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Over the past decade, governments around the world have spent historic amounts of money on one of the biggest problems facing developed countries - the collapse in birth rates. And the birth rate, almost everywhere, still continued to fall. If this was ever going to work anywhere, it had to be Singapore. Singapore is tiny, extremely wealthy, and the government has the kind of complete control over policy and resources per capita that most other countries can only dream of. And yet the birth rate has fallen by almost 46% in just 25 years, second only to South Korea in a ranking of leaders that no one really wants to be in. And it's not that Singapore hasn't tried.
The country has invested tens of billions of dollars in encouraging people to have children, starting with the child bonus back in 2001, and now spends more than $5 billion a year on it. So what was Singapore's response to decades of costly failures? Well, of course, spend even more by announcing its largest stimulus package for children in history. Instead of a one-time cash payment at birth, families will now receive ongoing support of up to $55,000 per child paid over 17 years. This makes this assistance one of the most generous incentives any government has ever offered its citizens for having a child. There is only one problem.
Most economists and demographers believe that this probably won't matter much, as money may not actually be the answer to the problem at all. So, as always, to understand what's going on, we need to answer a few questions. Why does spending huge amounts of money on falling birth rates over a very long period of time consistently not solve the problem? What really stands between people and having children? And finally, if cash isn't the answer, then what is? Budgeting used to mean putting physical dollars in the bank and hiding them in a closet. But in today's digital environment, the average person has five bank and transaction accounts. Checking and keeping all of these accounts up to date can seem like a full-time job
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Monarch has already paid for itself in the first month. But none of this works unless all of your family accounts are on the platform, which is why Monarch offers affiliate linking. You can invite your partner and link their accounts so everything is open. Check your personal finances at monarch.com/economics. And for a limited time, EE viewers will get 50% off by entering the code economics50 at checkout. To understand why Singapore is willing to spend this much money, we first need to understand what is at stake. In 2000, Singapore's total fertility rate was about 1.6 children per woman, about the same level as the United States in 2023. Not very big, but manageable. By 2024, this figure had fallen to 0.87.
Birth rates are one of those numbers that sound a bit abstract. So let's make this a little more real. If this rate continues, there will be 44 children for every 100 Singaporeans alive today, about 50 of whom are women. And these 44 children will have approximately 19 grandchildren. This is a population that is effectively halved Demographers use a total fertility rate of 2.1. This is the average number of children each woman needs to have to maintain population stability without relying on immigration. In Singapore, this figure is less than half. And a falling birth rate, combined with people living longer thanks to better healthcare, means Singapore is on track to become what demographers call a super-aging society as early as this year. This
means that more than one in five citizens is 65 years of age or older. The reason the government cares so much about this comes down to a concept called the old-age dependency ratio, which shows how many working-age people there are per pensioner. In the 1990s, when Singapore was young and developing, there were approximately 13 workers for every retiree. According to government projections this ratio could fall to around four to one by the early 2030s. It is true that the Singapore Central Pension Fund does not work like most pension systems, where today's workers fund today's retirees.
Instead, each person saves in their own individual account and then withdraws it when they retire. But labor shortages are still a big problem for the economy as a whole. Fewer workers mean lower economic output, lower tax revenues and greater pressure on healthcare and social services. And the government has to pay for all of this at the very moment when the number of taxpayers is decreasing. And there is another aspect. Historically, Singaporean families have lived in multi-generational households, where younger family members themselves have covered a significant portion of the costs of caring for elderly relatives, costs that governments in places like
Australia or the United Kingdom typically cover through public systems. This kept the bill for the state relatively low, but this buffer is eroding as cultural norms change. Families are less willing or simply less able to bear these costs on their own, which means that the state will have to shoulder most of the costs at a time when its tax base is shrinking. So the government isn't investing money in child benefits because it has suddenly developed a fondness for babies. He does this because the fiscal model the country was built on simply doesn't work with a population that is This is not Singapore's first attempt to change its birth rate, not even close. The government has been pursuing pro-natalist policies since the 1980s, which is somewhat ironic, since just
before that it was doing the exact opposite. Since 1972, Singapore has been running a " Stop at Two Children" campaign aimed at slowing population growth in the tiny city- state with very limited land and resources. It worked, perhaps even too well. By 1987, the government had completely changed its stance and launched a new campaign with the slogan "Have three or more if you can afford it." Which, to be fair, has a small but quite important condition. It provided tax breaks, childcare subsidies , maternity health insurance, and priority access to public housing improvements for families with a third child. Then, in 2001, the government introduced a birth bonus scheme, which provided parents with cash grants and matching savings contributions for each
child born. By 2004, this package was expanded into a broader marriage and parenthood benefits package, combining the birth bonus with additional childcare subsidies tax breaks, and housing incentives. And in 2008, the government roughly doubled the annual budget. So Singapore has been doing this for almost 40 years, trying tax breaks, cash bonuses, subsidized childcare, housing incentives, public awareness campaigns-you name it, they've tried it. And the birth rate has been declining almost continuously throughout this entire time. Which raises a pretty obvious question: If 40 years of increasingly generous stimulus hasn't worked, why should the next round be any different? Well, the government's response is that
the design is fundamentally different this time. The previous policy was mostly based on initial payments. You have a baby, you get a lump sum payment, and that's pretty much it. The problem with this approach is that it treats having a child as a one-time purchase. When the real costs of raising a child stretch over about two decades. It's a bit like if you gave someone a voucher for the first month of their mortgage and then wondered why they didn't buy a house. The new package, which will come into effect in 2027, is designed as ongoing support.
