Mind the fertility gap: Why people stopped having babies and how economic freedom can help

Clara E. Piano

No 143, IEA Discussion Papers from Institute of Economic Affairs (IEA)

Abstract: In 2023, the global total fertility rate (TFR) fell to 2.2 children per woman, below the population replacement rate of 2.3. In England and Wales the same year, the TFR was 1.44 children per woman- the lowest value ever recorded in those countries. Fertility intentions remain higher, creating a fertility gap between desired and actual family size. Falling birth rates pose problems for all levels of society. Governments will struggle with increasing dependency ratios and stunted economic growth, civil organisations and businesses will face a shortage of labour and innovation, family members will have fewer children or siblings than they hope for, and individuals will struggle with loneliness. The imminent population bust has generated an appetite across a growing number of countries for ostensibly pro-natal policies, such as baby bonuses or childcare subsidies, even as many governments face severe fiscal problems in meeting their current welfare obligations. While devoting more resources towards the production of children does result in more children (as with any other production process), financial incentives have limited success, do not address the root causes of birth rate declines, and are prohibitively costly for most governments. New research places other options on the table. In the context of the United States, lower regulatory burdens - especially in labour and childcare markets - are robustly associated with smaller fertility gaps, implying that women in these regions are more likely to achieve their fertility goals (Piano and Stone 2024). Other research in Europe and Latin America suggests that religious leaders can play an important role. Giving children their due political representation by letting their parents vote for them is the most promising and sustainable route to closing the fertility gap. Researchers can only learn so much: it is (potential) parents themselves who know which barriers are truly binding as they pursue their family goals.

Date: 2025
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