Saturday, March 17, 2007

Fresh in from MercatorNet: an excellent, excellent article about the relationship between pension plans and fertility rates.

From the point of view of fertility, a compulsory pension scheme externalises the value of children (or, to be more precise, a portion of their productivity). Children can no longer support their parents in old age, because a chunk of their salary is forcefully taken away from them and distributed to the entire population of retirees. That chunk is growing systematically, because governmental pension schemes are heading towards insolvency due to, among other things, low fertility rates.

Now, such socialised generosity sounds nice. Unfortunately, it wreaks havoc on social structures and private incentives. Individual parents no longer retain the economic benefit of having children, but they must still bear the bulk of the costs in terms of time and money spent. Everyone receives the same pension rights regardless of how many children they had, if any. Many are tempted to take a free-ride on the children of others.

In other words, the welfare state becomes a "forced family" that replaces the traditional family as a provider of social insurance. It is not only an alternative to the traditional family, but an option one is not allowed to refuse. Undoubtedly it provides some benefits, but it lacks the sense of common goals and reciprocity which is essential to real families.

If you skipped the quoted section above, I'm going to slap your hand and send you back to read it. You really should read the whole thing: it's that good.

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