My Own One Child Policy

Yesterday, in an informal setting, my boss remarked that it wouldn't be long before I had another kid. I hastily rejoindered that I was stopping at one. Like anyone who has heard me say that, my boss scoffed that her colleague had said the same thing and after a few years (from the first baby), she was now trying for the second. My boss is single but lest anyone assumes she is anti-natal in her management style, she has very definite opinions about gender equality and the right of female employees to maternal benefits. I was extremely heartened to hear her do a mathematical comparison between the amount of (paid) time off a male employee takes for annual obligatory military reservice for the 15 or more years during the peak of his career, which far exceeds any amount of maternity leave a woman might potentially take to bear a child. (If anyone is wondering, it's 4 months, going by our total fertility rate of 1.2 children per female). 

I've posted elsewhere about how the clowns who call themselves policymakers can improve our abysmal fertility rates (ameliorate social inequality for example) and encourage earlier marriage (which increases the odds of 2 or more children being born). The same clowns who beseech you to marry earlier (and settle for the one who's second to ideal since you won't ever find the ideal partner) and have kids would tell you in the same breath that marriage and parenting is a personal choice (as if this absolves the state from its policy failures in this department). I've already zoomed in on our rising social inequality and the status anxiety of middle class people as a root cause of this problem.

I'm going to state categorically today that meritocracy breeds inequality, cements it and reproduces even more inequality.

And why should we care? Because the more unequal society becomes, the less likely people will have 2.1 children and the less likely you get economic growth of the sort that isn't perverted by cheap foreign labour. Of course this is not the whole answer, it's just part of the equation, but I'm not an economist and I'm here only to show that an unfettered meritocracy is not only harmful to the good of society (mental and physical health outcomes, social stability, low unemployment), it simply raises the overall cost of having children.

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Meritocracies Favour the Rich

Jason DeParle's article in the New York Times described how latest trends in American households showed that the greatest increase in economic inequality was seen in families with children (see diagram). Why should we care? Simple: the more worse-off or well-off you feel, the less or more likely you are to have babies.

As the article notes, one thing affluent do with their money is buy enrichment activities for their children, such as tutors, sports and private schools. The gap between what upper- and lower-income families spend in this way has grown rapidly, from about $2,700 a year in the early 1970s to $7,600 a year in the mid-2000s.

Do we see the same trend of income disparities between the top and bottom wage earners in Singapore? I couldn't find the same breakdown in terms of families and singles, but I found 2011 figures for individuals in households that attest to the widening gap between rich and poor:

Source: Department of  Statistics, Singapore (2011)*

Even if you look only at the red line (income after accounting for transfers and taxes), the top earners here made about 8 times what the bottom did. The two spikes took place during the 2007 global financial crisis, when income inequality in Singapore spiked to the highest ever in a decade.What does that mean? In any serious market aberration like a financial crisis, the poor are the worst hit. So wealthier people not only have more resources than a poorer counterpart to spend on each child, they are less vulnerable and susceptible to financial gloom and doom.

Given this basic cost-benefit analysis, you and I would logically have only one child to increase our kid's odds in a zero-sum competition with other kids. In fact, this is the reality in China: in Shanxi province where the one-child policy was suspended, data showed no increase in TFR. The Chinese, when given the choice to have more than one child, chose not to.

Let me recover from the shock (duh). China's income inequality is notorious, especially in coastal cities like Shanghai. Going back to the meritocracy system (one in which people are rewarded according to their abilities rather than status or caste) which is essentially a system of social inequality, unequal outcomes is defended as logical in order that (a) the most talented people do the most important jobs and (b) these talented people are appropriately rewarded so it balances the cost of doing these jobs (like time, effort or the training required to do the job, e.g. studying medicine). 

This is classic functional theory (a la Davis and Moore ) and the criticisms of this theory is just as obvious. Who determines what is a more functionally important job, and who determines what is an appropriate reward? If meritocracy were as perfectly operationalized as it is idealistic in its claim to fairness of opportunity, then CEOs of major banks and tobacco companies should make about as much money as a high school mathematics teacher or a doctor. In fact, a doctor in Germany or Norway doesn't make that much more than a teacher or a waste collector. Obviously, the doctor pays more taxes than the waste collector, but the status of the waste collector and high school teacher isn't as starkly lower in Europe as compared to Asia. Basically, meritocracy cannot guarantee that the subjective and differential social status of a job (which is also culturally determined) does not affect the economic value of the job and thereby, how much said worker is paid. The Europeans figured this out and that's why they worked out a system of redistribution (what our politicians pejoratively dismiss as the welfare-state) to make sure that the postman is able to have as many children as the doctor, and that his children would be accorded the same opportunities in education and health as those of the doctor.

