The official blog of The Social Democratic Party.

The case for a family income

To address our crises of low birth-rates and broken families, Britain should pay couples £500 per child, per month.

By: Eric Siva-Jothy

The past several decades have seen a decline in many of the expectations and norms surrounding family life, with Britain seeing increases in single-parent households, divorces, and instances of child neglect. But underneath all of this is an even more disturbing trend – an outright demographic collapse, in which Britain’s workforce is too small to maintain a competitive economy, the welfare state, and social protection for the elderly.

Since a peak in the 1960s the British birth rate has been in continuous decline towards 1.6 children per woman. This is well below the amount of births needed to avoid population decline – the “replacement rate” – of 2.1 children per woman. Ultimately, the result over the course of decades has been that the workforce has dwindled, while the non-working population continues to grow. 

Ultimately, without intervention, this demographic collapse is set to be one of the biggest crises facing our country. It threatens to totally undermine the ability of British society to provide prosperity, a safety net, and a decent standard of living to all. 

Why has this happened? One of the biggest reasons is that child-rearing has become nigh unaffordable to many working people, who simply do not have the time or the financial stability to comfortably sustain a larger family with both parents in work. Amid surging house prices and stagnant wages many younger couples are now encouraged to delay having children, as the trade-off between financial security and family grows ever-more harsh. 

So far successive governments have handled this issue by simply kicking the can down the road indefinitely, or relying on labour substitution by way of mass immigration. But whereas birth rate increases provide clear long-term planning indicators for new housing, healthcare, education and transport infrastructure, huge influxes of working-age migrants in short periods do not and place huge strain on infrastructure and social services. 

There is a radical solution to this crisis: pay married couples to have children. Specifically, Britain should pay married couples £500 per month per child under the age of 18. This move would not only make having multiple children financially viable to many whose dream of family life is now unreachable, but also totally reshape our relationship with work and address many of today’s most pressing social issues. 

A family income will dramatically change economic life for families. It would serve to reduce the trade-off between child-rearing and earnings from employment for parents, which has a direct effect of making it much easier for couples to choose to have a child in the first place. However, this is but the tip of the iceberg.

At a macroeconomic level, a family income will serve to drive up wages across the board. This is because many families will be able to afford to reduce their participation in the labour market to care for their children, with some parents dropping out entirely to move towards a single-breadwinner model. This represents a drop in the labour supply available to industry, which means that to compete for the smaller pool of workers businesses will have to push up wages, along with conceding other improvements to working conditions.

This, in turn, will drive a positive feedback loop across the economy: workers will earn higher wages, which in turn will make it much more affordable for families inclined to do so to cut their total hours in the labour force. Indeed, a family income will help all workers through bringing an end to the all-too-common low-wage, high-hours model of employment faced by many workers.

In addition, a family income will also make for happier and healthier families. This is because the condition that a couple must be married to receive a family income will provide an incentive for families to raise children in a two-parent setting.

Study after study has demonstrated that children raised in two-parent households tend to enjoy much greater educational attainment, have lower rates of criminality, and improved mental health, and so encouraging the two-parent model should have a robust knock-on effect for child welfare. Research has also shown that married couples with children tend to be substantially happier than the general population, so long as they’re financially stable.

What’s most surprising about a family income is how affordable it is. If we assume for argument’s sake that every one of Britain’s 15.2 million under-18s is eligible, a cash payment of £500 per month per child would cost the nation £91.3 billion annually. While this is a large outgoing, most of the funding can come from efficiently reallocating current spending.

For example, family benefits, income support, and tax credits cost the state £46 billion per year – these can be totally phased out and replaced by a family income. Housing benefit, which costs the Treasury £25 billion per year, can also largely be replaced by a family income, and the government’s £35 billion annual budget for personal social services and other benefits will also be able to shrink as a family income will reduce the number of claimants.

This means that, potentially, a family income may break even in the long-run through replacing much of the social protection budget. In this way, a family income will actually serve to make our welfare system more affordable, efficient, and responsive to the needs of individuals – taking responsibility and power away from state bureaucracy, and giving it to individual families.

At the heart of the family income proposal is a challenge to radically rethink our social fabric, to place a family back at the centre of our way of life, and to give everyone greater freedom to pursue the best ends they can in life. A family income will rejuvenate our human capital and fix the birth-rate crisis, but it will also make us a healthier and more prosperous society.

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All Comments (9)

  • A radical yet refreshing proposal. Ultimately, we need to fix the incentives structure facing young people to make child rearing actually viable. Much of this must come from helping to end house price inflation and wage stagnation, but this measure will definitely tackle the latter while also helping to finally pay families for the reproductive labour they do.

    Rearing the next generation is an incredibly important task. Why shouldn’t it be compensated?

  • This article is based on a false premise. That a decline in population is a bad thing.

    First let’s dispense with the neo-liberal propaganda that we need more young people to support our aging population. Not true. We currently have over 600,000 unemployed young people between the ages of 16 and 24. We also have hundreds of thousands of young people currently in part time work in the gig economy. If we have a shortage of skills then that is due to lack of training not a shortage of young people.

