Are babies bad for the economy?

August 6, 2008

A report from Austrailia's Productivity Commission claims that an increase in the nation's birth rate will hurt the economy.

However, if one looks at the Australian Government's own charts it is clear that Australia is heading into a big demographic problem with way too few children to support an aging population.

The Commission's suggestion is very shortsighted and parochial: loss of taxes for the government.

The reality view: The longer the fertility increase is delayed the greater the crisis eventually faced. Babies that are not born in a particular year cannot be made up in future years. Australia may later decide to import other countries' people (but these people will likely be poorer and less well-educated than the children that could be born in Australia).

Furthermore, while the government may lose some taxes short term the average Australian household will likely not be much affected, except those where the mother brings in a very large salary (say over $110,000 per year). U.S. research shows that for married mothers with children who go out to work the income is virtually a wash when all the extra expenses and taxes are factored in (Aguirre M.S. 2006). And this without adding another loss: the loss of household productivity through which the wife adds value to her husbands income (it really is their income, but you get the point) by her own labor value added.

This is a case of an alliance between socialist and capitalist interests. Feed the market for the time being, bring in the taxes and forget the long term common good and definitely forget what women might want.