It starts with a cash payment at birth and then continues with annual payments and credits until the child turns 17. In total, it costs about S $70,000 per child, approximately US$55,000. But it's not just money. The program also expands access to low-cost daycare, one of the biggest headaches for young parents in Singapore. It also significantly expands paid parental and care leave, and makes it easier for families with children to buy their first home through Singapore's subsidized public housing system. So, to give it its due, this package does address a lot of the structural complaints that parents and parents-to-be have been raising for years.
The question is whether any of this is actually enough. Most demographers and economists are quite skeptical, and not because of this program. This skepticism comes from decades of evidence gathered from around the world. For example, since 2006, South Korea has spent an estimated $280 billion to combat its declining birthrate, trying everything from direct cash bonuses and infertility treatments to childcare infrastructure and parental leave. Yet the total fertility rate fell to a record low of 0.72 in 2023, the lowest rate in recorded history for any country on Earth. It has since risen slightly to 0.80, but calling it a recovery is a bit like celebrating the fact that most of your house is on fire. And then there's Hungary, which has built an entire political
identity around families having more children. The government offers interest-free housing loans that are partially forgiven with each additional child, and mothers of four or more children are exempt from paying income tax for life. Well, the fertility rate in Hungary has indeed increased significantly since the implementation of this policy, rising from around 1.23 in 2011 to almost 1.6 by 2021. But by 2024 it had fallen to around 1.4, suggesting that even fairly significant policy efforts may only provide a temporary boost. So, the research on cash bonuses is pretty consistent. They can change the time of delivery, meaning people who were already planning to have a baby can simply give birth a little earlier so as not to miss the payment;
but they don't actually change what demographers call the completed fertility rate, which is the total number of children a person has over their entire lifetime. In other words, they create a tempo effect, not a quantum effect, where time changes but the total quantity does not change. And the reason for this is quite intuitive, if you think about it. Now I would like to tell you about the Economics Explained newsletter. If you're watching this video and thinking there should be more stories like this, we've created a newsletter just for that. Once a week, we send out one economic story that covers things that quietly shape how the world works but rarely get a proper explanation. The newsletter is absolutely free, and you
can subscribe using the link in the description or the QR code on the screen now. Let's go back to the video. In economics, there is a concept called the idea is that as the economy develops, parents invest more and more in each individual child. More education, more extracurricular activities, more opportunities. So, raising each child is becoming more expensive because the bar for what is considered good parenting has risen dramatically. Or, to use the coldly precise language that makes economists so popular at parties, children are an expensive commodity whose relative price increases with income. Now, cash payments can offset some of the direct financial costs of raising a child, such as diapers, food, school fees, or clothing, but they don't address the
opportunity cost, that is, what you give up by having a child. It's the career you're slowing down, the income you're not earning, the promotion you're missing out on, the freedom you're losing, an entire decade of your life you're reshaping to fit the needs of another little person. To sum it up, a professional in Singapore who earns $150,000 per year and returns to part-time work loses more income in one year than the entire child benefit is paid out over 17 years. Think of it this way: If your employer offered you a $5,000 bonus for a job that pays $50,000 a year less, you probably wouldn't take it, no matter how nice the welcome basket was. This is, in fact, the deal that many young Singaporeans are looking at. And, as countries get richer, the opportunity
cost of having children increases, not decreases. A highly educated woman in Singapore with a successful career gives up much more by having a child than her grandmother did, simply because her grandmother had far fewer opportunities to give up. So, the richer and more developed a country becomes, the more complex this problem becomes. Add to that an uncertain economic outlook, a high cost of living that has nothing to do with children at all, and a broader cultural shift in how people imagine a fulfilling life, and you get a long list of reasons why people don't have children, most of which have nothing to do with whether the government sends them a check. In Singapore in particular, these barriers are deeply structural in nature.
