Commentary: Parenthood incentives – Singapore cannot keep doing more of the same without knowing whether these really work

SINGAPORE: Singapore’s Budget 2023 unveiled several goodies for parents and parents-to-be, among them, an additional S$3,000 in the Baby Bonus Cash Gift, double the paid paternity leave, more unpaid infant care leave and increased contributions to the Child Development Account. Changes in the tax relief for working mothers would also better support lower- to middle-income working mothers.

Deputy Prime Minister and Finance Minister Lawrence Wong said this was to support parents and help defray the cost of raising children.

As a parent of a four-year-old, I welcomed these announcements even though they will not affect me. Because they signal the Government’s commitment to supporting Singaporeans in their parenthood journey, even as attitudes and financial costs change.

The Baby Bonus was first introduced in 2001, with a wider suite of measures and incentives periodically enhanced thereafter, to tackle declining fertility trends. But these appear to have done little over the past two decades to boost birth rates. Singapore’s resident total fertility rate has continued falling, to a historic low of 1.10 in 2020.

Online cynics have called these pronatalist initiatives useless and too short-term in nature to be effective in tackling Singapore’s falling fertility rate.

Would the enhanced measures encourage my wife and I to have a second child? Honestly, I do not think so.

I’m not alone. Parents interviewed by CNA said the enhanced measures would not convince them to have more children, with one mother calling the financial support useful but “a small dent” in the cost of raising children.

WHETHER A POLICY IS EFFECTIVE DEPENDS ON ITS GOALS   

Whether policies are effective or not depends on what the intentions of the policy are. If the intent is to provide some financial support to parents and support fathers who want to play a bigger role in raising their children, then the policy could be effective. Parents do appreciate any extra help they can get and when the Government helps to push companies towards more family-friendly practices.   

If the intent is to encourage couples to have more children, then the effectiveness of parenthood policies would be unknown at this point.  

How have fertility rates responded to the Government’s interventions? Though fertility rates have continued falling since the marriage and parenthood package was first introduced in 2001, this does not mean the policy has not worked. Fertility rates could have declined even more drastically, had the Baby Bonus not been implemented.

Suppose the policies do indeed increase fertility, they still need to be evaluated to see if they are worth pursuing because they do come with costs.

The funds for the Baby Bonus Cash Gifts and to reimburse companies for paternity and maternity leave ultimately come from taxpayers’ pockets. More than S$900 million has been allocated in the financial year (FY) 2023 to marriage and parenthood initiatives under the Ministry of Family and Social Development.

And companies would have to contend with the operational challenges arising from reduced manpower when parents go on paternity leave. From an evidence-based policymaking perspective, only if the interventions sufficiently increase births to outweigh the costs incurred by the interventions, will implementing the policy be justified.   

UNDERSTANDING POLICY EFFECT ON FERTILITY RATES?   

The few studies that exist suggest that pronatalist policies do have a positive effect on fertility, according to a 2014 review by economist Elizabeth Brainerd from Brandeis University, published in the IZA World of Labor. In general, the effect came about by changing the timing of births and the probability of a birth, but these positive effects tend to be modest.

Other factors could play a more important role in childbearing decisions, including personal beliefs, the availability of qualified and affordable childcare, a family-friendly work culture and other cultural norms.   

These findings, however, were based on data sourced from other countries. But the effectiveness of pronatalist policies is likely to differ by country, depending on the societal and economic environment. It might be worth doing such a study in Singapore to get a better understanding of how effective our policies have been so far.

Ideally, the interventions should have increased the number of babies in a few ways: Changing couples’ minds about not having children, convincing them to have more children, or motivating them to have their first child earlier. But if the policies change the minds of only a few, while at the same time, provide financial benefits to all those who have already made up their mind to have children regardless of the new interventions, then modest gains would come at large costs.

DIFFERENT STROKES FOR DIFFERENT FOLKS?

Parenthood is a lifetime commitment. Financial support to raise children is always welcome but it alone will not be a game changer for a parent like me who is stopping at one.

What matters more is whether there will be someone who can take care of our child when we work, whether we will have supportive employers who will not fault us if we need time off to attend to a sick child, whether there will be sufficient liveable space at home to accommodate another child, or if we will have the means to support them till they are financially independent.

But though they will not change my mind, more financial support may do so for others. This is why we really should be thinking about quantifying the fertility effects of Singapore’s interventions.

We will never be able to know whether fertility rates could have been even lower than those today, if the Baby Bonus and other incentives had never been provided. The closest we might come is by employing a randomised controlled experiment – comparing fertility outcomes of those given some incentives to those who have not.

Perhaps when the marriage and parenthood initiatives are next reviewed and considered for enhancements, it would be useful to pilot a small randomised study, the gold standard for evaluating policy effects which could be designed to address potential ethical issues, before scaling it up. Policymaking might take more time, but it could help us be sure that Singapore isn’t going down the same old path to little effect.

Kelvin Seah is a Senior Lecturer in the Department of Economics, National University of Singapore and a Research Fellow at IZA.

Editor's note: This commentary has been amended to reflect that the historic low total fertility rate was 1.10 in 2020, instead of 1.12 in 2021. We apologise for the error.