With Fast-declining Birth Rates, The Importance Of Paid Parental Leave Is More Important Than Ever

• Countries need to have a birth rate of at least 2.1 children per woman to sustain the population, which inherently supports the economy and the workforce.   
• Declining birth rate is impacting Japan’s workforce and economy and the International Monetary Fund paper estimated that Japan’s economic growth would decline by 0.8 % on average each year over the next 40 years due to demographics alone 
• Two-thirds of countries in Europe have introduced measures to increase fertility rates, such as baby bonuses and tax incentives for extended paid parental leave. 

For years now, the birth rate globally has been declining (mainly in well-developed countries). 

Countries need to have a birth rate of at least 2.1 children per woman to sustain the population, which inherently supports the economy and the workforce.  

The average number in Europe is about 1.59. In America, it’s 1.7 children per woman. In Japan, it’s 1.34 per woman.  

Humanity is realizing that these numbers are non-sustainable in these countries, and something needs to be done if these countries are to have a functioning society in the years to come.  

Some countries such as Japan and Estonia have realized that offering extended and paid parental leave might improve birth rates.  

Why is a steady birth rate important for the economy? 

For women, not having children would allow them to better focus on their careers and to save money.   

For the future of the workforce and the economy, the outlook is not so positive. The economy will suffer due to a lack of consumers, and the workforce will dwindle.   

Many people would argue that the world is overpopulated and does not need any more humans in it, but long-term this might affect work. One example is Japan, whose declining birth rate is impacting its workforce and economy.

Analysts have long pointed toward the lack of support for working mothers in Japan, where there are strong expectations that women must do all the housework while also raising children alongside doing their jobs. It’s not surprising that these women are choosing to not have children.   

Younger generations of Japanese women have increasingly opted to continue working, rather than get married, have children, and give up their careers.  

In 2020, the country’s fertility rate (the expected number of births per woman) declined to 1.34 – among the lowest in the world.  

In November 2018, an International Monetary Fund paper estimated that Japan’s economic growth would decline by 0.8 % on average each year over the next 40 years due to demographics alone. This is because an ageing society results in challenging budget consequences. 

There still might be hope for Japan and countries with similar issues, though, but this might require comprehensive benefits and paid leave for parents.  

Excluding the U.S., countries that have the highest female workforce percentage have the best benefits and paid maternity leave.  

These countries realize that women are essential to the workforce and are being proactive in ensuring that they are able to take adequate parental leave in order to sustain the birth rate.  

If companies/governments offered adequate parental leave, would this improve birth rates? 

To incentivize women to have children, Japan offers one of the longest paid maternity leaves (35 weeks). The country even offers 30 weeks paid paternal leave.  

Perhaps if the U.S. (the only industrialized nation not to offer paid maternity or paternity leave) would implement paid parental leave legislation, birth rates would improve.  

In Europe, the fertility rate in 2017 was 1.59 births per woman. If that trend continues, the European Union will not have enough workers to pay for its growing population of elderly people. 

To combat this, two-thirds of countries in Europe have introduced measures to increase fertility rates, such as baby bonuses and tax incentives for extended paid parental leave.   

Estonia’s birth rate is 1.66 per mother, and this country offers more than a year and a half of paid leave for working mothers – by far the highest benefit provided by any country.  

Estonia’s birth rate has increased in recent years due to the benefits it provides working mothers, and other countries might follow in its footsteps to improve their own fertility rates.  

Should parental leave be employer-sponsored or government-sponsored? 

Opinions vary greatly on how paid parental leave should be funded, which is an issue that politicians and advocates have been debating for years. 

Only 17% of American workers have access to paid family leave through their employers, while 40% have access to short-term disability insurance. 

A study conducted by Pew Research Center found that Americans say employers, rather than the federal or state government, should cover the costs of paid parental leave.  

Still, the public is sharply divided over whether the government should require employers to provide this benefit or let employers decide for themselves. 

But many employers around the world do not want to sponsor paid parental leave, which leaves the responsibility up to their governments. 

If a government mandates that all employers in a country must offer paid parental leave, this may negatively affect businesses financially. 

If paid parental leave was government-sponsored and mandated, workers would not have to worry about the consequences of going on parental leave. 

If a government itself provides paid parental leave, this is more beneficial financially for employers. Governments have the ability to bring in funds through taxation, and these funds should be allocated to the most pressing issues in their respective countries – such as declining birth rates.