    Second, with the forthcoming advent of Artificial Intelligence (AI) there are going to be mass redundancies in many areas of work.

    So let’s turn to £500 per child per month. So a couple/single would get £2,500 per month after tax for 5 children or £5,000 after tax for 10 children. Over £600 and £1,200 per week respectively. Nice work if you can get it. This proposal is not serious.

    As for housing, increasing household income is not the answer – it will just drive up house prices and rents. We need to carry out SDP policy – build more council houses and restrict immigration.

    I do agree that a two parent family is much better than a one parent family and in my view every child should have the chance to experience the presence of its father. In this context our current allocation of council houses to never married single mothers is doing more harm than good.

    I also agree that long hours and low wages are absurd given mass unemployment. But mass unemployment is not an accident and neither is mass immigration. They are methods employed to keep down wages and keep rents high – very profitable for the more backward business and landlord sectors. In a rational society, unemployment would be kept down by cutting hours and having wages at a liveable level. This would necessitate international agreement to prevent the current race to the bottom concerning hours and wages. Import controls could also be used.

    A single bread winner model is no longer the norm, especially amongst professional couples. It is not something the SDP could attach itself to, although I would agree that this should be a choice for parents.

    Finally, I repeat, there is no birth rate crisis, but there is a crisis facing our young people: that of singles accommodation, housing for young families, growing poverty, training and jobs. I appreciate the article attempts to address some of these questions but in my view, from the wrong direction.

    • Hello Roger, thank you for a measured and refreshingly well-written response to my article.

      I’ll try and address everything you’ve said here one by one, starting with the claim there is no birthrate crisis. While you are correct skills shortages, unemployment and the gig economy are substantial problems in underutilising the younger workforce, the amount of young people available are still nowhere near enough to sustain the incoming mass of retirement-aged baby boomers and even the first trickles of Gen X. Even if you successfully managed to retrain and reindustrialise fast enough, you’re still looking at a huge glut in the workforce, the solution to which will be mass-migration most likely, which brings me to the second point: most of the steady growth in 18-30s is coming from migration to begin with, so your solution relies on continuing the undercutting of domestic labour supply with a relatively porous border, which is part of the feedback loop in lack of skills with young people.

      Further, to reiterate, this 600k is simply nowhere near enough to sustain the retired population; Japan is currently experiencing this where the government is considering proposals like retirement at 80, and companies are altering contracts to work well into the 70s. It is simple mathematics that you cant have a simultaneously shrinking workforce on the bottom end, and a growing group of dependents on the other. Indeed, even with the implementation of this policy, there may have to be measures taken to slow the retirement crisis by ways of raising the retirement age, or levying additional taxes to sustain the state pension. The picture isn’t good, even with the sensible measures you’ve proposed, the birth rate has to go up, or the elderly have to lose their quality of late life. I don’t think either of us wants that.

      However, if we take your assumption of our current number of youth being enough further, there is an additional problem: you are effectively saying we can sustain roughly one more retirement generation here. What happens after that? Retirees will still outnumber the younger workforce drastically, which without measures to boost the birth rate will continue on its downward trend; you’ve presented a plan to save the boomers, but abandoned everyone who comes after. Sure you could argue the birth rate will climb again by reskilling/higher wages/economic restructuring, but again, the time this takes is nowhere near enough to mitigate disaster. Action needs to be taken immediately, and oppositional arguments could just as easily be reframed as “abolish unemployment benefits entirely because in the future we will have abundant work and AI”

      Which brings me to your second point, mass-automation is not coming. Mass-automation has been predicted for decades, and has repeatedly failed to manifest the impact its proponents claim, indeed usually it has an adverse effect of lowering barriers to entry into certain fields (accountancy and lawyers for example, where automated tabulation of documents expanded the number of people working in both fields as utilising them became more accessible to begin with; almost like a modern version of the medieval guild system transforming into a mass-market). The pandemic has also given us a very interesting insight into automation: in theory we could scrap huge portions of the economy, namely physical in-person activities on the high street, and still function at the same level materially. After all, we furloughed a huge chunk of the workforce and put them out of work. However, the moment the lockdowns were lifted, many in the retail/high street sector returned to work, or will return to work as the sector recovers. There is demand for many human experiences automation is often touted as inevitably about to destroy. Lastly, it is important to note AI is being extremely overhyped by Silicon Valley to generate investment, we are about to enter what has been termed an ‘AI winter’, wherein failure to deliver on promises means massive divestment from the sector, and stagnant advance within it for a few decades. Mass-automation is a PR stunt, not a reality, and regardless, its pointless to base policy on futuristic speculations of a social and economic ‘dues ex machina’.

