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Transatlantic Blog

The moral harm of 'pro-fertility' economics

Poland has been undergoing a demographic implosion for some time, and this threatens the house of cards created by government intervention in the economy. In 2015, the fertility rate in Poland was 1.29. This is far below replacement level, which is roughly 2.1 children per couple. The government offered as a solution its “Family 500+” policy – a financial incentive paid each month to parents of underage children. But the cost of the policy is enormous, in financial and moral terms. While the ineffective program is paid for by all taxpayers, it serves only politicians, who can attempt to outbid each other with taxpayer subsidies.

National pride aside, the plunging fertility rate is an extremely important matter in Poland for a rather mundane reason: The Polish retirement plan is based on future generations paying the pensions of the present elderly. This program will collapse when there is nobody to pay that share.

To solve this problem, the ruling Law and Justice Party (PiS) opted to subsidize fertility. The “Family 500+” policy was the key campaign promise presented by the party during the elections. The policy – which is compatible with the party’s conservative-statist character – pays 500 PLN (approximately $135 U.S. or €120) monthly to families that give birth to more than one child. If the family’s income is below a certain threshold, the subsidy is extended to the first child, as well. As a result a family with four children will receive 1,500 PLN monthly or 2,000 PLN if their income is low enough. Such a bonus might not seem impressive to Western countries, but in Poland, where the social benefits are quite low, it amounts to be a significant part of a family’s monthly budget. The average net wage (after taxes) in Poland is approximately 3,200 PLN, and the minimum net wage is 1,530 PLN.

The financial cost

The policy went into effect in 2016, but the first full year of the “Family 500+” policy was last year. In 2017, the policy cost was around 24.5 billion PLN, amounting to 7.5 percent of Polish government revenues. The operation costs are not high, as the transfer of the resources is carried out through previously existing channels. Yet one can assume that every 500 PLN transferred costs between 507 and 516 PLN. But that grossly understates the program’s financial burden.

One cost that should be taken into consideration is higher inflation. Pumping this supply of money into the market was bound to influence prices, especially the cost of food. The slight deflation of recent years (-0.9 percent in 2015 and -0.6 percent in 2016) – and the cheaper goods that resulted – are all part of the past. In November 2017, inflation amounted to 2.5 percent. As inflation reduces the value of income, it acts as a hidden tax to finance the “Family 500+” is paid by each and every citizen of the nation.

For who do not have children, the “Family 500+” in reality is “500-.” They only pay their share without receiving anything in exchange. The promise that future generations will finance their pension is a pipe dream. Poland’ retirement plan simply cannot be fixed by this redistribution of wealth.

The government regards the effects of the policy as a huge success. It is true that fertility in Poland did increase slightly. Some 16,000 more children were born in 2016, when the policy came into operation, compared to 2015. However, even if this rise was caused solely by the “500+” (which is unlikely), it still only highlights the policy’s ineffectiveness. The fertility rate of 1.29 in 2015 increased to 1.36 in 2016. The cost of such a slight improvement has been enormous for the taxpayers.

If this is the case, why does the government want to maintain the “Family 500+” policy?

The moral cost

The expensive and ineffective program renders an important service to the government, if no one else: It essentially amounts to bribing voters with their own money. Of course, children don’t have the right to vote – but their parents do. It is easier to notice an extra 500 PLN in their pockets each month than to calculate the overall cost of the policy: the increase of the public debt, rising inflation, and its lackluster results. Families can finally feel that they are getting something from their government – although it is just their own money, which was extracted from them through the taxation in the first place.

Presenting a thorough critique of “Family 500+” is difficult in Poland. The Law and Justice Party has effectively exploited this program to gain the support of previously undecided voters. Since Poland is a highly traditional country and people hold family relationships in high regard, politicians have engaged in a highly effective strategy to stay in (or get into) power. Hence, opposition parties have attempted to join in a bidding war over new supporters. Thus, there has been a proposal to expand the program so that it would include the first child unconditionally, as well.

This is the first clearly immoral effect of “Family 500+”: The discussion on Polish demographic policy has made politics akin to an auction to the highest bidder. There is no reasoned, civilized debate over the effects of these interlocking social welfare policies, although such discourse should be characteristic of a mature republic.

Another immoral aspect of this is the fact that praiseworthy values like family cohesion have been placed in service of wealth redistribution policies that will ultimatley bankrupt the nation or fail in ruins. In this case, family values have been inverted and had a detrimental effect on the taxpayers – while financing the “Family 500+” either through higher taxation or through federal deficit spending. This state of affairs makes reasonable reforms even more difficult to carry out in Poland. But by the time the calculation fails, today’s ruling politicians and their opponents will have comfortably retired. Meanwhile, on January 10, 2017, the public debt of Poland passed the milestone of 1 trillion PLN.

The final, most egregiously immoral aspect of the policy is that it downgrades individuals, who are unique individuals made in the image of God, to numbers on a ledger. A higher birthrate is primarily intended to save the Polish welfare state. But reducing children, parents, and senior citizens to statistics assures that the equation cannot be solved properly. Economics must begin with the human person as its starting point, not as a means to finance government programs or perpetuate politicians’ tenure in office.

Marcin Chmielowski is vice president of Poland's Fundacja Wolności I Przedsiębiorczości (Freedom and Entrepreneurship Foundation), an educational think tank focused on promoting a libertarian agenda. Marcin holds a Ph.D. in political philosophy and an M.A. in political science, as well as a postgraduate diploma in central banking. He is the author of one book and many papers concentrated on the theory and practice of libertarianism. Experienced in managing third sector institutions, Dr. Chmielowski is a liberty-oriented columnist, commentator, and screenwriter.