and in 1939 passed the ‘Family Code’, offering financial incentives to families. The country therefore had institutions in place to implement new pronatalist policies when fertility dropped during the 70s and 80s. France currently enjoys the highest TFR of the EU at 2.01 (Eurostat, 2013). Other countries are notable for their
ineffective, and in cases nonexistent policy to tackle declining fertility. Countries such as Germany and Italy have been slow to react to these developments, and currently both suffer from fertility rates below 1.5. An overall European trend has developed, with TFR in German speaking and Southern and Eastern European nations falling behind that of Northern and Western European states (McDonald, 2006). The first group of countries predominantly experience ‘very low’ rates, defined as below 1.5. The second group has ‘moderately low’ fertility rates, within the range of 1.5-2.1.
Against this backdrop, the aim of this thesis is to gain a better understanding of why such striking differences exist between EU nations, and if changes in policy can help to increase TFR in countries currently experiencing ‘very low’ levels. In particular, this piece compares family policy implementation in France and Germany, with the goal of providing advice for Germany on how to boost its faltering fertility. The method used to obtain this advice is a comparative descriptive analysis of the two countries. The results found will be useful in providing advise for other countries suffering from low fertility, especially nations with similar social welfare systems to that of Germany.
The paper starts with a literature review, firstly explaining the current situation in the EU with regard to fertility rates, secondly looking at why low fertility rates are indeed a
problem and thirdly which policy measures can be used to stimulate fertility. Following the literature review, the methodology discusses the exact factors that will be taken into account when comparing the two nations. After that, the case studies will first provide a historical overview of fertility rates and policies in the respective countries, and then analyze the effectiveness of the policies in both countries. Then, the policies in the two countries will be compared with the goal of providing some family policy advice for Germany.
2. Literature Review
2.1 Explaining fertility rates in current-day EU
In order to analyze the current European situation of low fertility and skewed demographic trees and advise on policy that can be effective in countering the problems, it is important to understand the forces and factors that have led to the situation in the EU. First, I present a historical overview of social changes and their effect on fertility rate trends in Europe (current-day EU), beginning from the Second World War. Secondly, I discuss the causes of the slow and varied response by EU policymakers. After this, I provide a summary of the factors that influence fertility disparities between countries in the present-day EU.
In the period following the Second World War, fertility rates across Europe were relatively high. This is understandable due to the lack of contraceptive technology and low access to abortion in this period. Replacement rates during this period were also higher, due to underdeveloped healthcare technology, which meant that child mortality was more
common. Nevertheless, TFR exceeded replacement rates in all current EU-nations up to the 1950s (Eurostat, 2011). Radical social changes beginning in the 1960s caused TFR to drop dramatically in many European countries.
McDonald (2006) highlights two social movements that had profound effects on levels of TFR in the EU: social liberalism and economic deregulation. Social liberalism was a shift whereby individuals became more autonomous and had greater power to create identities outside the social norms and institutions, which had previously been dominant. People were held more accountable for their actions and as a result became more risk averse. The growing possibility of divorce made women more cautious when considering family
planning. Growing autonomy was a driving force behind a movement towards greater gender equity. Labour force participation rates for women grew strongly compared to men. Overall, the institution of the family became less self-evident, and women had the choice to pursue a professional career at the expense of becoming a mother. As a result, TFR dropped sharply across Europe in the 1960s and 1970s (Eurostat, 2011).
Economic deregulation, or new capitalism, was prevalent in the EU in the 1980s and 1990s. There was a large sentiment in Europe that the creation of free markets would lead to greater prosperity. Before this change, there was strong protection for employees in the form of longer-term contracts and the presence of trade unions, and this resulted in many people holding jobs for life. In the 1980s unemployment reached high levels and by the 1990s uncertainty on the labour market had grown significantly (McDonald, 2002). People responded to this economic uncertainty by either postponing family planning until a job had been secured, or by not having children at all. The highly competitive labour markets also placed more emphasis on the acquisition of human capital. This resulted in longer average education periods and thus delayed marriage and cohabitation.
As fertility rates plummeted, replacement rates also fell due to advances in technology making child mortality increasingly rare (Eurostat, 2013). However, by 1990 TFR in most current EU countries had fallen below 2. Notable exceptions were Ireland, where influential catholic traditions continued to produce large families, and Sweden, where pronatalist policies had helped to boost the previously ailing fertility rate. It is from this point onwards that a clear trend can be seen in the diversion of two sets of countries with highly differing birth rates. On the one hand the countries in Scandinavia and Northwest Europe managed to stop the decline, and in some cases increase it. On the other hand, German speaking and Southern European countries suffered further decreases in TFR, leading them to ‘very low’ levels (TFR<1.5), and in some cases ‘lowest low’ levels (TFR<1.3) (Eurostat, 2013). A
question arises as to why such a clear diversion materialized, and in particular why certain countries were so slow to react to the major demographic changes.
