Hungary For More

10 May 2024
Hungary For More - Featured image

Demographic lessons from Hungary and Japan suggest Australia’s way forward must value family and productivity alike, write IPA Research Fellows Brianna McKee and Lana Starkey.

Japan’s economy is no longer the world’s third largest, after the country slipped into a recession late last year and fell to fourth spot behind Germany. In what could now be considered an ominous parliamentary speech, in early 2023 Japan’s Prime Minister Fumio Kishida warned that the country was “on the brink” of social dysfunction. “The need to address the issue of children and child-rearing policies is a challenge that cannot be postponed”, Kishida stressed, with Japan’s steeply declining fertility rate (the average number of children per woman) almost certain to have serious consequences for the economy, aged care, and national security.

Businesses in Japan face shrinking sales and hiring opportunities, some rural towns are already struggling to find candidates for local elections, and almost 9,000 schools closed permanently between 2002 and 2020. Japan has long put economic prosperity first. It is a bitter irony that the country’s productivity-over-progeny approach has ultimately sabotaged national productivity. However, it seems a strong work ethic is no match for the cost of a family. In a 2021 survey in Japan, more than 50 per cent of respondents said the cost of raising children was a reason for having fewer. Meanwhile, the number of potential parents is dropping as the population ages, and the burden of supporting pensions and healthcare falls on the shoulders of an ever-shrinking workforce. Japan’s proportion of elderly people is the highest in the world, with more than 10 per cent of the population 80 or older.

With its childbearing population rapidly shrinking, little immigration, and the current fertility rate at 1.37 births per woman, Japan confronts the pivotal question of whether it is too late to reverse the decline. Once the fertility rate drops below the replacement rate of 2.1 births per woman, the situation can quickly deteriorate. An average of 1.6 births per woman will result in cohorts halving every three generations, 1.4 births per woman will result in cohorts halving every two generations, and just one birth per woman will result in cohorts halving in a generation. The population spiral is a slippery slope, and many countries are in the danger zone.

We live in a society that devalues family.

The key to reversing a falling fertility rate is being sought by a growing number of Asian and Western countries. Among them is South Korea, with the world’s lowest fertility rate at 0.78 births per woman. France’s fertility rate of 1.8 births per woman is the highest in Europe, but is still significantly lower than the replacement fertility rate. Across the East and West, a demographic doomsday looms. Lessons learned from Japan and Hungary can be applied when addressing Australia’s demographic decline.

OUR DEMOGRAPHIC DECLINE

Australia’s fertility rate was 1.58 births per woman in 2020 and has been below replacement level for decades. Since 2021 the average age of a woman at the time of her first birth has risen, and the childlessness rate hovers around 16 per cent. The driving factors behind these trends are financial, socio-political, and structural. They suggest we live in a society that increasingly devalues family, motherhood, and children. On the financial front the economic landscape in Australia is not family friendly. The cost of living is a significant challenge, with household expenditures rising much faster than the median family income. Australian Bureau of Statistics data for September 2023 show the average annual wage paid by employers in Australia was $99,570. However, with inflation only recently dropping below 5 per cent, and interest rates rising to 4.35 per cent in November 2023, a salary does not stretch as far as it once did.

Faced with rapidly rising housing and rental prices, many women are forced to return to work to help pay the bills. At least in part, the cost-of-living crisis is killing the stay-at-home mum and for many women the choice between returning to work or devoting more time to caring responsibilities has been made for them. Pair this with socio-political messaging that is increasingly hostile to motherhood and children. Anti-family rhetoric from famous political and cultural figures compounds the problem, favouring the career woman over the stay-at-home mum. Increasingly, the political class measures a woman’s success by her contribution to the economy. This feeds into the narrative that success should be viewed through a commercial lens and that employment is empowerment. Prime Minister Anthony Albanese made this clear in his address to The Australian’s Economic and Social Outlook conference last November:

We’ve narrowed the gender pay gap to its lowest point on record—and we’re not done yet. That’s why we have made equality for women a central economic priority—because it is central to our future economic success.

Albanese’s emphasis on the gender pay gap frames the argument about women’s empowerment in financial terms. It suits the budgetary interests of the political class to promote the perception that wealth, career, and lifestyle are the key markers of success. The Prime Minister acknowledged this when he said that women’s productivity is “essential to boosting productivity”. He said “making childcare more accessible and affordable is an economic reform that boosts productivity and participation for working women” which has also “delivered real and immediate help for around 1.2 million family budgets”.

