In late 2004, Taiwan’s Executive Yuan Development Committee released a population forecast predicting that Taiwan would face a “negative population growth” situation by 2016. This led to renewed concern over the phenomenon of “low birth rate,” and discussions on how to increase fertility rates ensued. In July 2002, the Executive Yuan Development Committee proposed tax exemptions for having a third child or more to encourage people to have more children. With Taiwan on the brink of an aging society, the population was facing a decline. However, this proposal received negative evaluations, and in early October of the same year, the Ministry of the Interior revisited the issue. In addition to incentives such as subsidies and tax exemptions, they even suggested imposing a “punishment tax” on those capable of having children but choosing not to. Naturally, this sparked controversy, and the Ministry of the Interior faced criticism. Let’s not delve into how the birth rate will impact Taiwan’s future but raise doubts about the hypothesis that population policies are the key factor influencing birth rates as believed by government officials and some experts.
According to statistical data, Taiwan’s population dynamics have also gone through the three stages of the “demographic transition theory”: initially characterized by high birth and death rates, followed by high birth rates alongside low death rates, and ultimately resulting in low birth rates coupled with low death rates. Due to Taiwan’s small land area and high population density, birth control and reducing fertility have long been consensus measures. Since the 1950s, Taiwan’s birth rate has been steadily declining, and this trend accelerated after the promotion of family planning in 1964. As population growth rates decreased with the implementation of family planning, a conclusion can be drawn that Taiwan’s birth rate declined due to population policies (i.e., family planning), ultimately leading to a decrease in population growth rates—a view strongly held by policymakers.
However, some studies suggest that the fundamental reason behind Taiwan’s declining population growth rate lies in the widespread education and increased educational attainment and rising incomes, with family planning merely playing a complementary role. In other words, the current rapid decrease in the population growth rate is the result of people voluntarily adopting birth control measures, supported by the tools and methods provided by family planning initiatives. The decision to control fertility rates was likely driven by rational individual choices prompted by their circumstances. This behavior can be explained by the “microeconomic theory of fertility,” revealed by Nobel laureate G.S. Becker in 1992, with the comprehensive mathematical model completed by R.Willis. The theory postulates that individuals make consumption choices to maximize utility within the constraints of their income and relative prices of goods, supposing a fixed set of preferences.
Skipping the value judgements, if we accept the premise of treating children as durable consumer goods, we can then analyze consumption choices within the constraints of income and relative prices. Assuming all else remains constant, if the price of raising children gradually rises above that of other goods, the demand for children will decrease due to the “substitution effect.” The cost of raising children encompasses tangible costs like food, clothing, housing, transportation, as well as the cost of enhancing their education, as well as intangible costs such as potential income loss from not working while caring for children. As a “normal good,” the demand for children should increase with rising income, i.e., the “income effect.” Nevertheless, alongside the quantity, there is a growing emphasis on the quality of children. Higher income and educational attainment lead to higher expectations for children’s quality, resulting in increased costs, outweighing the income effect. Therefore, the demand for children naturally decreases. This seems to reflect the reality of our society today. Notably, with the growing seriousness of juvenile delinquency and frequent moral deviations incidents, the satisfaction children bring to parents is gradually overshadowed by worries, undermining the normal characteristics of children as goods, thus diminishing the income effect.
It is worth emphasizing that the aforementioned analysis merely analogizes children as durable consumer goods, generating utility directly for consumers (parents and family members), which is applicable in advanced societies. In contrast, in underdeveloped nations, children are often seen as investment goods or means of production, fulfilling the role of ensuring financial security for the future, reflecting the old saying among Chinese people of “raising children to provide for old age.”
The individual economic theory of fertility should adequately explain the phenomena in contemporary Taiwanese society. Therefore, unless the value of children to parents increases or their relative prices decrease again as a result of economic and social developments, policies or incentives may have little effect on stabilizing or increasing birth rates. Ultimately, striving to maintain or raise birth rates may prove to be an elusive pursuit.