McDonald (2006) presents four factors that contributed to the slow reaction of policymakers across the EU. Firstly, during the 1970s and 1980s, some countries interpreted the decrease in fertility rates as purely a delay of family planning activities. Governments understood that couples were postponing childbearing as a result of the social forces discussed previously. They expected birth rates to rise again following the postponement, in a development known as a tempo effect. This proved not to be the case and TFR continued to decrease in the following decades. A second reason behind the slow reaction was the popular view that pronatalist policies were often extremely expensive and
produced questionable results. This went hand in hand with neo-liberalism, which argued for government spending cuts. It is true that most social policy is expensive, but the majority of results have been positive in the EU, as will be discussed later. It can also be argued that the consequences of not implementing policies could present far greater costs in the future than the current costs of introducing measures. Thirdly, pronatalist policy was seen as a political taboo in various European countries due to connotations with fascism. During the regimes of Hitler, Mussolini and Franco family policies were influential in a drive to create ‘racially pure’ populations. After these dictators were removed, citizens of these countries developed the view that the state should not dictate family affairs. As such, it became more difficult for governments to pursue family policies in these countries. Last of all, some policymakers were convinced that immigration could be used as a policy to make up for shortfalls in fertility. The shortcomings of immigration as a tool to counteract low fertility are discussed later. An additional hindrance for the implementation of social policy to promote larger families is that the effects on the labour market are only felt many years after the policy is introduced. For this reason, it is not attractive to politicians who typically serve terms of four or five years.
Having addressed the historical influences that contributed to the development towards the present-day situation of low fertility rates across large parts of the EU, the literature review continues with a review of the factors that are responsible for determining TFR in EU nations. As discussed above, there are large variations in fertility rates within the EU. The average TFR of the 28 member states is 1.58, with the highest level in France (2.01), and the lowest in Portugal (1.28) (Eurostat, 2013). The vast disparities in fertility are explained by social, cultural, economic differences that exist within the EU. Government policy can have a guiding role in altering these factors in order to promote higher birth rates.
Certain factors are helpful in explaining differences in fertility on a worldwide scale, but are not necessarily relevant for studying variance within the EU. For example, countries in which contraception and abortion are unavailable, either due to economic constraints or social and religious beliefs, have significantly higher fertility rates. However, contraceptives are widely available throughout the EU and abortion is legal in most countries. For this
reason, the availability of family planning services is not significant when analyzing current TFR differences within the EU. Instead, other factors are more important when identifying the causes of varying fertility rates in the EU.
Adsera (2011) provides evidence from 15 European countries that low unemployment and high levels of employment in the public sector are predictors for high TFR. She also argues that access to part-time employment and public sector jobs accelerates the transition to second and third births. Economic security is an important factor when couples begin family planning behaviour. Parents like to be sure that they are financially capable of offering their children a safe and healthy upbringing without their own welfare declining to undesirable levels. During periods of high unemployment, security on the labour market is low and couples are less inclined to begin family planning behaviour. Goldstein et al (2013) found a strong negative correlation between unemployment rates and TFR in Europe in the period following the global economic crisis from 2007. In most EU countries, public sector employees are given relatively long, paid parental leave. Young parents are also offered flexible working hours, with the option of working part-time (Adsera, 2011). These
generous provisions are not offered by most profit-driven private enterprises, and in many cases mothers are forced to leave the workforce as childcare is either unaffordable or of low quality. As a result of family friendly measures, countries with high employment by government generally have higher fertility rates. To put this correlation into a EU context, Scandinavian countries have the highest levels of public sector employment, approximately 30%; followed by France (25%), these are also the EU countries with the highest TFR
(Adsera, 2011).
Female employment levels are particularly interesting when studying the problem. One would expect fertility to decline with growing levels of female participation in the labour market, because many prospective mothers would be forced into a decision between career and motherhood. Ahn and Mira (2002) indeed found that this negative relationship existed in the 1970s and early 1980s. However, somewhat surprisingly this trend switched in the late 1980s and there is currently a relatively strong positive correlation between percentage of women in the labour force and TFR in developed countries. This reasoning is strengthened by findings of higher TFR in countries with higher educational attainment
levels of women (Sleebos, 2003). Scandinavian nations, for example, have far higher female participation rates than Southern European countries and experience significantly higher birth rates (Eurostat, 2013). McDonald (2006) states that in EU countries in which the male breadwinner family model is still intact, true in most Southern European countries, TFR is lower. This is explained by the expectation in those countries on women to provide caring and maintenance work. For this reason public service sectors are much smaller in these countries. These sectors, as mentioned previously, have the most family friendly working conditions, and thus countries with smaller public sectors are also likely to experience lower TFR.