What the Prime Minister pointedly failed to admit is this policy only helps mothers who want to return to the workforce, not the stay-at-home mum. When politicians describe motherhood as ‘unpaid caring’ and a ‘penalty’, what they are really concerned about are ‘unpaid taxes’ and a ‘penalty on the national GDP’. These politically opportunistic catchphrases are all about encouraging women to make a rapid return to work. Today’s policies around childcare have everything to do with economic interests and very little to do with giving women a choice.

The zeitgeist is anti-family.

The modern life cycle is also anti-family. This is a structural issue which leaves many women putting their career first and having children much later in life. Montreal-based demographer Lyman Stone says low fertility rates in Canada are not the product of wanting few children but of a structural problem in advanced economies: the timeline that most women follow for school, work, self-development, and marriage simply leaves too few economically stable years left to achieve the families they want. Stone says this dynamic leaves Canadian women with fewer children than they would like, alongside reduced life satisfaction.

This same phenomenon is playing out in Australia. As noted in a 2022 ANU report, Impacts of Policies on Fertility Rates, Australia has experienced a long-running trend of women having fewer children, later in life. The average age of women giving birth in 2020 was 31.6, up from 25.8 in 1975. Later entry into parenthood is often associated with lower fertility, and assisted reproductive technology can only do so much. Higher education attainment is also associated with a later start to childbearing. Significantly, major cities in Australia tend to have lower fertility rates than regional areas, and ours is a famously urbanised population. Taken together, the outcome of these trends is women having children later in life, which inevitably reduces their chance of having a larger family. The broader cultural zeitgeist is increasingly anti-family. A decline in ‘traditional values’ and an increase in more ‘individualistic’ values also play into this, along with falling marriage rates and increased incidence of divorce. The provision of pensions has also reduced the economic imperative to have children, while the cost of living and increasing housing costs have given rise to the two-income family. So, macro-level structural, economic, and cultural factors (such as social norms around parenthood and lifestyle) interact with micro-level factors (such as age, relationship status, and education choices). Both inform Australia’s overall fertility rate.

IS IMMIGRATION A SOLUTION?

For Australia, the answer to the falling birth rate has been increased immigration. This contrasts with Japan, where immigration has historically been tightly limited in order to preserve Japanese culture and customs. Just as a low birth rate leads to social disfunction, so too a high immigration rate leads to a host of issues relating to assimilation. We only need to look to the European migrant crisis following the eruption of civil war in Syria in 2011. More than one million Syrian asylum-seekers and refugees moved into Europe during this time. Germany and Sweden now host 70 per cent of that total. In Sweden an open-door immigration policy paired with a lack of measures to help newcomers integrate has led to the emergence of districts where almost all residents are immigrants and unemployment rates are high. This has served as an incubator of serious crime, now the country’s number one issue. A government-sponsored study in Germany found violent crime rose by about 10 per cent in 2015 and 2016, and more than 90 per cent of this was ascribed to young male refugees.

Australia has always been a tolerant and welcoming country, and immigration has long been a key part of our way of life. However, large-scale immigration is at best a band-aid solution to counteracting a low birth rate. It does not address the underlying problems, which includes a culture that does not value motherhood and children, and an economic environment which requires two incomes in order for a family to survive.

If we cannot replace ourselves, the Australian way of life as we know it will be replaced by something else.

WHAT DO WOMEN WANT?

It is significant that despite a range of societal and individual factors working against them, many Australian women say they would prefer the homemaker role. On top of this, many Australian women also want more children than they are having. Today, women’s workforce participation in Australia is at 62.8 per cent. However, according to the latest Gallup poll, 50 per cent of women with children under 18 would prefer to stay at home.

Significantly, one in four Australian women aged 35, and one in three men, were hoping to have a child or more children in the future according to the Household, Income and Labour Dynamics in Australia (HILDA) survey. But by age 49, about half report they have not yet had the number of children for which they hoped. This is backed by recent research out of the United States which shows many people want more children than they are having. A study published by Ohio State University’s Institute for Population Research suggests demographic decline could be reversed if people simply had the children they claim to want. If that is the case, then the role of government in the family policy space would be to eliminate the economic, socio-political, and structural barriers to women having children.

A range of parental leave and childcare options are now offered. Australia introduced government-funded paid parental leave for mothers in 2011, and Dad and Partner Pay in 2013. More recently, childcare has been central to the policy platforms of many state and federal governments. The Child Care Subsidy has expanded exponentially since it was introduced in 2018. These, however, have not proven sufficient to enable and incentivise families to have more children.

Family policy has worked for Australia in the past. When in 2001 Australia’s population hit its lowest birth rate ever recorded (1.7) the government introduced the ‘baby bonus’ policy aimed at lightening the financial load for new parents. The policy initially granted $2,500 in tax cuts per year for parents of newborns (2002) then was amended to lump-sum payments of $3,000 from 1 July 2004, with this amount subsequently increased in July 2006 to $4,000 and in July 2008 to $5,000. The birth rate rose from 1.7 in 2001 to 2.02 in 2008. The baby bonus was a tremendous success. The policy was abolished in 2014, and Australia’s fertility rate has since declined to below 1.6.

