Trésor-Info - Publications de la direction générale du Trésor - Birth-rate

The Economic Issues Surrounding Redistribution to Families

2025-02-27T00:00:00+01:00

Since its introduction in the 1930s, family policy has been resolutely directed towards childbirth goals by horizontal redistribution from childless households to those with children. The first major change took place in the 1970s with the start of vertical redistribution from wealthy families to low-income ones. Family policy expenditure now encompasses a large number of objectives, including support for early childhood and gender equality.

Family policy has adjusted itself to socio-demographic changes in recent decades, in particular the increase in women in the workforce and single-parent families.

Today, family policy has three main goals: contributing to offsetting family expenses, helping vulnerable families and ensuring a work-life balance. To achieve its targets, the policy comprises tax schemes (essentially income splitting, the quotient familial), universal or means-tested monetary allowances, increased welfare benefits depending on the age or number of children, and the provision of public childcare services.

The French welfare and tax system now focuses mainly on low-income families, single-parent families and large families for which the poverty rate is higher than for other families. Besides income levels and the number of children, the additional monetary benefits paid for having children depend on their age and birth order. Nevertheless, changes to welfare and tax transfers based on these criteria are not always commensurate with the increase in costs for families. In addition, the "layering" of schemes creates changes in the amount of means-tested benefits paid per child that are difficult to understand (see Chart).

Childcare options conducive to a work-life balance are thought to have a stronger impact on fertility rates than the monetary benefits under family policy.

Italy and its Demographic Challenge

2023-10-24T00:00:00+02:00

Italy is the third most populous country in the European Union. After reaching a peak of 60 million in 2014, Italy’s population fell to 59 million in 2022 and could drop to 47 million by 2070. In 2022, while Italy recorded fewer than 400,000 births – the lowest figure since the country’s unification in 1861 – it posted more than 700,000 deaths, the highest level since the 2020 COVID-19 pandemic. Immigration can no longer offset this stark natural decrease.

Italy has a rapidly ageing population: life expectancy, which now stands at 83, has increased by three years since 2000. According to the World Bank classification, Italy has had a “very old population” since 2007, falling into this category three years after Japan and 11 years before France. Ahead by a few years, Italy’s declining population is a harbinger of the EU’s own depopulation by 2030 according to Eurostat projections.

A dwindling and ageing population is hampering GDP growth given changes in (i) the workforce and labour market participation and (ii) investment and productivity in an economy largely formed by family-owned VSEs and SMEs faced with the issue of their hand over.

This “longevity shock” puts pressure on public finances, since it increases the proportion dedicated to pensions, healthcare and long-term care expenditure in the budget. While the percentage of over-65s is growing, that of the workforce is shrinking, raising the risk to the sustainability of public debt which stood at 141.7% of GDP in 2022.

Measures – whose outcomes are as yet unclear – have been taken to mitigate the impact of unfavourable demographic changes: pronatalist policies, labour market reform and selective immigration. Changes to the pension system for 2024 have yet to be determined.