Apart from the overall economic situation and the level of female participation on the labour market, there are a number of other factors resulting from social liberalism and economic deregulation that are relevant for determining fertility rates. They will be defined as ‘delay factors’, as they postpone the transition towards family planning behaviour. A delay in family planning behaviour results in a shorter period between family planning and the end of the female fertile period, ultimately leading to decreased fertility. A trend that holds across EU nations with ‘very low’ TFR is a persistent gap between realized and desired fertility (Sleebos, 2003). While desired TFR is reasonably consistent in the EU - at levels close to 2 - realized rates lag behind significantly in many countries. The first delay factor is the trend towards later marriage in the EU, which can in part be attributed to the social liberalism movement. There is a clear correlation across the EU between age at marriage and TFR. Even Eastern-European nations - traditionally known for young marriage age - have experienced significant increases, corresponding with falling birth rates
(Eurostat, 2013). In many countries (including Germany), childbirth outside marriage is not socially accepted, so delayed marriage translates into a shorter period of potential
childbirth - in which both criteria of female fertility and social approval are satisfied. A second delay factor, which may be partially responsible for the increase in average age at marriage, is an increased emphasis on human capital accumulation due to increasingly competitive labour markets. This development is a clear effect of economic deregulation. As human capital becomes more important for young adults joining the labour market, they spend more time in education. This in turn delays the movement towards family planning. A third and final delay factor is the rising price of housing relative to average
income in large parts of the EU (Eurostat, 2013). Rising house prices have forced young adults to focus first on education and obtaining a steady salary before considering cohabitation, thus strengthening the emphasis on human capital accumulation (delay factor 2).
The current situation of low fertility rates in the EU is largely a result of social changes experienced in the period 1960-1990. Social liberalism and economic deregulation caused major decreases in TFR across the EU and many countries were slow to react to the changes for a number of general and country-specific reasons. The effects of the social changes and the lack of policy implementation in some countries has led to a situation of varying, but generally low fertility in the EU. A number of factors can help explain the fertility variations in the current-day EU. These factors are centred on the general economic situation in a country and the level of female participation in the labour force. Additional ‘delay factors’ have caused a disparity between preferred and realized fertility. Policymakers should look to target these variables in order to boost fertility rates.
2.2 Why is low fertility a problem?
A fundamental question to answer is whether declining TFR in the EU, or any country, is necessarily a bad development. If so, why is this the case? The primary starting point for research into these questions is the age dependency ratio. The age dependency ratio is the non-working age population (children and pensioners) divided by the working age
population (age 15-64). This ratio gives an idea of the pressure put on the working
population to carry costs for retirees. In 2010 the age dependency ratio for the EU-27 was 26%, OECD (2010) predicts that this ratio will grow to 50% by 2050. Some countries are expected to experience far greater shocks, for example Poland, which will move from 19% in 2010 to 56% in 2050 – a near 300% rise (OECD, 2010). The effects of rising life
expectancy - a trend consistent across the EU - and low birth rates, will not be
compensated by migration. This will leave a working population having to pay significantly more taxes per head to uphold the social security systems that are characteristic of
Western European countries.
It is also almost certain that total output of countries suffering low TFR will decrease. Consider a Cobb-Douglas production function, if the labour force decreases, technological progress will need to grow to compensate the shortfall. Skirbekk (2003) states that
technological progress is typically driven by a younger generation of workers. The ideas that arise are then financed and marketed by older workers who have accrued capital and have market nous. This would mean that technological progress could also be expected to drop, leaving a country with low TFR with long-term negative growth. An ethical problem also arises, that of intergenerational inequality. As dependency ratios continue to rise, the proportion of tax that labourers will need to pay to finance the ‘dependent’ population will also rise. This will leave the younger generation – those joining the labour force in the coming years – with lower welfare during their working years than their predecessors. There is also an intergenerational inequality issue when viewed from the standpoint of the retirees; these are people who have paid taxes their whole lives and feel they are entitled to expect the same treatment as the generations before them.
The largest problems are expected to be in the healthcare sector, where the growing elderly population will be responsible for large rises in health costs in the EU. According to a paper by the European Commission (2010), the percentage of healthcare costs over GDP will rise by 14% in the period 2015-2040. This is the period in which the post-war baby boom generation will demand the most healthcare financing. Again there are great
differences across the EU, with Sweden forecast to experience a 6% increase compared to 20% for Spain.
There are also arguments that fertility below replacement rate could in fact be beneficial for welfare. These are based on factors of environmental impact and education. Population size, and thus TFR, has clear environmental effects. Climate scientists argue that low
fertility rates can be beneficial for long-term welfare, especially in parts of over-inhabited Western Europe. The reasoning is that smaller population sizes would produce less carbon emissions, reducing the risks of large costs of extreme weather events in the future. This assertion is given credibility for short-term practice by a paper by Striessning and Lutz (2013), who argue that education levels should be taken into account when deriving optimal TFR. The theory behind their paper is that highly educated people contribute more
to the dependent population (retirees) than those who are less educated. Educated people are also likely to retire later and live more healthily. After taking these factors into account, the fertility rate yielding highest levels of welfare is found to be between 1.5-1.8, far lower than replacement rate (2.1). This level could be even lower if countries experience high immigration. Lower TFR would also be positive for the environment, as discussed above. The writers suggest that investing in education, instead of other more traditional family policies could have more sustainable effects. It is however, difficult to imagine countries aiming for such low fertility rates, even if it may be rational. Countries with large
populations have greater political power and can use this to exert influence on their interests.
European countries have a long history with immigration, and some argue that higher levels of immigration could solve the problem presented by falling TFR. There has been a discussion about the feasibility of ‘replacement migration’, however a UN report in 2000 found that increasing the working population through immigration would only have a short- to medium-term effect and would not offset population aging in the EU. Immigrants initially maintain fertility patterns from their country of heritage, but tend to quickly revert to norms of their new home meaning that immigration is not long-lasting tool for
increasing fertility rates. The UN report concludes that in order to counteract the development of population aging, immigration to the EU would need to be significantly higher than any immigration that has ever occurred (United Nations, 2000). This
conclusion, coupled with the European perception that high levels of immigration create ‘social discohesion’ (Coleman, 1995), render any hopes of low fertility being completely compensated by immigration impossible. Immigration can be used as a tool to dampen shocks, and will continue to be used in that manner if EU nations can overcome populist anti-immigration sentiment.
