Belgium needs more children for a healthy economy

Economic opinion

Over the past decade, the number of children per woman in Belgium has decreased substantially. The question is whether the continuing fall in the fertility rate is still a consequence of the past financial crisis, or whether there are other, more structural factors at play. If, contrary to what the Belgian Federal Planning Bureau expects, the figure does not rise again, this will have negative consequences for the future labour force, and therefore for the growth potential of the Belgian economy. In addition to (justified) public measures that focus on working longer at older ages, the government should pay more attention to measures that support childbirth.

The demographic evolution is generally seen as an important determinant of the structural growth path of an economy in the future. This so-called potential growth reflects how fast an economy can grow in a balanced way with a normal use of the available production factors. With regard to the production factor labour, we are talking about the working age population, i.e. the 20-64 year olds. Like most other advanced economies, Belgium is faced with an ageing population. This has a negative impact on the labour force, which will reduce the contribution of the labour component to potential growth. According to the latest demographic projections by the Federal Planning Bureau, the Belgian working age population will effectively start to decline from 2022 onwards.


In addition to longer life expectancy, a major cause of the ageing population is the low birth rate. The fertility rate (i.e. the average number of children per woman) fell in Belgium from a peak of 2.71 in the mid-1960s to a low of 1.51 in the mid-1980s. There are various explanations for the sharp decline in that period, including the increased participation of women in the labour market and access to contraception. In recent decades, the fertility rate has remained more stable, although there have still been fluctuations in the shorter term. In particular, the figure recovered to a new peak of 1.86 in 2008, but since then it has fallen back to 1.63 today. The recovery after 1985 concerned, among other things, a catch-up effect characterised by an increase in fertility among women at a more advanced age, which followed a previous postponement of motherhood.

Fertility and the economy

Short-term movements in fertility rates are also linked to the general economic situation. In unfavourable economic circumstances, couples often postpone their intention to have a child. In practice, we see a reasonably good correlation between the development of consumer confidence and that of the fertility rate, the latter with a delay of two years (Figure 1). Young couples in particular postpone their desire to have children in the face of economic hardship, because the biological limit for having a child is not yet close. Later, when the economic situation improves, there will be a catch-up effect and the fertility rate will increase.

Figure 1 - Relationship between the fertility rate and consumer confidence in Belgium

Source: KBC Economics based on Federal Planning Bureau and NBB.Stat

After the outbreak of the financial and economic crisis in 2008, the fertility rate fell considerably. It is striking that although confidence, and the economy in general, has recovered since 2013, the fertility rate has not yet risen again. This contrasts with previous economic crises, which saw a faster recovery of the rate (Figure 2). The oil crisis at the end of the 1970s, for instance, was also very serious, and at that time the fertility rate was already recovering after only seven years. We are now ten years after the start of the financial and economic crisis, with GDP growth that has been very labour-intensive in recent years, and still see no increase in fertility.

Figure 2 - Development of the fertility rate since start crisis (start = year between brackets)

Source: KBC Economics based on Federal Planning Bureau and NBB.Stat

In its latest demographic projections, the Federal Planning Bureau assumes that the fertility rate will indeed recover, even from 2019 onwards. The rate is forecast to gradually return to pre-crisis levels by 2030. The Planning Bureau has become somewhat more cautious in its recent demographic projection, as in previous editions the recovery of the fertility rate was still expected by 2020. According to the Planning Bureau, the (long) delay in restoring the fertility rate is due to the fact that finding a stable job and access to housing have become more difficult.


It follows from the literature that structural changes in the labour market and decreasing affordability of housing can indeed be detrimental to birth rates. An important question, therefore, is whether the fertility rate will recover at all. A number of social trends suggest that there is a great risk that this will not be the case. Data (from Eurostat, among others) show that the number of singles among young people is increasing, and in Belgium the rise is particularly strong. Furthermore, an increasing number of young people aged 25-30 live with their parents. Fertility could also decrease as the recently-enlarged group of citizens of foreign origin, who traditionally have more children, becomes integrated. Finally, the more difficult reconciliation of family and professional life, and a stronger career drive of young women can also continue to structurally hamper fertility.
 

Family-friendly policies

If the fertility rate does not rise again, this will have a negative impact on the future growth potential of the Belgian economy. Contrary to what the Planning Bureau now expects, the working-age population would then continue to decline in the long term (past 2040), which would reduce the labour potential. It takes about 20 years for newborn children to enter the labour market. The old-age dependency ratio (the ratio of people over 67 to the working-age population) would not stabilise after 2040, as currently expected, but would increase further. This would increase the budgetary costs of ageing for a longer period of time.


Obviously, it remains difficult to predict behavioural variables such as fertility. Projections, certainly in the longer term, are always based on assumptions which, by definition, imply a high degree of uncertainty. Nevertheless, it would be good if the government would pay more attention to helping couples achieve their desire for children. Surveys show that this wish is usually greater than the effective number of children. In addition to (justified) public measures that focus on working longer at older ages, there is need for a good family policy that supports couples having children. This includes, for example, measures to improve work-life balance, reduce child poverty and make housing affordable for families.
 

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