Public housing apartments are expensive compared to young couples' incomes, and access to them is tied to starting a family, meaning that young couples can wait years for housing before they even start thinking about having a family. Then there is Singapore's notoriously demanding work culture, where long hours are the norm and giving up a career, even for a short time, comes with huge costs. And, as Singapore became wealthy, an entire generation grew up considering travel, independence, and, in fact, owning one's own business, as the default path to the good life. As you might have guessed, children tend to get in the way of all this. So $55,000 spread over 17 years in one of the most expensive cities on the planet really
helps. But the evidence suggests that this does not change the fundamental mathematical calculations for most people weighing this decision. So is there anything that actually works? Well, based on the evidence we have, no country has ever completely reversed its decline in fertility through policy alone, but some have certainly achieved better results than others. Sweden and other Scandinavian countries are the ones that most often rise to their feet, and for good reason. Their fertility rates have also not recovered to replacement levels, but they have stabilized at a significantly higher level than in countries like South Korea or Singapore. And the difference is not how much
money they spend, but what they spend it on. Sweden has created a system where childcare is state-provided, widely available, and capped at just 3% of Norway and Sweden have also set aside a portion of parental leave specifically for fathers, and if they don't use it, they lose it. This makes childcare a more collaborative effort, and it reduces the career penalty that usually falls mostly on women. Employers can't just assume that only the mother will step down, which means that having a child becomes less of a one-sided career sacrifice, and it's much more important than it might seem. One of the biggest drivers of the fertility gap in rich countries is that women bear the majority of the professional costs associated with childbearing. If the system
distributes these costs more evenly, the decision becomes much less punitive for either parent. Flexibility in the workplace also matters, and that's something that cash bonuses simply can't buy. A culture where leaving work at 5:00 to pick up your child doesn't make you less dedicated, and where cutting back on your hours while your kids are young doesn't ruin your career forever, that kind of change is worth more than any government check. Now, Singapore's new package includes some of these things, such as more childcare, parental leave, and housing support. These are real improvements over the previous policy, which was mostly just cash at birth. But whether they will go far enough to change the basic math in a city with a cost of living and work culture like
Singapore's is still an open question, and even the best family policies have limits, so governments struggling with demographic decline have a second lever of influence-immigration. The big advantage here is quite simple. You don't have to wait 18 years for an immigrant to join the workforce, and they are already showing up at working age. And Singapore has pulled this lever quite hard. 40% of the country's population is non-citizens, which is one of the highest proportions in the world. This is a mix of permanent residents, many of whom have lived in Singapore for decades, and foreign workers in construction, domestic service and service sectors. But this strategy has political limitations, as many Singaporeans associate rising immigration with higher
property prices, pressures on cultural cohesion and greater competition for jobs. Regardless of whether these perceptions are fair, they limit how far the government can go. So, ultimately, if you want to prevent a demographic crisis, you either find a way to have more children, or you accept more immigrants, or you redesign your economy to work with a smaller and older workforce. Which brings us to what most political discussions about fertility tend to avoid. There is a growing belief among demographers that the whole concept of a fertility crisis is somewhat exaggerated. After all, a smaller, richer, and better educated population is not necessarily a disaster. And if that's true, and the evidence increasingly suggests
it is, then perhaps the question we should be asking is not how to get people to have more children, but how to build an economy that works well with fewer people. This is a question that challenges many assumptions in economics, as most growth models are built on the idea that the workforce and consumer base will simply continue to grow. When this does not happen, completely different models are needed. Countries will need to invest in automation and productivity so that fewer workers can produce more. They will also need to redesign pension systems so that they don't collapse when the ratio of workers to retirees changes. It also means rethinking what economic success really looks like. GDP growth that arises from a larger
population is very different from GDP growth per capita, which arises from increased human productivity. A country can become richer per capita even as its overall economic output stagnates if it manages the transition well. And, to Singapore's credit, it works on both sides of this process. The baby bonus directly affects the birth rate, even if it is unlikely to fix it on its own, and the government is also investing heavily in automation, artificial intelligence, and productivity-enhancing technologies to prepare for a future with fewer $55,000 per child will convince more Singaporeans to become parents is something no one can predict in the future, least of all economists. But the main lesson is that,
based on the available data, money alone has never been enough. The countries that have come closest to stabilizing fertility rates are those where becoming a father doesn't mean giving up everything else. If you're interested in seeing how Singapore went from a poor country to the 33rd largest economy in 50 years, we've already made a whole video about it. Now you can go to it on your screen by clicking on it. Thanks for watching, friend. Goodbye.