The literature is fairly clear that declining fertility will cause problems for EU nations through large increases in dependency ratios. As a result of these increases, declining working populations will bear increasing costs for the elderly demographic, largely from rising healthcare costs. Taxes per head will need to increase in order to maintain the social welfare systems currently characteristic of many Western-European nations. This also
presents issues of intergenerational inequality, asking if it is fair to saddle the coming generation with major tax increases, or indeed if it is fair to leave retirees with reduced healthcare financing than past generations. There are also arguments that fertility rates beneath replacement rate could produce higher levels of welfare, also by helping to reduce future environmental costs, but these opinions are likely to be ignored by governments. It is also irrational to expect immigration to solve aging issues in the EU, as it can only affect fertility in the short- to medium-term.
2.3 Which policy measures can be used to stimulate fertility?
It is evident that some EU nations have been more successful in preserving a healthy fertility rate than others. These countries have been successful in implementing various policies to facilitate family planning. Gunnar Myrdal was the man who laid the basis for Swedish family policy when the country was suffering low birth rates in the 1930s. He famously stated: “Children are a crucial investment for society, but an economic burden for society. Therefore, government should redistribute wealth from families with few, or no children to those with many.” The aim of pronatalist policy is to ensure that childbearing does not lead to unacceptable levels of welfare decline for parents. Family policy is split into two types: direct and indirect. Direct policy involves cash transfers and tax benefits for parents - direct financial incentives for prospective parents. Indirect policies can involve a number of benefits, which indirectly incentivize family planning behaviour. These can include generous parental leave, family friendly workplaces or subsidized childcare. The notion that cash benefits could have a significant impact on fertility rates was long doubted. A paper by Gauthier and Hatzius (1997) concluded that family allowances indeed had a positive effect on fertility, with a 25% increase in government expenditure in terms of cash benefits being related to a 0.07 increase in TFR. However the relatively small increase was widely viewed as evidence that allowances were not a feasible method for stimulating family planning. Castles (2003) noted a methodological shortcoming in the research. He argued that the countries that implement these policies are generally the countries that suffer from low fertility. Therefore, it is to be expected that countries with these policies should have low TFR in the short- to medium-term following the
implementation, and that effectiveness of family policies should instead be judged in the long run. One of the main benefits of cash transfers is that they can easily be awarded to the main carer of the child, which in many cases is the mother. Tax breaks are generally given to the main earner, often the father. McDonald (2002) showed that mothers are more likely to spend the extra cash on their child than the father. For this reason, cash benefits could be more effective in raising fertility than tax benefits. A problem with the method of cash benefits is that administration costs are far higher than for tax-based policies. In some countries tax breaks are politically more acceptable in times of expenditure cuts (Sleebos, 2003).
Public funded high quality childcare allows mothers to continue working, while also adds job opportunities for women (Del Boca, 2002). In countries with these childcare provisions, households are not forced into a loss in permanent income due to women not being able to work after childbirth. Ermisch (1989) states that direct cash transfers reduce the costs of childbearing, while childcare provisions that allow mothers to work after childbirth reduce opportunity costs. Rindfuss et al. (2004) find a strong, significant positive relationship between the availability of childcare and reduced postponement of first childbirth by studying data from Norway. As mentioned above, there is also a strong positive
relationship between fertility and the proportion of workers in the public sector (Adsera, 2011). Buttner and Lutz (1990) found that a 40% increase of maternal leave and a paid leave for mothers with two or more children had a significant effect on fertility.
Overall, it is impossible to define an optimal set of policies for any given country. As always with public policy, it is extremely difficult to predict the results of policy measures in
different countries; often it is a case of trial and error. Each country has it’s own preferences and many policies may lead to a desirable outcome. For example, Sweden invests highly in childcare and offers long, fully paid maternity and paternity leave. France is another country that has implemented successful policy measures, placing great emphasis on the importance of childcare services. However, France uses a combination of tax cuts and cash transfers as its method of direct policy, whereas Sweden exclusively uses transfers (OECD, 2009). A factor that seems to be a feature of all successful EU family policy packages is a high level of expenditure in childcare services and other provisions to help mothers continue working.
The literature is unanimous that the best way to stop fertility from declining is to provide more certainty and confidence to young couples on the labour and housing market (Kohler et al., 2006; Sleebos, 2003; McDonald, 2006). This is based on the fundamental assumption that individual fertility preferences, given the correct socioeconomic circumstances, are close to replacement rate (Sleebos, 2003).
