Friendly for Which Families?

Since the mid-twentieth century, social and economic developments have disrupted the traditional patterns and weakened the bonds of family life in advanced industrialized countries. Marriage rates have fallen precipitously—so much so that it is not uncommon to find 25 percent of 44-year-old women in European countries having never married. If the current U.S. trend continues, it’s anticipated that by 2030, 25 percent of middle-aged Americans are unlikely to have ever married.

Falling marriage rates have been accompanied by a rising tide of cohabitation. Between 1995 and 2018, the share of U.S. adults in cohabiting relationships more than doubled from 3 percent to 7 percent of households. Among the younger generation of adults ages 25 to 34, the rate swelled to 15 percent. The average rate of cohabitation for the 28 countries in the European Union is also 7 percent, though almost 30 percent among the young adults in France and Sweden.

While cohabitation fills a void in interpersonal relations, it is a weak substitute for marriage when it comes to reinforcing stable attachments of family life. Married couples score higher on subjective measures of trust, commitment, satisfaction and well-being than cohabiting partners.  In almost every country, children born to cohabitating couples are more likely to have their parents split up by age twelve than those born into married families, regardless of the mother’s educational level.

Meanwhile, fertility rates have fallen to a historic low. Since 1960 the average fertility rate in Europe fell from 2.6 to 1.5, a level that is well below the replacement rate of 2.1 births per woman. At 1.3 births per woman, Spain now has among the lowest fertility rates in Europe. In 2019, for the first time in history, the Korean fertility rate dropped below 1.0. Demographers describe fertility rates this low as entering a death spiral, which makes it very difficult for a shrinking population to regain its size.

These demographic trends pose a critical challenge to the health and well-being of the coming generation. Increasing rates of divorce and single parenthood leave family units with fewer adults to care for children and heightened loneliness in old age. As fewer people experience being fathers and mothers, having brothers and sisters, and being grandparents, the web of intergenerational family relationships withers, generating social isolation and loneliness.

In efforts to strengthen the bonds of family life and reverse declining fertility rates, many of the wealthy countries represented in the Organization for Economic Cooperation and Development (OECD) are actively promoting so-called “family-friendly” policies to provide financial supports and services to parents. The overall size of these packages varies as do the eligibility and amounts of specific benefits. Ireland’s children’s allowance, for example, pays $1,848 per child up to the age of 18 for all families, whereas Canada’s benefit is income tested for children under 17 and pays $4,803 per child under age six and $4,053 for those ages 6-to-17.

Compared to most OECD countries, the United States is a laggard in dispensing publicly subsidized benefits to families—spending just .06% of GDP on the conventional package of family-friendly benefits versus the OECD average of 2.1% in 2017.

Do marriage and fertility rates respond to the growth of public spending on family-friendly benefits? The experience to date in many countries raises serious doubts. Korea’s public expenditure on family benefits as a percent of GDP soared ten-fold between 2000 and 2018, during which time the fertility rate plummeted to a historic low. In Spain, between 1990 and 2017, public spending on family policy as a percent of GDP rose four-fold as the fertility rate fell to a record low. The fertility rate in Norway has been on the decline since 2009, falling to 1.6 in 2018, its lowest level in history, despite maintaining the third-highest level of spending as a percent of GDP among OECD countries. Overall, both fertility and marriage rates have declined across the OECD countries, as the average expenditure on family benefits increased by one-third since 1990. In East Asia both the modest tax break for newborns in Hong Kong and the more comprehensive package of family policies in Singapore have been in place for many years. Despite the major differences in the levels of support for marriage and childbearing, these countries have almost equally low fertility rates of below 1.4. Meanwhile, the U.S., despite its much lower public funding of family benefits, maintains one of the OECD’s highest fertility levels.

Such rudimentary comparisons exclude many social, economic, and cultural variables that might influence marriage and birth rates. There is, however, a substantial body of multi-variate empirical research on the issue. Documenting numerous inconclusive and contradictory results, these studies mainly prove that measuring the impact of family-friendly benefits is fraught with methodological issues. The best that can be said is summed in two judicious independent reviews of the evidence:

While a small positive effect of policies on fertility is found in numerous studies, no statistically significant effect is found in others. Moreover, some studies suggest that the effect of policies tends to be on the timing of births rather than on completed fertility.¹A.H. Gauthier, “The impact of family policies on fertility in industrialized countries: a review of the literature,” Population Research and Policy Review (2007).

