How much is a child?

09. janvāris, 2011


Vjačeslavs Dombrovskis

Diena, one of the largest daily newspapers, seems to have embarked on a holy crusade to make the government stop reforming the system of child benefits.

Essentially, the government plans to replace the system where each family receives 8 LVL per child with a more targeted one, where only families with at least two (or even three) children would be eligible.This measure is projected to save 11 million LVL. Through its editorials, Diena has been attacking the plan for quite some time. In what was an obvious attempt to affect the vote in the Parliament, the Friday’s issue featured a front page headline saying “one child becomes worthless” To drive the point home, nearly all of the front page featured an equality sign between a baby, on the left hand side, and zero, on the right hand side. Overall, Diena’s position was neatly summarized by Maris Zanders in his Friday’s co-ed: “in practice, it means that poor families will not plan having children at all…”. I disagree with such an interpretation. I think the government is making steps in the right direction in what regards child benefits. Moreover, I can think of at least two serious reasons why the position taken by Diena is irresponsible. This is a serious allegation, so let me explain.

Will a more targeted child benefit policy discourage people from having children? This is what Diena seems to believe. However, I can easily produce a different narrative.I don’t know about the effect of 8 LVL per child per month (but I’ll get to it later),but there is one thing I am quite sure about. The number of children planned certainly depends on one’s security in the future, i.e. having a stable source of income, and having a job. It’s not a coincidence birth rates usually plummet during the times of severe distress, as they did in Latvia the early 1990s, and as they probably did during this crisis. As long as people are afraid of wage cuts, or losing a job, or, in the case of almost every fifth Latvian, not finding one, my guess is that having children is not among the first things on their mind. Further, I think we have a broad consensus now that balancing the budget will go a long way to restoring economic growth and, thus, reducing unemployment. This means budget consolidation. So when Diena is relentlessly attacking a consolidation measure (like it vehemently opposed a car tax some time ago), without proposing a viable alternative, it makes the whole process longer, the crisis – more protracted, the demographic situation – worse. Moreover, it risks pushing the government into really stupid consolidation measures that are detrimental to growth, like raising the social tax rate and minimum wage. I think such behavior is irresponsible. Diena doesn’t like this particular measure? If it considers itself a serious newspaper, it must propose an alternative.

Next, lets address the question of whether a monthly benefit of 8 LVL per child is effective. That is, how many more children are there in a world of 8 LVLper child, as compared with a world without them? At this point, I should say I am not an expert in demography, and I am not familiar with the relevant literature. So I really don’t know what the anwer to the above question is. But lets suppose the effect is ‘substantial’ and carefully think through the implications. Latvia is not the only country dealing with the problem of ‘too few’ or ‘too many’ (as in say China) children. If a subsidy, or a tax, tied to the number of children is an effective measure of birth control, why so many people are making a fuss of demographic problems? You want more children? Pay 8 LVL (or more) per child. You want less? Tax 8 LVL per child. We seem to have a perpetum mobile for child creation here, in which putting money from one pocket to another (tax and transfer schemes) has large real effects. Why hasn’t anyone come up with this ingenious scheme? Do we have something that qualifies for a Nobel prize? When we start thinking that lots of people have been very dumb for a very long time – it’s a pleasant feeling, I know – but we are most likely in error in our reasoning somewhere. So maybe the idea that paying 8 LVL per child can have substantial effect on the num,ber of children is wrong.

So which measures are effective? I don’t know – but at least I know that I don’t know. Here are some good guesses though. I already mentioned stablity of incomes. How much women can minimize the adverse effects of rearing children on their professional careers is probably another important area. Next, what would happen to a woman that must raise her children alone, after a divorce? Can she count on adequate alimonies from her ex-husband? Not in this country. Further, we don’t just want to maximize the output of children, do we? We also want their parents to take care of them, invest in them, give them education. An unwanted (save for ‘being worth’ monthly revenue of 8 LVL) child runs serious risks of, say, becoming a drug addict and robbing you on the street. Hardly someone you want to pay a subsidy for, do you? So maybe ‘quality’ of children should matter as well, not just their raw numbers. What I am trying to say is that family planning is an extraordinarly compex decision, and I am sure that many clever people, smarter than me or you, have done a lot of serious thinking and research on this subject. Maybe we should try to learn from their efforts. And what does Diena do? It presents the whole issue as being largely about 8 LVL per month. And that is the biggest problem. Instead of fostering a high-quality debate, explaning the complex trade-offs involved, educating and enlightening its readers, it reduced the whole debate into the ridiculous ‘8 LVL per child or people would have no children’. For a paper that considers itself serious, this is irresponsible.

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