3. Methodology
The analysis contains descriptive case studies on the impact of family policy measures on fertility in two EU countries: France and Germany. These two nations are suitable for analysis because they express highly differing views on the role of family policy, and experience contrasting fertility trends. From the insight gained the literature review and case studies, I intend to provide advice for Germany as to how to tackle the problem of low fertility. It is not possible to compare the two cases completely - the literature review has made it clear that there are no universal rules for social policy and that there is no way of predicting exact behavioural responses to any given measure. Another complication is that policy measures are often introduced in packages, making it difficult to differentiate between the effects of different measures. Despite these limitations there are some overriding trends, which will make it possible to provide some tentative policy advice. From the literature review, a number of factors were identified that are crucial for
determining fertility in EU countries. Some of these will not be included in the analysis. The most important factor, as stated by much of the literature, is the overall economic situation in a given country, in particular the unemployment rate. This is not a factor that will be taken into account in the analysis, because governments attempt to reduce unemployment regardless of fertility rates. Employment policy is not a tool aimed at increasing fertility; instead fertility effects are by-products of any such policy. Another factor that will not be discussed in the analysis, but which does have an effect on fertility, is the percentage of population employed in the public sector. The reason this will not be analyzed, is that the size of the public sector in a country cannot be influenced easily, and is therefore not a relevant variable for policymakers. Of the ‘delay factors’ mentioned in 2.1, the increasing emphasis on human capital accumulation is likely to be irrelevant when explaining
differences in TFR. This is a trend that is experienced throughout the industrialized world; as a result it is not likely to be largely responsible for differences in fertility between EU
nations. Also, it is not feasible to believe that policymakers would seek to decrease the level of competition on labour markets to target increased fertility.
The factors chosen for the analysis can be influenced by policy and have a clear effect on 14
fertility rates. Labour participation rates of mothers have a significant positive effect on fertility rates. Increases can be achieved by lowering the gender pay gap, thus making it more attractive for women to work. Another method to increase female participation is a high level of investment in childcare facilities, enabling mothers of young children to continue their careers. Access to part-time employment also enables parents to work while raising children, and provisions to ensure that these jobs are available can help to improve fertility.
The ‘delay factors’ are also important when analyzing fertility rates in EU nations, as they help create disparities between preferred and realized fertility. The extent to which trends towards later marriage affect fertility in countries differs, depending on the social and legal importance of marriage. Policymakers can look to facilitate earlier marriage, or to promote the notion of childbirth outside marriage. The final ‘delay factor’ of rising house prices can be targeted by policymakers with the goal of shortening the transition to family planning behaviour. Policies may include low interest mortgages or housing allowances for young families, to reduce the costs of a family home.
For such an analysis, it is important to consider the history of family policy in the respective countries. The tradition of social policy in a certain country shapes the context in which it should be analyzed. To gather an adequate understanding of the policy measures, one must take into account the various demographic, social and political motives that led to the actions taken. Therefore, both case studies begin with a historical overview of family policy measures. After the overview, current family policy in the two countries will be analyzed on the basis of the factors presented above, which are also provided in a table in the appendix. From this analysis, I hope to present policy advice to Germany aiming at increasing its fertility rate.
4. Case Studies 4.1 France
4.1.1 Historical review
France has one of the healthiest fertility rates in the EU (TFR 2.01 in 2012). It has achieved this state by a long history of concerted policy measures explicitly targeting higher birth rates. Pronatalism has had a high priority status on the French political agenda since the country suffered damaging population aging in the period 1850-1950. This was out of keeping with positive demographic trends in the rest of Europe, with the other European powers of Germany and Britain experiencing high levels of population growth during this era (Kaufmann, 2002). As a result of this worrying development French policymakers decided to intervene by encouraging couples to have more children. Kaufmann (2002) highlights two motives underlying the decision to take action. First, a Familial-Institutional motive, attempting to strengthen the importance of the institution of the family. Secondly, a Population-related motive, which was fuelled by nationalist sentiment that France was losing its influential role in global politics as a result of low fertility rates. In 1896, the National Alliance for the Growth of the French Population (ANAPF) was formed; it was the first organization of its kind. In 1939, the Family Code (Code de la Famille) was passed; it banned contraceptives and abortion, and offered mothers allowances to look after their children. The Code laid the basis for increasingly pronatalist policies following the Second World War.
4.1.2 Current family policy measures
Current policy measures for families in France facilitate family planning behaviour. There is special focus on accommodating a third child, with longer parental leave and higher
allowance transfers than for the first two children. The French tax system also benefits large families, as the unit of taxation is the family instead of the individual. As a result, the more children families have, the less tax they pay per child, the so-called ‘family quotient’. In the 1960s and 1970s, most policy measures were based on direct financially compensation for
costs the costs of childbirth. However, in recent years the emphasis has switched to
encouraging a healthy work-family balance. A 35-hour workweek was introduced in 1999 to promote this idea. A clear difference with other, more conservative European welfare states is that family allowances and paid leave are viewed as a replacement for foregone wages, and not a direct wage for motherhood (Grant et al., 2004). France currently has a well-developed childcare system that encourages mothers to work after childbirth. Nurseries are available for all children after maternity leave, typically from the age of three months. Authorized child minders (who can look after up to 4 children) are also popular, with 18% of all children under the age of three taken care of by a nanny. From the age of two, children can enroll in école maternelle (pre-school), which is fully subsidized by the Family Allowance Fund. Of all children from the age of 3-6, 95 percent are enrolled in pre-school, which is viewed as a crucial stage in a child’s emotional and educational development. There are also subsidized after-school centres, which are open in the school holidays.