      The proposal itself: it is completely against all available data we have that there would be some great mass of couples having even 5 children, let alone 10. I’d suggest looking at fertility data from across the 19th and 20th centuries here. Sure, there may exist a functionally small handful who do, and good luck to them, but the vast majority will likely be in the realm of 3, some on 4, with the distribution curve of births tailing off hard from there. Humans do not just have children as economic units, they have them because it is a qualitative experience and human impulse; the grant policy is to allow that once again, as our current economic framework (which we both agree on) artificially suppresses and renders extremely difficult that natural, human process. Further, a repeat issue with this criticism of “abusing the system” that arises is people seem to forget the money isn’t just going to the parents, they still have to care for the children by feeding them, clothing them, dedicating time to them, etc. This is not only economically costly (hence the grant), but is additionally emotionally and physically taxing (especially if someone is just pumping out children constantly, the strange scenario this criticism relies on). The concern raised almost seems to be entirely around a complaint that it’d be ‘too easy’ for people to raise a larger family, in which case, thats the point of the policy. Plus, having 5-10 kids is a huge boon to future society and the workforce, as explained above, so the cost is offset in their parents very comfortable retirement. I can’t think of anything more communitarian than that.

      The single breadwinner model has been phased out yes, but as my article explains, this is largely artificial, and has had disastrous consequences from the actual quality of parenting through to economic prosperity. There is an assumption here that ‘young professional couples’ is a cultural inevitability and not downstream from sweeping neoliberal structural reforms. This is termed ‘the two income trap’ and is highly worth reading into. I think we both agree that the pre-neoliberal economic order was far superior, and SDP policy mostly aims at restoring it: the nuclear family/breadwinner model was an integral part of that order, and indeed, so was a family allowance that took the exact form of my proposal here.

      There is certainly a crisis facing our young people, but I think whats often missed is that a lot of us would like to have a family and raise kids, not just have a good job. We are denied a whole roster of state benefits prior generations had as well as a less precarious economic system. I think throwing out policy proposals like this on the basis of structural economic adjustment would be akin to expecting the Britons of the 1940s to rebuild without any welfare state assistance or government intervention/planning of the economy: it’d be long, painful, economically unsound and unfair. Finally, one aspect of everyone seems to miss is its not just economic, its human: family life is a joy, having children and raising them is conducive to a happier, healthier society in and of itself, not just because it conveys economic benefits; this neoliberal financial tabulation of families is alien to me, I see them as imperative to healthy socialisation of both the individual and the collective, and the psychological data I cited in my article is just the tip of the iceberg there (as you yourself said, healthy families produce happier people). A society that cannot successfully reproduce itself and allow people to widely participate in the joy of family life is a selfish, miserable and short-lived one.

  • The Tories will deservedly possibly lose the next general election Labour are unelectable permanently neither party have any vision or inclination to help British people there needs to be more incentives for people to get on in life the governmental system in this Country needs fully dismantling as does the huge taxation system

  • The population of the world is too big for our planet. At some point we need to accept that we cannot keep our population at the size it is.
    This article appears to disregard the role of retired people in out community. Our GDP is largely based on cash, salaries and wages etc.
    Taking one of the two people parenting children might eventually lead to a larger workforce however in the short time it might well reduce the workforce.
    If the government were to increase the support of families by offering a market rate for child care it would immediately offer the opportunity of choice to couples when to have children and how and when either would have a break in their career.
    It would greatly increase the numbers of those working in the childcare sector. Highly skilled parents often but not always females could maintain their skills, upgrade or retrain in other areas and not suffer the effect on their own careers and futurevpemsions.
    Many older individuals are currently providing child care or support to their own parents, often leading to their early exit from the jobs market. We know we did and we do!
    Greater support for the older persons care sector could keep many of these supporting their parents in the jobs market.
    Also many voluntary posts are carried out by the ‘retired’ lol.
    In our town the open spaces are kept tidy by groups mainly of the retired. The Britain In Bloom is run by the retired as are many charities etc.
    Without the activities of these the community environment would be a far worse place.
    The decrease in male fertility is unlilely to be an economic side effect much more likely to be an environmental issue. Some couples are choosing not to have children because of the uncertainty of the future from an environmental stance.
    The article does not appear to consider these other aspects.

  • I believe that this proposal is completely unaffordable, and whilst it might be well intentioned it is the sort of idea that Labour under Corbyn would have come up with.

  • Very interesting proposal with a lot to think about. I understand the wish to promote marriage and responsibility, but it seems unfair that children of single parents or unmarried parents would miss out on the family income, thus reducing their life chances? Would the family income only being available to married families, would this not create a cohort of kids stigmatized and alienated?

  • It’s naïve to think benefits currently going to single parents can be phased out. Those parents will continue to need them unless you think they should be incentivised to marry the first person they can find to get into this scheme. What about people in abusive relationships? Are they to be penalised for escaping?
    Much as we want to incentivise stable families, we have to recognise this cannot always be achieved and provide some means of support for those who are in a position now.
    As for population decline, the population of the world as a whole continues to rise, and is unsustainable. While we might have a local problem here, we have to consider the global as well. The real problem is that human beings have built our whole economy since our species emerged on the idea of growth, and that cannot go on for ever in a finite world. At some point we need a new economic model not based on more people working harder in the next generation. What that model should be is the challenge. No one knows – we’ve always used the growth model and know nothing else – but it clearly can’t last for ever. Economists might argue otherwise, but economists work with numbers, which are infinite, rather than a planet, which is not.

Family, Community, Nation.