# Do welfare payments for children incentivise having children?

A common argument against safety net social welfare for people with children is that it can incentivise people without better options to have children. This could be considered a problem if it means people who aren't fit to be parents continue having children.

For example in New Zealand the the Domestic Purposes Benefit (a benefit paid to people with children, if child support from the other parent does not exceed the base rate) pays about the same rate as a minimum wage full time job.

An argument could be made that the economically rational decision for an uneducated person is to have children, where they can't be fired, aren't subject to starting times or drug tests etc.

Is there any evidence for what the effect of welfare payments for children has?

In particular I'm interested in any situation where the entitlement has either increased or decreased, and what the effects on birthrate or people applying for the benefit has been after that.

• You could compare Denmark - where you get 13 months of paid maternity leave - to somewhere you none? Can't remember the exact years, but you should be able to find lots of info about Denmark via danmarksstatistik.dk/en Sep 28 '15 at 5:26
• @Lasse I don't think cross-country regressions are a valid tool w.r.t. identification. Sep 28 '15 at 11:10
• Historically, it was an argument for family benefits (“generous” is very loaded, there are significant costs to rearing a child in any case, try telling a parent they are freer with their time than an employee!), incentivising having children was the point. But the evidence that it works is not strong, as far as I know. And even it did, empirically, I don't think it would lend much support to your argument, it might also simply be that the benefits allow people to have children they wished but could not otherwise afford. Sep 28 '15 at 11:32
• Just a note— this is one of those questions where the wording in the title will be taken by an economist to mean something very different than to a normal person. Of course it would be surprising if, on the margin, per-child welfare payments did not increase fertility. But the average person will take the wording "welfare payments for children incentivise having children" to mean that people will have children purely for the purpose of obtaining the extra welfare payments, which is likely rare unless the payments are extraordinarily large. Sep 28 '15 at 22:15
• @dwjohnston — I would note that the cost of a child in NZ for a low-income family is \$150/wk— or \$3.75/hr if someone managed to only spend 40 hours parenting (ask anyone with kids whether this is realistic)— so the payment would have to be well in excess of minimum wage for parenting to be a net-income-maximizing choice when a normal job was available. (taxpolicy.ird.govt.nz/publications/2010-dd-supporting-children/…) Sep 28 '15 at 22:31