4.1.3 Analysis of effectiveness of family policy
The effectiveness of French family policy measures has not been constant since its inception in 1939. Expansive policy in the 1970s achieved a stabilization of fertility rates after a
significant decline in the 1960s and 1970s - a result of the social liberalism movement discussed previously. In the past two decades fertility has increased steadily from a TFR of 1.79 in 1990, to a rate close to replacement level today (Eurostat, 2013). France’s success in stimulating fertility can be attributed to a clear and explicit strategy that has been in place for more than half a century, which was initially driven by an acute fear of depopulation. A number of factors in France point towards an emphasis on facilitating and incentivizing mothers to continue working after childbearing, which seems to be the number one goal in French family policy. Women’s wages are relatively high compared to in other European nations, observed by a low pay gap (Eurostat, 2013). This incentivizes women to stay at work after childbirth due to high opportunity costs. High expenditure on childcare is another example of French family policy focusing on allowing mothers to work. The level of expenditure on childcare is 1.1 percent of GDP; almost double the OECD average (OECD, 2009). France could facilitate working mothers even more by providing more part-time jobs
for women. Female part-time employment rates are below EU average (Eurostat, 2013), although this could be partly explained by the low gender wage gap, which may incentivize French women to instead work full-time. All in all French policy attempts to limit the loss of family permanent income resulting from childbirth, and it is successful in achieving this. The ‘delay factors’ are also important in analyzing family policy in France. First of all, the institution of the family is less socially important than in most other EU states. This is
evident from the high number of births outside marriage (Eurostat, 2013). Theoretically, this should result in a lesser influence of later marriage on TFR. This is because the period of potential childbirth, wherein the two criteria of social acceptance and female fertility are fulfilled, is less strongly affected by delayed marriage trends. Housing benefits for young families target the delay to family formation behaviour caused by rising housing prices (Eurostat, 2013). Although it is not one of the main factors targeted by French policy, it helps families to find houses that are suitable for raising a family. The policies targeting the ‘delay variables’ could be partly responsible for a reasonably low mean age at first childbirth in France, although clearly other social factors play important roles in determining this outcome.
In summary, French governments have continuously sought to move away from the Breadwinner-Housewife model by incentivizing mothers to work. They have learnt from evidence across the EU that promoting that the Dual-Earner model is an effective way of stimulating fertility rates. Expenditure on family benefits is relatively high, in particular spending on childcare services. Free and high quality childcare services are abundant and help mothers to continue their careers. The tax system is another factor that must be taken into account when analyzing family policy in France. The ‘family quotient’ favours large families, and therefore enhances the effects of any family policy measures implemented.
4.2 Germany
4.2.1 Historical review
Germany has suffered ‘very low’ birth rates since TFR first dropped under 1.5 in 1975. Back then the country was split in two: The Federal Republic of Germany (FRG) in the West and The German Democratic Republic (GDR) in the East. It is an interesting exercise to compare the fertility rates of the two countries, as the two countries implemented different
strategies regarding family policy.
Public policy in FRG was heavily influenced by an aversion to all policy that bared resemblance to that of the National Socialist party under Hitler’s regime. Under Hitler’s power Germany aggressively pursued ‘racial cleansing’ or eugenics, by means of
incentivizing Arian couples to produce offspring. When the Nazi reign came to an end, Germans developed the attitude that the state should not meddle in family matters. Leaders were reluctant to be viewed as ‘infringing on civil liberties’ (McIntosh, 1983). This legacy was a determining factor in family policy in FRG, and is arguably still influential in current day Germany. Because of this fear of reverting to old norms, family policy in West Germany was virtually non-existent. It was only in the 1970s, after a great fall in fertility in the 1960s, that the federal government decided that families should be compensated for the costs of raising children. The policy was centred on the belief that economic compensation was the best method of promoting childbirth (Kaufmann, 2001). In 1979, the government introduced the first major family policy package. It involved an extension of the maternity leave, significant increases in family allowances and low interest housing loans for young couples (McIntosh, 1986). Fertility rates stabilized in the 1980s, but were still at levels that would have been deemed unacceptable in other European nations.
Family policy in GDR was not hampered by connotations with Nazism. Policymakers in the East were far clearer with their goals for family policy and as a result achieved positive results. Fertility trends were highly similar to that of West Germany until 1975, with steady rises in the period 1955-1965 giving way to a major decline in the following ten years. Fertility in East and West Germany fell from around 2.5 in 1965 to less than 1.5 in 1975.
