universal pensions and fertility

Sub-Saharan Africa had a late start, three decades ago, on a demographic transition that has already been completed in other regions. The total fertility rate remains high, at 5.1 per woman, and is not expected to reach 3 children per woman for 35 years. This fertility decline is slow, compared to that registered earlier in South America, China and India, and there is concern that cash payments for children may be partially to blame.

Could introduction of public age pensions offset the effect of child allowances and speed up the demographic transition? In theory, this could work, if parents look at children in part as an investment in old age support, and public pensions provide alternative support in old age. Empirical studies of OECD countries have uncovered support for this hypothesis, for example here, and here.

Does a pension-fertility link exist in sub-Saharan Africa? Swedish economist Göran Holmqvist examines this question by observing that five sub-Saharan African countries – South Africa, Mauritius, Namibia, Seychelles and Botswana – have a long history of universal or near-universal public pensions. Lesotho, Swaziland and Cape Verde joined this group of  ‘high-coverage’ countries only recently, so it is too early to see what effects, if any, this policy change might have on fertility. All other countries in the region have extremely low pension coverage rates, so Holmqvist feels comfortable looking at the region as an experiment in which five countries receive a ‘fertility treatment’, while others are left untreated.

The potential link between child-related cash transfers and increased fertility is often raised as an issue of concern in debates as to their use. Old age pensions are a form of cash transfer where theory would suggest the opposite impact, namely, pensions equalling decreasing fertility. A handful of sub-Saharan African countries have introduced non-contributory social pensions that cover the great majority of the older population. This makes these countries a distinctive group in relation to the rest of the region, where public old age security arrangements, if they exist at all, are largely confined to the formal sector. This article attempts to trace the impact these high-coverage pension schemes may have had on fertility. The findings suggest there has been such an impact, to the extent of 0.5 to 1.5 fewer children per woman, depending on model specification. However, data limitations and methodological concerns require that the results be interpreted cautiously. ….

If these findings are to be believed, what are the policy implications? ….[T]he author does not wish to argue that fertility reduction should be the main motive for introducing old age pensions, as considerations related to poverty, dignity, social cohesion and humanitarian principles are likely to weigh heavier, just as in the case of child-related cash transfers. Furthermore, to the extent that fertility is a major concern, a wide range of other policy instruments exist to influence fertility levels that are likely to be cheaper and more efficient than pensions in reaching that objective. Much is left to be done when it comes to implementing reproductive health policies in sub-Saharan Africa.

Still, … [t]he results presented here serve to remind us that a balanced social protection approach, caring for both elderly and children as proposed by the UN social protection floor, might contribute to a balanced fertility impact as well.

Göran Holmqvist, “Fertility impact of high-coverage public pensions in sub-Saharan Africa“, Global Social Policy 11:2-3 (December 2011), pp. 152-174. (free access)

Göran Holmqvist until recently was a Senior Policy Analyst/Researcher at the Nordic Africa Institute, Uppsala, Sweden. He is currently Associate Director of Strategic Research at UNICEF Office of Research in Florence, Italy.

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