HUNGARY’S SOLUTION

In the year that Australia introduced its ‘baby bonus’ policy, Hungary faced an even more dire situation with its fertility rate below 1.3. Only with the election of the Fidesz government in 2010—which considered demography the national strategic problem and emphasised that Hungary needed to become a society based on work and a society based on families—did things begin to look like they might turn around. In 2010 the government introduced a policy framework that included incentives for families, support for early childhood care, work-family balance measures, and a defence of traditional family values. The catch is that it does not come cheap. Hungary invests five per cent of GDP on family policy. To put that in perspective, the defence budget of most countries is less than two per cent of GDP.

Despite steep demographic decline since 1981, the country’s fertility rate has now increased from 1.21 in 2010 to 1.56 in 2022. After hitting its lowest point in 2011, the rate has been increasing year on year. The marriage rate is up while the abortion rate and average childbearing age are both down. The government started by supporting marriage on the basis that marriage is the most secure place to raise a child, and that the family is the basic unit of society. Basic pro-family and pro-life principles were added to the constitution. The experiment worked. Marriages had dropped 23 per cent between 2002 and 2010, but since 2012 the number of marriages in Hungary has doubled.

The baby bonus was a success.

Measures to assist with financial stability from the start of the marriage to help prepare couples for child rearing include modest monthly payments for a period of 24 months for newlyweds. When the baby arrives so do the benefits, and couples can access a loan of up to 10 million forint (about AU$42,100), with interest-free repayments if a child is born within five years of the application. If the couple has three or more children, the government pays the entirety of the loan. Mortgage assistance also allows young couples to get ahead without needing a large amount of savings.

Hungary’s tax system is also very family friendly. Motherhood becomes a lucrative value proposition even for the committed career woman. Women who have four or more children never pay income tax again and the flat tax of 15 per cent is reduced based on the number of children in a family. Other financial incentives in Hungary include reducing student loan repayments for mothers based on the number of children they have. For the first child, the loan is pushed back for three years. This is coupled with an interest subsidy, so the total loan does not increase. For the second child, the loan is reduced by 50 per cent. For the third child, the loan is written off in full. For paid parental leave, an annual allowance for the first three years of a child’s life can be taken by either the mother or father. Grandparents can use this leave from the child’s first to third birthday if the child is looked after at home. There is also a home-building subsidy, expanded childcare, and free or discounted summer camps for kids. It is important to note that Hungary’s pro-children and pro-motherhood benefits do not consider family structure. Once a child is born, no distinction is made between married and unmarried couples or single parents.

While some have accused Hungary’s Prime Minister Viktor Orbán of creating a welfare state, he argues that his policies are about promoting a government-wide orientation towards the family. Instead of replacing the role of parents with government institutions, he is seeking to eliminate or reduce the systemic disadvantages faced by those having children.

In contrast, Australia’s measures target subsidised childcare, which encourages parents to re-enter the workforce and allow others to raise their children. In short, Australia offers mothers two jobs for the price of one. The incentive to have children is merely that you do not have to stop working while raising them. After a period of paid parental leave, women are pushed back into the workforce and their children consigned to subsidised childcare.

WHERE TO FROM HERE?

Children are unquestionably a public good. They are the next generation and will, in a multitude of ways, enrich our lives. At the purely economic level, however, they will support us. They will be the taxpayers responsible for funding healthcare and pensions for the generation which went before them. If there are more people entering retirement than the workforce, the financial burden on younger people increases and the quality of life falls for everyone. Japan has already entered that zone and has struggled, so far unsuccessfully, to climb out of it. In contrast, Hungary’s family policies are geared towards large, married, home-owning families, and as a result the country appears to have reversed a decline towards demographic crisis. Both countries have lessons from which Australia can learn.

Australia’s system is currently biased towards two-income families with fewer children due to the cost of child-care. There is no incentive for family formation built into the design of our social system and in that sense we resemble Japan, which has historically prioritised productivity over family. Hungary, by contrast, explicitly prioritises family.

In an age of demographic decline, Australians must address the elephant in the room and ask themselves what they value as a society. Japan and Hungary represent two possible ways forward. Looking ahead, we must aim to be a society that values both family and productivity. While the political elites often frame these ideas as mutually exclusive, that is not the case. Australia can and should pursue both.

This article from the Autumn 2024 edition of the IPA Review is written by IPA Research Fellows
Brianna McKee and Lana Starkey.

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