CFIC Introduction
"Encouragement Fund" will help expand domestic demand in the short term and help enhance economic and social vitality in the long term. It is an important tool for supply-side structural reform and high-quality development. The achievements are in the present and the benefits are in the future.
China faces the world's most serious "low fertility trap". There are currently local policies, with too little strength and limited results. The reason is nothing more than the local governments have no money, individuals have no energy and no money, and the cost of education and medical housing is high. Only by vigorously solving the above problems can we break out of the "low fertility trap". Based on the experience of developed countries, most of the funds for encouragement of fertility come from the central government, local governments provide additional subsidies, and establish special institutions to establish a system for encouragement of fertility. Most studies have found that regular cash subsidies have a positive effect on fertility. Therefore, we recommend accelerating the construction of a fertility support system. At present, the most important thing is to establish a "encouragement fund" by the central and local governments. The design can refer to the shantytown renovation project and the central bank's carbon emission reduction support tool to fundamentally solve the problems of local governments having no money and excessive burdens for enterprises and individuals, and support cash subsidies for fertility families, personal income tax deductions, corporate income tax exemptions, housing purchase and rental subsidies, and construction of nurseries. This is effective in OECD countries and can improve the fertility rate. The "Encouraging Fertility Fund" will help expand domestic demand in the short term and help enhance economic and social vitality in the long term. It is an important tool for supply-side structural reform and high-quality development. The achievements are in the present and the benefits are in the future.
1. China faces the world's most serious "low fertility trap". The existing policies are too small and will not help.
In 2020, China's total fertility rate was only 1.3, which is lower than Japan. Only 12 million births were born in the whole year, the lowest birth rate on record. There is evidence that the fertility rate will further drop to around 1.1 in 2021, and the number of births may drop to around 10 million. If policies are not adjusted vigorously, China will undoubtedly become one of the countries with the worst aging and population shrinkage within decades. If the total fertility rate is 1.0, by 2100, the number of newborns will be only 1.79 million, less than half of the newborns in the United States. Population aging and low birth rate will far-reachingly affect China's economic growth potential, innovation vitality, maintenance burden, people's happiness index and even national rejuvenation. (Refer to the "China Population Forecast Report 2021 Edition", Yuwa Population)
Check out the global total fertility data, Europe is 1.6, North America is 1.8, Latin America is 2, Oceania is 2.4, Asia is 2.2, China is 1.3, Japan is 1.34, Africa is 4, and Muslim countries is 3.6. You can think about what will happen to this world in the next 100 years?
China has become one of the countries with the lowest fertility rates in the world for many reasons. There are various reasons. There are international general regular reasons, such as the change in the concept of functional fertility for raising children to prevent old age, the improvement of women's education level, the increase in income level, and the increase in the cost of fertility opportunities, and young people's pursuit of individual independent and free enjoyment, etc.; but it also includes special reasons in China, such as the high cost of fertility education, education, medical and housing, etc., direct cost, , the burden of pension and high opportunity cost, inhibiting fertility behavior, "can afford to give birth, can't afford to raise." House prices have risen rapidly, and from 2004 to 2018, the mortgage income ratio increased from 17% to 48%, and China accounted for half of the world's top ten high-priced cities. The cost of education has increased significantly, especially the supply of nurseries and public kindergartens is seriously insufficient. From 1997 to 2019, the proportion of public kindergartens in China has dropped from 95% to 44%. Medical expenses continue to rise, and residents' health care expenditures rose 27 times from 1995 to 2018. The "421" family structure has a heavy burden on pension to squeeze the willingness to give birth. Women's labor participation rate is high, but their employment rights are not protected enough, resulting in high opportunity cost for childbirth. In recent years, the main women of childbearing age have decreased by more than 3 million per year.
On July 20, 2021, the central government officially issued the " Decision on Optimizing the Population Policies to Promote the Long-term Balanced Development of the Population", proposing "Implement the policy of a couple having three children, and cancel the restrictive measures such as social support fee , clean up and abolish relevant penalties, and implement active childbirth support measures in line with the implementation of active childbirth support measures."In December, the Central Economic Work Conference proposed to "promote the implementation of new birth policies."
