A Plummeting Birth Rate Cannot Guarantee a Replacement Rate

A Plummeting Birth Rate Cannot Guarantee a Replacement Rate

During the last two decades two main developments have taken place in European countries that should attract the attention of policy-makers and the public alike.

On the one hand, the fertility rate has sharply decreased in most developed countries and is now below the replacement rate. As far as Spain is concerned, its fertility rate has fallen to another record low in 2012, with 9.69 births per 1000 women, aged 15 to 44, according to the National Statistics Institute. That is down slightly from the previous low of 10.07 in 2011, and it marked the fourth year in a row that Spanish birth rate has declined, and the lowest rate since 1996.

On the other hand, there are reversing standard trends. These trends are not only fertility rates but also female participation and female employment rates that have changed in the past years. Which means that any exit from the market at childbirth implies a loss of income that varies due to three factors: forgone earnings during the time spent with the child; a lower wage growth due to missed experience and a potential increase in unemployment risk.
It is widely admitted that due to these circumstances a plummeting birth rate cannot guarantee a replacement rate, and politicians advocate that labor laws should be changed as well as our current Pension System.

Politicians always say the same thing: “you can only do what it is said by those in power” and when both (left or right-wing political parties) also insist that the alternative is a catastrophe, ordinary people such you and me end up feeling fear and accepting without questioning that “only” alternative. A unique alternative that always comes down to the same thing: cutting wages (direct, indirect form of social expenditure or as deferred pensions), claiming that when the economy is doing well, it is worth doing it and, when it goes wrong, it is crucial in order to do well.

Reality shows without any doubt that when you have implemented the kind of...

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