Would The New Child Benefit Proposal Remedy Our Falling Birth Rate?

How does income affect fertility rates or, more generally, family size? Or, put more bluntly, do the poor have more kids than the middle class? Do they, are they’ve long been accused of, have “too many” kids?

Turns out, it’s hard to find data to answer that question. We know that fertility rates vary by race. We know that number of children in poverty is disproportionately high — 16% vs. 11% for working-age adults, as of 2018 — but, given that the poverty cutoffs rise with each additional child in the family, that doesn’t necessarily mean that households with children have less income than those with no, or fewer children.

Here’s my own calculation, based on data from the National Survey of Family Growth, which asks over 6,000 American women of childbearing age a multitude of questions related to childbearing. The survey asks each woman how many children they now have and how many more children they intend to have, and also collects their household income. Here’s the data on number of children, sorted by age and income group:

What’s to be made of the fact that there are some under-20-year-old women with income above $100,000? This is household income, and a woman need not be living in her own household to be a part of this survey.

At any rate, yes, women whose income is lower, have fewer children, across all ages. But, on average, even the poorest women don’t have outlandishly large families, despite the occasional stories in the paper otherwise. Note, however, that these statistics are not “completed” fertility rates, women in their 40s do still have children as well. And the seeming contradiction of 40 – 49-year-old $20 – $30,000-earning women having fewer children than the 30 – 39-year-old group is no such contradiction; these are different cohorts of women, not the same group of women over time.

And let’s look at another set of averages, those of intended family size — this comes from adding up questions about current family size as well as the number of children survey respondents say they still want to have in the future.

This gets more interesting. Although these numbers are all larger than the “actuals” from the prior chart, under-20 women, or more precisely, teen girls, of all income levels, have pretty much the same family size intentions, on average. Again, these are household incomes, so there may be some mixing of “teens of middle-class upbringing who have low incomes at the start of their adult lives” and “teens from poor families”; is this muddying the picture? But these family size expectations again remain relatively similar even for women in their 20s, when this wouldn’t be an issue.

For older women: across all income levels, 30 – 39-year-old women want to have families of, on average, 2 – 2.5 children. Their decade-older counterparts have considerably lower expectations. Again, the survey doesn’t trace specific women over time so it isn’t possible to see if this is a generational/cohort change or whether this simply means that, despite worries about preventing unplanned pregnancies, the reality of most women’s experience is that, in their lifetime, they have fewer children, on average, than they had hoped to have.

So why am I looking at this?

It seems that, over the past week, everyone is talking about child benefits. Biden’s covid spending plan includes a temporary child benefit proposal. Sen. Mitt Romney introduced a permanent proposal for $350 per child per month for children up to age 5, and $250 per month for 6 to 17-year-olds, which would shift money around as a “pay-for,” including the elimination of traditional “welfare” (TANF). The proposal would max out at $1,250 per month, a cap of 5 older kids or 3 1/2 younger ones. Subsequently, Sens. Marco Rubio and Mike Lee voiced their opposition by claiming that the plan would sap motivation to work.

What is striking to me is, first, that the last time there was a debate about babies and benefits was during the mid-1990s when, paired with welfare reform and the implementation of TANF (with its emphasis on temporary-ness) in 1996, various states instituted family caps, capping welfare benefits for families so that any children born after a family begins to receive TANF do not trigger increases in benefits. Proponents of caps believed that they would be an incentive to women to make more diligent efforts to avoid pregnancy; some even claimed that women intentionally had more children to gain increased benefits (or were perhaps falsely accused of making this claim). Subsequent studies on the impact of those caps on birthrates have been inconclusive.

The absence, then, of these concerns now is noteworthy — but, at the same time, there has been a considerable shift in awareness to the importance of children having stable family relationships, that is, that the life chances of children born with married parents are much greater than without, even for low-income children. And researchers have raised alarms about the degree to which benefits provide disincentives for couples to marry, and have lent support to Romney’s proposal because it fixes this “marriage penalty.”

But, to return again to fertility rates, which are cratering in the United States, even prior to the pandemic, with statistics last year that we had now dropped as low as 1.705 children per woman, would a child benefit boost fertility rate? New York Times columnist Ross Douthat thinks so, writing in his Sunday column that:

“To a much greater extent than 25 years ago, America simply needs more babies — from the rich and poor and middle-class alike. Public policy alone cannot deliver them, even something as ambitious as the Romney plan. But its reasonable goal isn’t an immediate baby boom, desirable though that might be. It’s to lay the firmest possible policy foundation on which a more fertile, youthful and hopeful society might eventually be built.”

Yet the United States would not be the first country to institute cash payments for families with children, so there exists data to answer this question. Here’s the conclusion of a working paper by three Viennese economists/demographers published by the United Nations Population Fund:

“Most empirical research finds that regular cash transfers have small but positive effects on period [short-term] fertility. . . .

Few studies verified, however, whether cash transfers had a long-term influence on fertility, encouraging women and men to have children they would not have otherwise. Research which addressed this issue shows that the long-term effects are typically small (if any). This suggests that cash transfers usually encourage people to have children earlier, but rarely to have larger families.”

What’s the bottom line? It seems intuitive that such a credit would increase poor children’s well-being, so long as there aren’t unanticipated consequences. But for good or for ill, it would appear not to be the path to boosting birth rates.

As always, you’re invited to comment at JaneTheActuary.com!