After 1975, the policies in GDR and FRG differed strongly. The socialist leaders in East Germany made it clear that their goal was to stimulate the fertility rate in order to
counteract the development towards population aging (Grant et al., 2004). Young families were offered a generous range of social benefits. The first policy package was implemented in 1972; it included extended maternity leave, birth allowances, child allowances and family formation loans (Grant et al., 2004). Abortion was also legalised in the same package, which may have led to a counterproductive effect on fertility. This assertion is backed up by the observation that TFR continued to fall following the introduction of the package. In 1976 new policy was implemented, aiming at replacement level fertility in the long run. This time the policy was not merely based on an assumption of economic compensation, but also included indirect measures such as a thorough programme aimed at supervision of all children under the age of 6. By 1977, 90 percent of children between the ages of 3-6 were enrolled in state run kindergartens (Grant et al., 2004). These expansive family policy measures were extended in a new package in 1984. The East German fertility rate rose sharply around this period: from a minimum TFR reached in 1973 below 1.6, rates bounced back to a maximum of around 1.9 by 1980, approximately 0.4 higher than the level in West Germany. It is not possible to conclude that the policies implemented were solely
responsible for this shift, but it highly probable that they were at least partly accountable, considering the prior trends and the situation in West Germany.
In 1989, the countries were reunified. Immediately, reunification had a disastrous effect on fertility in former East Germany where TFR dropped from 1.5 to 0.8 in the space of a year (Witte & Wagner, 1995). This could be in part due to the scrapping of government funded day-care schemes. Rates in the former FRG remained relatively constant at around 1.5. In the years following the reunification, the federal government continued to show an indifferent attitude towards the issue of ‘very low’ birth rates (Fleckenstein, 2011). 4.2.2 Current family policy measures
Current family policy in Germany is slowly changing from being purely geared towards the Breadwinner-Housewife model to facilitate more working mothers. The governing Christian Democrat party (CDU) has displayed a shift towards a more dual-earner model in the last
decade, borne more out of necessity than conviction. It is a means of attracting the increasingly important female vote, which was a crucial factor in the election defeats of 1998 and 2002 (Fleckenstein, 2011). There has been more investment in childcare services in recent years and legislation in 2013 ensured a legal right for all children from 1-3 to pre-school. However, most families do not send their children to pre-school, there are two main reasons for this. Firstly, childcare provisions in Germany are of poor quality, inflexible, and have limited opening hours (Hoorens et al., 2011). The second reason, which may in part be due to the poor quality of childcare provisions, is that attitudes towards childcare are negative. For example, research in 2006 showed that 7 percent of German mothers would find it appropriate to leave a child under the age of one at a pre-school, compared to 62 percent in France (Köppen, 2006). Because of these attitudes, it is difficult for the German government to encourage mothers to work. It is, however, believed that if major childcare investments are made and policy to incentivize mothers to work is introduced, these attitudes could change.
Policy introduced simultaneously to the childcare legislation in 2013, demanded by the conservative factions of the CDU, offers parents the choice of paid parental leave with payments of €150 per month. It was criticized by many, who argued that it undermined the goal of the state funded child-care by incentivizing mothers to stay at home. Critics also argued that the policy would lead poor parents of children who would most benefit from pre-school to choose the subsidy instead. Progress towards the Dual-Earner is also impeded significantly by the tax system. The joint taxation system results in high marginal tax rates for women, who usually earn less than their husband, thus incentivizing them not to work (Honekamp, 2008).
4.2.3 Analysis of effectiveness of family policy
German family policy is widely considered to be ineffective in stimulating fertility. The country has not laid out explicit goals to increase the birth rate and for a long time seemed largely indifferent towards low fertility. In recent years, the governing CDU party has attempted to implement policies that facilitate families with two earners, however a number of structural issues have meant that the effect on TFR has been limited. Family
policy was, and arguably still is, affected by connotations with fascism, and is therefore difficult to implement. TFR has been steady at levels around 1.4 for the past twenty years (Eurostat, 2013).
Policy measures in Germany are slowly changing to accommodate the Dual Earner model, although the conservative government is not intrinsically motivated to move away from the dominant Breadwinner-Housewife model. This has led to contradictory policy measures concerning incentivizing mothers to work, as clearly shown in the previous section. The gender pay gap in Germany is much larger than the EU average, which encourages women to stay at home after childbearing (Eurostat, 2013). Expenditure on childcare facilities, although rising, was still below the OECD average in 2009 (OECD, 2009). Part-time female employment rates are also low compared to other EU nations, also a sign that policy is not geared towards facilitating working mothers (Eurostat, 2013).
German family policymakers should target all three of these shortcomings. Gender equity legislation could be put in place to ensure the disparity in average salary between men and women is reduced. By doing so, the opportunity costs of a mother becoming a housewife after childbirth would rise, which should stimulate employment under mothers. Childcare services must be improved greatly in order to change public attitudes about them. The process of changing public perception is slow, but if enough time and money is invested in childcare, more families will utilize the services. Better-paid part-time jobs for both men and women could be created to encourage a more equal division of childcare duties.
The ‘delay factors’ are also very influential in explaining German fertility rates, especially the delayed marriage factor. Marriage continues to be a very important institution in German society and childbirth outside marriage is uncommon (Eurostat, 2013). Traditional Christian values are at the centre of many aspects of German society and the tax system assumes families of married couples. As a result, the trend towards later marriage has a significant effect on TFR, as preferred fertility drops below the realized rate. German public policy cannot exert influence on the tax system, making it difficult to stop the trend to later marriage affecting fertility rates. Delays resulting from rising house prices are less likely in Germany as the country has a comprehensive housing benefit scheme. Approximately 12
percent of households in Germany receive direct financial support for housing. The delay to family planning caused by marriage trends may be partly responsible for the relatively high mean age at first birth.
