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Falling birth rates have become a major concern for some of Asia’s largest economies, prompting governments in the region to invest billions of dollars in reversing this trend. The question is, will these efforts be effective?

Japan initiated policies in the 1990s to encourage couples to have more children, followed by South Korea in the 2000s and Singapore in 1987. More recently, China, which experienced its first population decline in 60 years, joined the club of countries addressing this issue.

While the exact cost of these policies is difficult to quantify, South Korean President Yoon Suk-yeol recently stated that his country had spent over $200 billion in the past 16 years to boost the population. Despite such efforts, South Korea set a new record last year for the world’s lowest fertility rate, with an average of only 0.78 babies expected per woman.

In neighboring Japan, where births fell below 800,000 last year, Prime Minister Fumio Kishida has pledged to double the budget for child-related policies to over 10 trillion yen ($74.7 billion), representing just over 2% of the country’s GDP.

Globally, while more countries are aiming to lower birth rates, the number of nations seeking to increase fertility has more than tripled since 1976, according to a recent report by the United Nations.

Why do these governments want to grow their populations?

The answer is simple: a larger population means a larger workforce capable of producing more goods and services, leading to higher economic growth. While a bigger population may entail higher costs for governments, it also results in increased tax revenues. Additionally, many Asian countries are facing rapid aging populations. Japan leads the way with nearly 30% of its population over the age of 65, and several other regional nations are not far behind.

In contrast, India, which recently surpassed China as the world’s most populous nation, has more than a quarter of its people aged between 10 and 20, providing significant potential for economic growth.

When the share of the working-age population decreases, the costs and burdens of supporting the non-working population grow. Xiujian Peng of Victoria University explains, “Negative population growth has an impact on the economy, and combined with an aging population, they won’t be able to afford to support the elderly.”

Most of the measures implemented across the region to increase birth rates have been similar: financial support for new parents, subsidized or free education, additional childcare facilities, tax incentives, and extended parental leave.

But do these measures work?

Data from Japan, South Korea, and Singapore over the past few decades show that attempts to boost their populations have had little impact. A study by Japan’s finance ministry even concluded that these policies were a failure. The United Nations echoes this view, stating that incentivizing women to have more babies through demographic engineering policies is ineffective. The underlying reasons behind low birth rates lie in the challenges women face in balancing work and family life.

Scandinavian countries, on the other hand, have seen more success with fertility policies compared to Asia, largely due to their robust welfare systems and lower costs of raising children. Gender equality also plays a significant role, where the gender gap is more balanced compared to Asian countries, as reflected in the World Economic Forum’s global gender gap report.

Major questions arise regarding the funding of these expensive measures, especially for Japan, the world’s most indebted developed economy. Options under consideration include issuing more government bonds, which increases debt, raising the sales tax, or increasing social insurance premiums. Each option poses financial burdens or difficulties for different segments of society.

Antonio Fatás, professor of economics at INSEAD, argues that regardless of the effectiveness of these policies, governments have no choice but to invest in them. He suggests that without such support, fertility rates might have been even lower.

Governments are also investing in other areas to prepare their economies for shrinking populations. China, for instance, is focusing on technology and innovation to compensate for the declining labor force and mitigate the negative impact of a shrinking population. Additionally, although unpopular in countries like Japan and South Korea, discussions are underway to consider changing immigration rules to attract younger workers from overseas.

As the global fertility rate continues to decline, attracting young people to work in a country becomes a race, as noted by Ms. Peng.

Ultimately, whether the money spent on fertility policies is well invested, these governments seem to have no alternative but to take action.

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