Recently, some policies have been introduced in various places, but most of them focus on giving generous incentives to extend parental leave, etc. uses documents to implement documents, the central government arranges tasks for local governments, local governments treat guests and let companies pay for the bill, and vacation incentives actually increase the burden on enterprises, especially in the context of the recurring epidemic and the high pressure to stabilize growth, and it will also lead to enterprises being more cautious in recruiting female employees and increasing employment discrimination for women.
According to the policies to support birth control issued by various places, the efforts are too small and will not help. The reason is nothing more than the local governments have no money, individuals have no energy and no money, and the cost of education and medical housing is high. Only by vigorously solving the above problems fundamentally can we break out of the "low fertility trap".
2. Most of the funds for the encouragement of fertility in developed countries come from the central government, local governments provide additional subsidies, and establish special institutions to establish a system for fertility encouragement
According to international experience research, the fertility subsidy policies of various countries are basically distributed by governments and responsible families, welfare and social security departments. The funds come from the fiscal budget of the central government. Local governments and state governments can provide additional subsidy policies according to regional needs and include them in the local fiscal budget. Since fertility and nurturing education itself will increase the burden on individuals and enterprises, the government will provide funds to encourage fertility, which can increase the fertility rate without increasing the burden on individuals and enterprises, and achieve reasonable sharing of costs among individuals, enterprises and governments.
For example, the parenting allowance in Germany is implemented by the state government or its entrusted agencies, and the federal government bears the allowance costs; the child welfare is implemented by the German Federal Labor Department and the federal government provides funds; the basic maternity allowance in Italy is paid by the National Labor and Social Security Agency; Russia is transferred by the Federal Pension Foundation to mothers with second, third and more children to pay allowances, and many regions supplement according to this policy to provide more childbirth subsidies for families with third and above. In 2017, the proportion of household welfare public expenditure in Germany, France and Italy accounted for 3.17%, 3.6% (the highest OECD), and 2.47%. Overall, in 2017, the proportion of household welfare public expenditure in OECD countries was 2%-3%, of which the proportion of welfare expenditure subsidized in cash was 1.2%.
Most studies have found that regular cash subsidies have a positive effect on the impact of fertility. For example, for every 1% increase in child welfare-related expenditure in Hungary, the total fertility rate increases by 0.2%. According to Luci-Greulich (2013), a study of on OECD countries shows that for every 1 percentage point increase in cash welfare expenditure, the total fertility rate will increase by 0.02 . Quebec, Canada, gave maternity allowance in 1988, which was terminated in 1997, and the fertility rate increased by 12%. The specific policy is to give 500 Canadian dollars to the first two and 375 Canadian dollars to the first two, and to increase the subsidy standards in the following years. In 2004, Australia established a similar fertility subsidy, which was abolished in 2014, and the fertility rate increased by 3.2%. The specific subsidy was a one-time payment of AU$3,000 and AU$5,000 in 2008 (refer to the United Nations Family Policy Document). Overall, cash subsidies can support fertility, but may have a great impact on the fertility rate of people with low education, low income or unemployed people. Cash incentives that distinguish different income families can bring better results .
OECDNational encouragement of fertility systems are often based on the establishment of specialized institutions.
Germany established the German Ministry of Family Affairs, Elderly, Women and Youth in 1995. It is one of the federal ministries and commissions responsible for paying attention to population changes and sustainability issues. The department responsible for child welfare applications is its subordinate German Federal Labor Department. The application process is about 1-1.5 months, and the federal government bears the allowance costs. The specific subsidy standard is: the first two children in are 219 euros per month; the third child is 225 euros per month; the fourth and later children are 250 euros per month until the child turns 18 years old (if you are still in continuing education after the age of 18, you can continue to receive it until the age of 25). In 2017, the proportion of household welfare public expenditure to GDP was 3.17%.A prominent feature of Germany's fiscal system is that the federal, state and region's responsibilities are highly coordinated, among which the financial expenditure responsibilities of social security are in the federal, state and region.
