Quebec’s Bébé Bonus
The looming depopulation crisis is causing some countries to enact pro-natal policies to encourage people to have children. Critics maintain that these policies are ineffective at raising the birthrate, but a recent study of Quebec’s baby bonus indicates that they warrant a second look.
Kevin Milligan, a doctoral candidate in economics at the University of Toronto, studied the Allowance for Newborn Children (ANC), which was in effect in Quebec from 1988 until 1997. Milligan’s study, Subsidizing the Stork: New Evidence on Tax Incentives and Fertility, shows that the ANC had an effect on the fertility rates of Quebec couples. Milligan’s study shows that while the ANC was in effect, Quebec’s fertility rate grew by 12 percent. The effect of larger payments was even greater. The largest bonus, $8000 for third or higher children, led to a 25 percent increase in fertility. These increases put Quebec’s fertility on par with the rest of Canada, Before the ANC, Quebec’s birthrate was lower than the rest of Canada’s, and since the law was discontinued, it has gone back down.
The ANC worked by paying non-taxable money to families when a child was born into the family, or a child under age five was adopted. The payments started at $500 for the first child, and increased for subsequent children, up to 16 quarterly payments totally $8000 for third or later children.
Milligan explains the effectiveness of baby benefits. “People respond to incentives…If a couple is on the edge, saying ‘Should we have a child or not,’ this kind of thing would push them over the edge.”
Pierre Lefebvre, economics professor at the University of Quebec, Montreal, concurred with Milligan’s conclusions. “We have children because they bring us pleasure. We’re ready to make sacrifices for that .… But having a child also involves major direct costs, and that makes some people hesitate.” Baby bonuses, he believes, have a “positive effect.”
The ANC was highly controversial throughout its existence, The Minister for the Family who canceled the bonus in 1997 called it an “abject failure.” Other opponents of the bonus compared it to the government playing Santa Claus, Certainly, with birthrates throughout Canada at 1.6, something is needed to encourage families to be generous in welcoming children.
(“Paying the stork worked in Quebec,” The Globe and Mail, 31 January 2001, quoted in LifeSite News, 1 February 2001; Subsidizing the Stork: New Evidence on Tax Incentives and Fertility, Kevin Milligan, University of Toronto, 31 December 2000)
Baby Boomer Increase in Canada
The latest population projections for Canada recently released by Statistics Canada reveal a population that is rapidly aging, and will soon be rapidly declining. Currently, one in every eight Canadians is over the age of 65. By the year 2026, one in every five Canadians will be over 65. The actual number of those over 65 will double from approximately 4 million in 2000 to 8 million in 2026. Of that 8 million, 1.9 million will be over the age of 80. By the year 2016, there will be more seniors in Canada than children under the age of 14, This growing disparity between large numbers of elderly and very few young people is caused by both longer life expectancies and falling fertility rates. If fertility rates continue to decline, the population of Canada will likely be declining by .4 percent per year by mid-century. Total population will begin to drop as early as the 2030s. One of the effects of this decline will be the fewer and fewer workers to support the growing number of elderly. The “potential support ratio,” which is the ratio of people of working age to seniors will fall to three workers per senior within the next two decades. These latest statistics paint a grim picture of the future of Canada, And unless birthrates worldwide begin to increase, it’s a picture that will be mirrored by many other nations in the decades to come.
(Statistics Canada, “Population Projections,” The Daily, 13 March 2001, see http://www.statgan.ca.)
