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The Actuary The magazine of the Institute & Faculty of Actuaries

More babies?

T he actuarial profession’s Family Policy Research Group (FPRG) recently published a discussion leaflet with the provocative title of ‘More Babies? Who Needs Them?’. The question is deliberately left for the reader to answer, with the leaflet setting out information and questions rather than opinions and conclusions.
There has been much press talk of a demographic time-bomb, with an ageing population leading to a reduction in the number of workers paying taxes to support the retired population. The reasons are increased longevity, the imminent retirement of the large post-war baby-boom cohort, and lower fertility. Immigration to the UK could mitigate the ageing pattern to some degree, but only temporarily, and with the consequence of even greater population growth.
The Government Actuary’s Department’s (GAD) recent publication of its latest population projections put this topic in the news again. Commentators focused on immigration and the projected longevity increases, and on the prospects of longer lives leading to higher taxes and requiring higher pension saving and later retirement.
However, little has been said about fertility. With the profession’s commitment to the public interest, this leaflet has been written to help fill that gap. The FRPG goes boldly where others fear to tread, with a carefully worded leaflet supported by the Social Policy Board and the Faculty and Institute presidents. The FRPG feels it is important the public is able to have an informed discussion about the implications of different levels of fertility for the UK population. The actuarial profession should not shrink from providing a discussion starter because of the worry that it may not be politically correct to talk about fertility rates, or the fear of being labelled pro-natalist or anti-natalist.
So, the FRPG aimed to write a leaflet setting out the issues, providing facts, and leaving readers to draw their own conclusions. The leaflet is aimed at the general public, not just policy-makers, and has been sent to charities with an interest in this topic as well as MPs, MSPs, and public libraries. The document is also available on the profession’s website, with an on-line survey for responses.

The future is in our hands
What does the future hold for us? GAD’s main projection assumed the total fertility rate (the sum of the age-specific fertility rates at any time) would increase from its 2001 level of 1.64 to 1.74, so that eventually women will bear 1.74 children on average. Recently published figures show the birth rate in England and Wales rose from 1.65 in 2002 to 1.73 in 2003.
Under GAD’s main projection, the UK population is predicted to grow from nearly 60m in 2004 to 65m in 2050. At the same time, the median age is estimated to rise from 38 to 44. The ratio of people aged 18 to 64 to those over 65, which gives one measure of the ‘support ratio’, is predicted to decrease from 3.9 to 2.2 over this period.
What will this change in the UK population look like? Figure 1 above shows projected 2050 population against a sketch of the shape of the 2004 population. The older age groups push through the bounds of the 2004 population lines.
Buckingham Palace will be busy sending out around 46,000 100th birthday congratulations a year, compared to about 4,000 a year currently.
Italian fashions?
But what if the total fertility rate were to decrease instead to 1.2? This isn’t impossible, as Italy was recently at this level. The FRPG commissioned a new projection from GAD, using the main projection assumptions on migration and mortality, but gradually decreasing the fertility to 1.2. The 2004 to 2050 change is more striking, with the overall population decreasing to 55m and the support ratio decreasing to 1.9. Pictorially, the 2050 age profile looks more like a diamond than the traditional pyramid (figure 2 right).

Go forth and multiply?
What if the total fertility rate was to increase to 2.4? This is the figure reached for the average completed family for women born in the UK in 1940. The second FRPG-commissioned projection assumes fertility increases to 2.4, and again uses the main projection assumptions on migration and mortality. This new projection shows the total UK population expanding to 80m and the support ratio moving to 2.6. The age profile looks very different (figure 3).

Outlook for the birth rate?
Is the declining birth rate just a result of women delaying childbirth? To illustrate existing trends since the 1960s, figure 4 below shows the average number of children per woman, year by year. Each line represents a cohort of women born in the specified year.
This shows that each succeeding generation has achieved a lower family size. However, the figures are not yet complete for the generations of women born since 1960, so they may break the trend.

A nanny state?
Clearly the fertility rate has a big impact on the size and age profile of the UK’s future population and readers will have different views of what would be the ‘best’ outcome.
Fertility rates depend on people’s decisions and experiences, which are influenced by, among other things, the level of state and employer support for child-raising. So the leaflet ends with a list of measures that might influence child-raising decisions, and asks the reader to decide whether those measures should be strengthened, weakened, or left just as they are. Readers can feed back their views via the profession’s website.
Some people dislike the idea that changes to child-raising support could be viewed in the light of their likely impact on encouraging or discouraging people from having children but keeping the status quo also affects people’s choices. At the FRPG we hope this leaflet will help to broaden the debate in the UK.