It makes perfect sense then, that in highly developed and highly meritocratic (read: unequal) societies like Singapore and the United States, people who want access to more vital resources like education, healthcare would choose to have fewer children. Fewer children means more income to procure the very resources needed for each child to success in a meritocracy. Immigration is the only reason the Americans are not experiencing what the rest of the OECD is experiencing in low birthrates. You can have a meritocracy, I am by no means denouncing this as the least objectionable system of rewarding people, but just like democracy is the least objectionable form of governance, you need something else to fix the bad effects inherent in any system. And this system, call it welfare or call it a donkey-kong, depends on what that society deems is most important for all. In this respect, I admit that democracies are the best tool to ensure such an outcome.

Don't quote me, see the evidence out there that inequality is associated with lower levels of fertility (Perrotti, 1993).  Scholars have emphasized the role of equality in allowing individuals to overcome fixed costs of investment in human capital: if a society is more equal, given the same level of income, a higher fraction of its poor would be willing to undertake investments with considerable fixed costs. There are good reasons to believe that education investment is precisely characterized by fixed costs and increasing returns.

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The Myth that Meritocracy and Inequality are essential for Economic Growth

Klaus Deininger and Lyn Squire (1998) showed that there is a strong negative relationship between initial inequality in asset distribution and long-term growth. In fact inequality reduces income growth for the poor, but not for the rich, which gives you a clue why your highly-paid politicians keep telling you that our GINI coefficient is okay and still lower than in "other countries". It's funny how they tout Finland and Denmark as role models in terms of education and innovation but leave out the fact that they are also highly equal societies. When someone brings that up, you will hear the automatic reply that the Finns pay more taxes. Hello, if I could get universal healthcare, 2 years of paid maternity/paternity leave (without fear of the chop) and free quality childcare (and not some half-baked, overpriced pre-school programme) in exchange for giving up 30% of my income (which is higher than the average Singaporean's anyway), I AM WILLING PAY MORE TAXES, HAPPILY.

Plus, more and/or better redistribution doesn't necessarily equate to more taxes for ALL segments of society. You just need to tax the richer (who, at the moment are paying ridiculously low rates). Warren Buffett called for the government to increase taxes on his and his peers' incomes, for crying out loud. And if you do a check, you will see that the amount of taxes collected through our famous ERP (road-use toll) last year outstripped personal income taxes by manyfold. Where's all that money going to?

Inequality can be harmful to long run economic growth by making it harder to implement economic reforms. Inequality can reduce the base of support for fundamental structural transformations necessary to embark on a path of high growth because inequality tends to result in polarized societies and polarized societies may be in a weaker position to undertake fundamental economic reforms (I'm thinking of Greece now). Rodrik (1998) has provided empirical evidence that unequal societies are less likely to carry out the adjustments necessary to respond to negative macroeconomic shocks. Indeed, Rodrik finds that what is particularly destructive is a combination of high inequality and poor institutions of conflict management (such as social safety nets, democratic institutions, rule of law, and efficient government institutions). In Singapore, we can say that these had always existed, and were a major reason why our country managed to pull out of each major financial crisis when other countries buckled. 

You may say that Singapore does fine, as we have a bunch of technocrats helming the ship, but however benign and sagely your authoritarian regime may be, it's contingent on the same regime being able to replenish its ranks. The Chinese do not believe that the wealth of a family could outlast three generations for this reason. We cannot rely on a bunch of technocrats who are the bottom-feeders of the meritocratic trench.

Today we are seeing the effects of policies that supported an unfettered economic growth and inadequate resources channelled to remedying the ill effects of that "growth". The ultra rich here do not pay enough taxes to ameliorate the stagnant incomes of the lower classes and the toxic outcomes of inflation. At a time when more and more people need universal healthcare, comprehensive insurance and a level playing field for school-age children, you see trends that instead reveal rising income poverty (the poor are taxed more than the rich when it comes to falling sick and basic goods and services), and rich-poor divide. The Scandinavian countries and Japan consistently have the smallest differences between higher and lower incomes, and the best record of psycho-social health (Wilkinson and Pickette 2009).

Back to my proposition: babies have everything to do with meritocracy and how unequal a society is. I'm not feeling very well-off as an individual. I do well on a statistical graph of average incomes in Singapore but it tells you nothing about how confident I feel in my ability to provide a reasonable amount of resources to my child. This story is not found in the median incomes chart or the GDP growth chart. It's in the other chart that your politicians would rather not address. 

What would I do then? As an individual without much power to mobilise for lofty social change, I do what the other 2 million or so of my countrymen would obviously do: Stop At One. 

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*Dept of Statistics Singapore: Key Household Income Characteristics and Household Income Trends, 2011

Deininger and Squire, 1998, New ways of looking at old issues: inequality and growth, Journal of Developmental Economics, 57(2): 259-87.

Perotti, Roberto, 1993, Political Equilibrium, Income Distribution, and Growth, Review of
Economic Studies 60(4): 755-76.

Rodrik, Dani, 1998, Where Did All the Growth Go? External Shocks, Growth Collapses and
Social Conflict. NBER Working Paper 6350.