Why not pay Granny to take a hike?

Why not pay Granny to take a hike?

Western European countries and Japan, grappling with low fertility rates and averse to immigration, have in place or are considering various financial schemes to encourage births. But, as the Wall St. Journal reports, Cash Incentives Aren’t Enough to Lift Fertility. The problem these countries have is too low a ratio of young people to old people. The theory is that younger people work, paying for the pensions and health care benefits of the old.

But paying for babies isn’t terribly efficient. After all, it’s costly for parents to raise a kid, so whatever cash is offered won’t make it pay off. Also, even assuming the kid turns out well and doesn’t consume a ton of social services on his way up (brave assumptions), the payoff to the system from the child’s eventual entry into the workforce and the payment of taxes is 20 or more years off.

Maybe more attention should be given to the other end of the age spectrum, where the potential financial benefits are higher and more immediate –although the social costs may be less acceptable. First, in many of these same countries people retire way too soon. Why not provide incentives for people to work until they are 70 instead of retiring in their 50s or early 60s as is so common?

And why not pay older people to leave the country –encouraging them to move to lower-cost countries like Mexico, Costa Rica, and India, where good, cheap medical and nursing care are available? Even if governments continued to pay the full cost of health care, there would be a large, immediate savings.

Looked at another way, maybe the problem is the high ratio of oldsters to youngsters rather than the low ratio of youngsters to oldsters.

August 17, 2006

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