5. Comparison of French and German family policies
Overall it can be concluded that, although certain policy measures would have a positive effect on fertility in Germany, the main obstructions to higher birth rates are structural and political/attitudinal. The policy measure that would have the greatest effect on fertility is an increase in public expenditure on childcare services. Germany should impose policies to improve the public perception of childcare services. The government should also look to reduce the pay gap between men and women, and try to promote a more even distribution of childcare duties; this is something that French governments have been particularly successful in achieving (Hoorens et al., 2011).
As mentioned, structural and political elements are largely responsible for the different results of family policy in the two countries. In France, the ‘family quotient’ is an element of the tax system that promotes large families (Grant et al., 2004). As a result, it helps to enhance the effects of all policies aimed at increasing fertility rates. In Germany the opposite is true; structural issues obstruct the implementation of successful family policy. The tax system is geared towards the Breadwinner-Housewife model, meaning that any policy measures aimed at incentivizing mothers to work are fundamentally compromised. The structure of the German legal system is an extension of the political sentiment of the country. The governing CDU party is not convinced about moving away from its traditional ideal of a single earner family, even though there is pressure to adopt a more modern welfare system (Hoorens et al., 2011). France has a concise and explicit view on fertility rates, aiming at replacement level. Germany has not stated any clear goal for fertility; the hands-off approach perhaps originating from public mistrust of family policy from
connotations with Hitler’s reign. In order to increase fertility significantly, Germany needs to collectively move away from the Breadwinner-Housewife model.
6. Discussion
The conclusions drawn from comparing the family policies in France and Germany provide some advice as to how German policy can improve in incentivizing larger families. The policy measures recommended are capable of achieving slight increases in fertility. However, some important limiting factors to the power of family policy were also noted. The literature showed that one of the main methods of achieving higher fertility is to target higher levels of employment under mothers, a policy that has been extremely successful in France and Scandinavia. However, as stated, the German tax system is not compatible with measures promoting the Dual Earner model, due to high marginal tax rates for the lowest earner in a household; often a woman (Fleckenstein, 2011) . Further research can seek to infer if significant fertility increases are at all possible under the current tax system, or if incentives for mothers to work are simply not great enough in any setting. Research can look to determine if there could come a point at which a long period of low fertility rates could precipitate a change in setup of the tax system to support a Dual Earner model.
7. Conclusion
The literature provided insight into the factors that help to explain predominantly low and varying fertility across the EU. Social movements in the period from 1960 to 1990 caused great decreases in fertility across the EU, which some governments were slow or ineffective in reacting to. These developments led to the current situation in the EU in which two sets of nations experience highly differing fertility rates. Nordic and North-Western European countries had ‘moderately low’ rates, just under replacement rate, whereas German
speaking and Southern European nations experienced ‘very low’ rates (McIntosh, 2006). The analysis of this paper compares fertility rates and policies in two EU nations with highly differing experiences with family policy: France and Germany.
From the literature, a number of factors were found to have significant influence on fertility rates. The most important of these are related to the overall economic situation in a country (unemployment rate), labour participation of mothers and a number of ‘delay factors’, which create a disparity between preferred and realized fertility. The factors chosen for the analysis are the variables that can be influenced by policy: labour participation of mothers and the ‘delay factors’
The analysis provided a number of interesting findings. French policy has been extremely successful in its implementation of family policy. The French government has a clear goal of fertility at replacement rate and concentrates largely on facilitating working mothers (Köppen, 2006). It achieves this by high levels of investment in childcare services and relatively high female salaries. Pronatalist policy in France is also assisted by the ‘family quotient’, which offers a tax advantage to larger families. The family situation in Germany is a stark contrast to that of France. The German government has not presented a clear goal for the policy in terms of an ideal level of TFR. There is a clear lack of spending on childcare facilities and other provisions to allow mothers to continue working after childbearing. Attitudes towards childcare are also negative, potentially partly due to the low quality of the services (Hoorens et al., 2011). The gender pay gap is relatively large, meaning that mothers have less of an incentive to work after giving birth. With regards to the ‘delay factors’, the importance of marriage in German law and society contributes to a delay in family planning
behaviour. However, the main obstruction to implementing successful family policy is the tax system, which is geared towards the Breadwinner-Housewife model. Germany may implement policy to improve childcare services and to try to decrease the gender pay gap, but efforts to incentivize mothers to work are compromised, because of high marginal tax rates for the lower earner of the family.
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II. Appendix
Relevant Statistics France/Germany
Variable France Germany EU average
TFR (Eurostat, 2012) 2.01 1.38 1.58
Mean age of mother at first
birth (Eurostat, 2012) 30.1 30.6 30.1
Public spending on family benefits (% GDP) (OECD, 2009) 4 3 2.6 (OECD average) Expenditure childcare services (% GDP) (OECD, 2009) 1.1 0.5 0.6 (OECD average)
Gender pay gap (Eurostat,
2012) 14.8 22.4 16.4
Live births outside marriage
(% of births) (Eurostat, 2011) 55.8 33.8 39.3
TFR France/Germany since 1960
TFR GDR/FRG with policy measures
