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Two Ways to Encourage Japanese to Have Kids

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Japan would like to stabilize its rapidly aging population, and there are really only two ways to do that. It can let in tons of immigrants, or it can find some way to raise fertility. Otherwise, it had better resign itself to decades of sluggish economic growth, as hard-working young people are required to carry a larger and larger pyramid of retired old people on their backs. Its social security system will go bankrupt, the health care system will struggle, and interest rates might stay at zero permanently.

So, if Japan wants to avoid that, does it go with immigration or does it promote higher birth rates? The U.S., Canada, Australia and most of the other large countries of the Anglosphere have gone with the former, as have a few city-states like Singapore. But given the backlash against mass immigration in Europe, and the general turn against globalization in the developed world, a giant wave of imported population seems an unlikely solution for Japan. That leaves fertility as the main option.

The administration of Prime Minister Shinzo Abe knows this, of course. And it’s making fertility a big priority:

The government plans to make addressing the declining birthrate…an especially urgent, top priority issue…As a measure to support child-rearing, the plan sets forth a goal of eliminating the need for waiting lists for admission to day-care centers by fiscal 2017 and for admission to after-school day-care centers by the end of fiscal 2019. The government will make efforts to improve the working conditions of day-care staff and secure manpower.

The plan also includes the improvement of working conditions for non-regular employees, such as the realization of equal pay for equal work, the concept that workers should not be given differing remuneration based on employment status, and redressing of prolonged work hours.

These are both good steps. Cost is almost certainly a major consideration in people’s decision to have children -- the more it costs to raise each child, the fewer of them people tend to have, and the longer they wait to start having them. Make raising children cheaper, and people will probably have more kids.

Day care is especially important because the financial burden of child-rearing is measured in both time and money. If day care isn’t available, parents -- which in Japan, usually means women -- have to take time off work, which results in huge amounts of forgone lifetime earnings. But private markets struggle to provide child care because of a basic information asymmetry problem -- parents are understandably worried about putting their kids in someone else’s hands. That’s why Japanese parents rely on the government for day care, and that’s why Abe’s efforts to increase day care availability are so important.

The government’s emphasis on female labor force participation is also welcome. Since the 1980s, the correlation between working women and fertility rates has become strongly positive in countries in the Organization for Economic Cooperation and Development. This may be because increasing child-care costs means that only two-income families can comfortably afford kids, or it might be that forcing women to choose between career and family reduces fertility. Abe’s government, influenced by proponents of "womenomics" such as Kathy Matsui of Goldman Sachs, is attempting to leverage this correlation through workplace gender equality initiatives -- a very welcome policy move.

However, despite these good steps, there’s a lot more that Japan could be doing on the baby-promoting front. Policies to encourage higher birth rates have such a dismal record that a country in Japan’s situation needs to be trying many approaches at once.

One idea is to make housing cheaper, by allowing a bit more suburban sprawl. High rents are negatively correlated with fertility, probably because space is a key cost of child-rearing. Japanese rents per square foot are low compared with U.S. cities, but still high overall due to Japan’s dense urbanization. So a little more suburbanization could help.

But an even more important policy would be to promote more flexible working hours. The Abe administration is already trying to get Japanese people to work less, but these efforts are going to be met with a great deal of resistance -- Japan’s culture values long hours, and companies’ inefficient management practices mean that many companies need long hours to stay competitive.

A better move is to push companies toward letting more workers take their work home with them. Parents who work from home can multitask, keeping an eye on the kids while getting the job done. It also allows families to enjoy each other’s company more. Because of Japan’s interminable office hours, many families don't eat dinner together. Working from home would allow people to do that and finish office tasks after the kids go to sleep. And it also allows both parents to be home at the same time in the evening, which may lead to more babies in the natural way.

Unfortunately, remote work is a rarity in Japan. Corporate managers and executives I’ve spoken with cite information security concerns, and managers’ desire to look over employees’ shoulders. But if the government encourages more companies to let their employees take some of their work home, this controlling business culture will change.

Promoting remote work might even help enhance both productivity and life satisfaction -- something else Japan desperately needs to do. Research by Stanford University’s Nicholas Bloom and James Liang suggests that remote work boosts efficiency, happiness and health.

So Japan Inc. needs to let its people work from home. The Abe administration and the various bureaucracies should use their numerous levers of influence to push companies toward this practice.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net