And:

[G]enerous arrangements for parental leave, child benefits, and childcare may be considered desirable in their own right, but such policies alone are unlikely to succeed in raising the fertility level on a grand scale; they must be embedded in a family-friendly culture deliberately nurtured by the state.²Jan M. Hoem, “Overview Chapter 8: The Impact of Public Policies on European Fertility.” Demographic Research(2008). A similar conclusion is reached in an earlier review of the literature. See Joelle Sleebos, “Low Fertility Rates in OECD Countries: Facts and Policy Responses,” OECD (2003).

Of course, in the absence of compelling empirical evidence that family-friendly policies promote marriage and childbearing, an appeal to the counterfactual prophecy is always at hand to support the case for continued funding. Who knows, if these policies have not fueled the formation of family life, perhaps they served as a brake to slow down its dissolution. It could well be that, absent family-friendly policies, marriage and fertility rates would have fallen more steeply.

American policymakers and analysts advocate for an expansion of family-friendly benefits. Should they? Whether this makes sense depends in large part on the actual objectives advanced, which in turn have major implications for the design of specific policies. It is crucial, therefore, to understand the various rationales and evaluate them on their own terms. The question is not so much how friendly policy should be to families, but rather to which families and for what purposes.

Two-Earner Households

From the perspective of some experts, family policy’s core purpose should be to advance gender equality and harmonize work and family life in two-earner households. With one of the highest female employment rates (71%) and most highly regarded family policy schemes in Europe, Sweden is often held up as an exemplar. In addition to universal daycare, Swedes receive 16 months of paid parental leave, which replaces 77.6% of earnings up to an annual income up to $68,000 for 13 months and a flat rate of $27 per day for the last three months. As in many European countries, the Swedish benefit has a “use it or lose it” clause requiring each parent to take the paid leave for at least 90 days. This “daddy quota” is designed mainly as an egalitarian incentive for fathers to share the childrearing responsibility. Although Sweden’s fertility rate of 1.7 is among the highest in Europe, it has been falling over the last decade and remains well below the 2.1 replacement rate.

This approach has several shortcomings. First, it does not comport with the stated preferences of families. Surveys continually reveal that European and American mothers of children under age 18 would prefer part-time employment or not working at all outside the home to a full-time job. Second, it does not appear to work on its own terms. Although the Nordic countries are well-known for achieving high levels of female labor force participation, most of their women work in the public sector, fewer own business or have attained managerial positions in the private sector compared to other European countries, and fathers still take a relatively small percentage of the parental leave to which they are entitled. The most critical shortcoming, however, is highlighted by those who argue that family policies designed to keep parents of young children in the labor force, whether for purposes of gender equity or economic growth, are not family-friendly at all; “market-friendly” would be the more fitting designation.

The incentive for early attachment to the labor force begins with parental leave, the benefits of which require being employed before having a child, and is reinforced by publicly subsidized child care. The shift of a parent’s unpaid labor to paid employment leaves little time for providing care, domestic production, and household maintenance. Publicly employed daycare staff take charge of the socialization and nurturing of children during their most crucial years of development, work performed for pay rather than the intimate emotional commitments of parenthood. At the same time, domestic production and household maintenance are outsourced to the market. As a result, the state and the market assume responsibility for many core functions of family life, creating greater freedom for parents while inadvertently undermining the interdependence of marital bonds—a process awkwardly labeled “defamilialization.”

From this perspective, even with parental leave and subsidized child care, for many families there is no way to “harmonize” the demands of both parents employed full-time, raising two children, and managing a household. “Harmony” is a euphemism for surviving the pandemonium of the parents’ workday in which kids are washed, fed, dressed, transported to the daycare center and taken home, bathed, and put to bed; then there’s dinner for the adults, shopping for groceries and children’s clothes, house cleaning, laundry, doctor appointments, and haircuts—in addition to coping with illness and infection endemic to the preschool years. There is little left for playful “quality time” with the children.

Caring for young children is a relentless 24/7 labor-intensive job, which few two-earner households are able to balance comfortably with full-time employment. Those that can are often found among the experts who publicize the idea that family policies advance gender equality and harmonize work and family life. The kind of work they perform allows a degree of autonomy to manage the when, where, and what of their labor, which is unknown in the typical middle-class workweek of nine-to-five employment. Although this occupational elite continually testifies to the value of family policies in promoting full-time careers for working parents, they seem to be the only ones who believe it.