France began to encourage fertility as early as , before in World War II. It is also one of the countries that attaches importance to the earliest, has the greatest strength and the best results among developed countries. Therefore, France's fertility rate exceeds 1.8, and one of the highest among developed countries. Currently, the main subsidies for newborns and their families include: maternity allowance, basic allowance, family allowance, childcare allowance, etc., and the relevant institutions of family welfare and social security are responsible for . According to the official website of the French government, the government provides incremental family allowances for the number of second-child , third-child and above. For example, for low-income families, the subsidies for second-child, third-child and fourth-child are 131 euros/month, 299 euros/month, and 467 euros/month, respectively. According to OECD data, in 2017, the proportion of household welfare public expenditure in France accounted for 3.6% of GDP, the highest among OECD countries.
Italy's basic maternity allowance (community maternity allowance) and maternity leave allowance are paid by the community and paid by the State Labor and Social Security Bureau. There will be distributions on family and maternity allowances in the annual fiscal budget bill. According to OECD data, the proportion of household welfare public expenditure in GDP in 2017 was 2.47%.
Russia passed the "Extra Measures on State Expenditures for Family with Children" in 2006, and issued a clear policy of encouraging birth control since 2007. The Russian Federation Pension Foundation transferred the allowance to mothers with second, third and more children (each mother can only get one sum, regardless of how many children). Since 2015, the subsidy has been 4.53,000 rupees (equivalent to about RMB 13,600), and many regions have supplemented it according to this policy to provide more birth subsidies for families with third and above.
3. It is urgent to establish a "birth encouragement fund" and reverse the "low fertility trap"
According to our research on the OECD national policy system for encouraging births, the more effective policies are mainly four aspects: economic subsidies, childcare services, female employment support, and guaranteed leave.
Accelerate the construction of a fertility support system. The most important thing at present is that the central and local governments have established a "encouraging fertility fund" to fundamentally solve the problems of local governments having no money and excessive burdens for enterprises and individuals, and support cash subsidies for fertility families, personal income tax deductions, corporate income tax exemptions, housing purchase and rental subsidies, and construction of nurseries. This is effective in OECD countries and can improve fertility rates. The design can refer to the shanty town renovation project and the central bank's carbon emission reduction support tool. In the end, the central bank will print money without increasing the local government deficit and burden on enterprises. At present, instead of stimulating real estate infrastructure, it is better to support childbirth. realizes reasonable sharing of the cost of childbirth among individuals, enterprises and governments, so that more young people can afford, support and dare to have children.
"Encouragement Fund" focuses on supporting the direction:
First, implement differentiated personal income tax deduction and economic subsidy policies, covering from pregnancy and health care to 18 years old or the end of academic education. For example, for each minor child in the second child and the already-employed family, a monthly cash subsidy of 1,000 yuan will be given, and the income tax and social security will be reduced by half. Give each child from a family with multiple children a monthly cash subsidy of 2,000 yuan, and exempt income tax and social security (a cap limit can be set).
The second is to increase the supply of childcare services, build nurseries, vigorously increase the rate of childcare aged 0-3 from the current 4% to 50% , and implement economic encouragement for intergenerational care.
The third is to further improve the protection of women's employment rights and interests and implement tax incentives for fertility for enterprises.
Fourth, strengthen the protection of equal rights for illegitimate childbirth.
Fifth, increase investment in education and medical care, connect to people and financial stability to build a long-term mechanism to achieve long-term stability of housing prices and reduce the direct cost of raising children. Implement housing purchase subsidy for children with childbirth and subsidize through mortgage interest refund or housing price discount. For example, if 50% of the mortgage interest for a second-child family is returned, all the mortgage interest for a third-child family can be returned (the cap can be set).
"Encouragement Fund" will help expand domestic demand, stabilize growth and employment in the short term, and help improve human resources, human capital, and economic and social vitality in the long term. It is an important tool for supply-side structural reform and high-quality development. The achievements are in the present and the benefits are in the future.
Author: Yuwa Population Ren Zeping Liang Jianzhang Huang Wenzheng He Yafu Xiong Chai
Special thanks: Bai Xuesong and Chai Keqing have contributed to data organization
Source of this article: Zeping Macro
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