March 23, 2022

We’re having fewer children. Now what?

Recent data show that Canada and Alberta have continued their decades-long trend of declining fertility rates.

In fact, Canada set a new record-low total fertility rate (TFR) in 2020—the statistical average number of children that a woman will give birth to over her child-bearing years (ages 15-49). The minimum TFR needed to maintain a constant population through natural growth is 2.1 live births per woman. This number is called the replacement fertility rate (RFR).

In 2020, Canada’s TFR was 1.40 (20.5% below 1991 and 2008 levels), and Alberta’s was 1.51 (down 18.6% since 1991 and 17.2% since 2008).

So what’s going on?

A convergence of long- and short-term trends

The long-term trend is clear: the fertility rate is declining. According to UN estimates, Canada’s TFR has not been above replacement level since 1971. While the steep post-baby boom TFR decline in the 1960s and 70s has leveled out since the early 1980s, a modest trend of decline has continued.

As it did around much of the developed world, Canada’s post-World War II baby boom gave way to declining fertility rates correlated with several contributing societal phenomena. These include, but are not limited to:

  • increased participation of women in the labour force;
  • higher levels of educational attainment for women;
  • delayed couple formation; and
  • increased access to contraception, empowering women to avoid unwanted pregnancy more easily.

These intertwining factors allow women to choose to delay having children to a later age or to not have them at all. This trend bears out in the data. Canadian women aged 15-29 have seen their fertility rate decline by 51% since 1991 whereas the rate for women aged 30-49 has increased by 45% in that same timeframe.

More recently, low-fertility-rate countries (a TFR is below 2.1) have generally seen their TFR decline in the aftermath of the 2008 financial crisis, likely positively correlated with declining economic conditions. These same countries have also seen a steep TFR decline since the onset of the pandemic, with Statistics Canada survey results suggesting 19.2% of Canadians aged 15-49 intend to delay having kids or want fewer children, whereas only 4.3% want earlier or more children in response to COVID.

Policy implications

A population that cannot sustain itself through natural childbirth will inevitably rapidly age. The wider the gap by which Canada’s replacement fertility rate exceeds the total fertility rate, the faster the population will naturally age and the more pressure that will be placed on our public services.

Natural population decline and longer average lifespans lead to an increasingly small pool of working-aged Canadians (aged 15-64) capable of paying for vital public services. As citizens age and leave the workforce, they simultaneously decrease government’s ability to raise revenue while increasing their use of social services such as healthcare, the Canada Pension Plan, and Old Age Security. Governments are forced to either raise more revenue on the backs of a proportionately shrinking workforce and business community, or they must cut vital services to those in need.

What can be done?

There are several approaches to helping solve these challenges, including the following:

1. Increase the natural birth rate

We know that a declining birth rate is highly correlated with higher labour force participation of women; better education opportunities for women; increased national GDP; and better access to contraceptives. But these trends result from a society progressing towards more equality, more prosperity, and the empowerment of women. These are fantastic developments that shouldn’t be reversed.

Rather than eroding this progress, many countries implement policies that make it more feasible to have children and address the associated affordability challenges, such as: providing generous tax incentives or government subsidies for having a child; improving work-family life balance for working parents; providing generous maternity and/or paternity leaves; and subsidizing childcare to affordable levels. Countries like France and Sweden (and, to a growing extent, Canada) have generous policies in this vein. These policies have been somewhat successful at stemming the decline in births and have ancillary benefits as well, but fertility rates remain well below replacement level.

2. Increase immigration

Canada’s longstanding primary means to address low fertility rates has been the aggressive pursuit of immigration. Between 2016 and 2021, approximately 80% of Canada’s population growth was due to immigration, and that isn’t about to slow down. Canada is targeting approximately 1.34 million new permanent residents by the end of 2024, 57% of which from the Economic immigrant category—a highly skilled group well suited to address challenges related to a naturally aging workforce.

3. Increase efficiency and improve productivity

Finally, improving the delivery of public services while simultaneously pursuing efficiencies can help reduce the cost burden on a shrinking workforce. Furthermore, improving workforce productivity—the ability to create more value from the same amount of work—will help a shrinking workforce maintain high quality public services for an aging population.

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