Family Choice

A competing strain of thought holds that public policy should seek to insulate families, particularly those with young children, from the market rather than amplify its pull. Thus, public support should offer the same benefits to families with stay-at-home parents as to those in which the parents are all working.

In Europe, several countries including Norway, Finland, and Germany offer both state-subsidized daycare services and cash-for-care benefits that allow parents to choose between labor-force participation and in-home childcare during the preschool years. However, the cash-for-care alternative has sparked heated public debate. Those supporting the policy maintain it fosters freedom of choice around child-care arrangements and introduces greater equality in the cash transfers that parents receive from the state—regardless of child-care arrangements. Those opposed argue that it retards gender equality in parenthood, impedes women’s career prospects, and hinders the integration of migrants, who are more likely to care for their children at home. In Finland home-care allowances were substantially cutback in 1995, and Germany’s national cash-for-care policy established in 2013 was overturned two years later, leaving the implementation of benefits to the political dispositions of regional bodies.

The idea that family policies should compensate parents for in-home child care has been debated in the United States since the 1920s, when feminists in the Mother’s Pensions movement sought financial aid for a childrearing salary. In 1980 the White House Conference on Families recommended that homemaking be classified as a career with tax credits established to pay full-time homemakers. And in the 1990s various groups again proposed policy reforms to compensate stay-at-home parents for child-care. This approach has not gained purchase in the U.S., where family policy advocates have typically pushed for universal daycare and parental leave. Recently, however, several proposals for substantial cash benefits to reduce market pressures on families with children have stirred public interest. These benefits are framed as supports for family life rather than a parental wage. While promoting family choice, a central issue in the design of alternative proposals concerns the extent to which benefits are dependent on the employment of at least one parent.

Fertility

From another perspective, if the goal is not only to support families but actively encourage their formation and growth, then even a generous package of conventional family benefits may be inadequate. The concern here is less about promoting gender equality and labor-force participation than about whether a benefit such as the Finnish children’s allowance of $1,900 a year creates a sufficient incentive to have a third child or even a second child. In the cost-benefit accounting of family life, the deep-seated emotional pleasures and transcendental awe of childrearing are more difficult to envisage than the material gratifications and freedom of a childfree postmodern lifestyle. Decisions about marriage and family size do not yield readily to moderate economic incentives. Incentives of family-friendly benefits are not strong enough – more needs to be given.

Following this line of thought, in 2019 Hungary’s Prime Minister Viktor Orban introduced a sweeping array of family benefits designed to increase the country’s fertility rate, which had dropped from 2.0 in 1990 to 1.5 in 2018. To appreciate the magnitude of these benefits, it is important to keep in mind that the average annual gross earnings of Hungarian workers in 2019 was $14,900 (4,413,996 forints), roughly one-third of the American level. The benefits included:

• An all-purpose interest-free loan of $34,500 (10 Million forints) to women under 40 who were in their first marriage and had been employed for at least three years, 30% of which would be forgiven on the birth of a second child and the whole debt canceled on the birth of a third child.
• Home-ownership subsidies of $34,500 (10 million forints) and $51,750 (15 million forints) to families with two and three children, respectively.
• The deduction of $3,450 (1 million forints) from the mortgages of married couples after the birth of a second child, $13,800 (4 million forints) after the third child, plus $3,450 (1 million forints) for each additional child thereafter.
• A lifetime waiver of personal income tax for women who have had at least four children.
• A grant of $8,625 to families with three children or more for the purchase of a new 7-seater car.

In addition to these payments, Hungary’s standard package of family policies contains subsidized child care services and universal allowances that provide $2,230 (661,200 Forints) and $4,250 (1,260,000 forints) to families with two and three children, respectively. While it is too soon to gauge the impact of these measures, initial indications reveal a significant increase in the number of marriages between 2019 and 2020. However, at the cost of 4.8% of the GDP, Hungary’s family policy expenditures are more than twice the OECD average.

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The conventional package of benefits speaks to the interests of two-earner couples who prefer equal participation in the home and labor market. The “cash or care” reform advances the opportunity for parents to choose how to divide their labor between the home and the market and share the responsibilities of family life. Hungary’s extravagant package of benefits lends impetus to the intentions of those inclined to marry and have children. Policymakers can learn much from their counterparts abroad, and one unavoidable lesson is that no one has yet figured it out. Based on the experience to date, it’s not clear whether any of these approaches will reinforce the crumbling foundations of marriage and parenthood that narrow the coming generation’s chances to partake in the humanistic journey of family life. Time is running short to find one that will.