Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / Sweden's Pro-Natalist Policy Experiment Results
Transcript
- Lucas: So Sweden. For years it was held up as proof that pro-natalist policies actually work. Luna: Right, the poster child. While the rest of Europe was dropping below 1.5, Sweden was hovering around 1.9 for a decade and a half. Lucas: Exactly. From the early 2000s through about 2016, the total fertility rate stayed between 1.8 and 1.95. That's basically replacement level minus a small fraction. Demographers around the world looked at Sweden and said, see, generous family policy can keep birth rates up. Luna: Then something changed. Lucas: It did. After 2016, the rate started sliding. By 2022 it was down to 1.5. That's a twenty percent drop in about six years. And here's the thing — the policies didn't change. The parental leave system, the subsidized childcare, the housing allowances — they were all still in place. Luna: So what gives? Did the policies stop working, or was it something else? Lucas: That's the million-dollar question. Let me lay out the Swedish policy package first, because it's genuinely impressive. Paid parental leave is 480 days per child, with 90 days reserved for each parent — the famous use it or lose it months for fathers. Childcare is heavily subsidized, capped at about 3 percent of household income. There's a child allowance paid monthly until the kid turns 16. Luna: And it's not just money. There's also the cultural piece. Sweden normalized working fathers taking leave years ago. Lucas: Right. That's key. The policy was designed to push gender equality in caregiving, which in theory makes it easier for women to have both a career and kids. And for a while, the data supported that. Female labor force participation stayed high, and fertility didn't crater like in Southern Europe. Luna: So what broke it? Start with the obvious: migration. Lucas: Migration is the first candidate. Sweden took in a large number of refugees in 2015 — about 163,000 asylum seekers in a country of 10 million. Initially, that actually bumped up the birth rate, because newly arrived women tend to have higher fertility. But then it came down as those women integrated and adjusted their fertility downward. Luna: So there's a composition effect. The mix of the population changed, and that shifted the average. Lucas: Exactly. But demographers have done the cohort analysis, and migration explains maybe a third of the drop. The rest is native-born Swedes having fewer children. So what changed for them? Luna: Housing costs? Stockholm has gotten brutal. Lucas: Huge factor. Real home prices in Stockholm rose about 80 percent between 2010 and 2020. Meanwhile, the housing allowance for families hasn't kept pace. Young couples look at a two-bedroom apartment and think, how do we afford a third person in this space? Luna: And the labor market. Even with generous leave, there's precarity. Lucas: Right. Sweden's labor market has dualized — a core of permanent workers with full benefits, and a growing periphery of temporary contracts, gig work, and fixed-term positions. If you're on a one-year contract, taking parental leave might mean your contract isn't renewed. Even with the policy, the risk is real. Luna: So the policies are great, but they're not enough to counter broader economic anxiety. Lucas: That's the takeaway. And it's not just Sweden. Look at Finland and Norway. They have similar policies, and their fertility rates have also dropped since 2016. Norway went from 1.9 to 1.4. Finland from 1.8 to 1.3. So it's a Nordic phenomenon. Luna: That's a broader pattern. What do demographers point to? Lucas: There's a concept called tempo effects. When you improve gender equality and labor market opportunities, women delay childbearing. That creates a temporary dip in the period fertility rate — the rate measured in a given year. But the cohort fertility rate — the number of children women eventually have — might stay stable. The question is whether Sweden's drop is tempo or permanent. Luna: And what's the evidence? Lucas: Early indications are mixed. Cohort fertility for women born in the 1980s is around 1.9, which is stable. For the 1990s cohort, it might drop to 1.7. So some of the decline is real. Women are having fewer children overall, not just later. Luna: That's sobering. Especially for countries like South Korea and Japan that are looking to Sweden as a model. Lucas: Exactly. South Korea has spent over $200 billion on pro-natalist policies since 2006. Their fertility rate is now 0.72. So clearly money alone doesn't fix it. Sweden shows that even with a comprehensive, well-designed system, you hit a ceiling. Luna: What's the ceiling? Is there a maximum fertility rate a developed country can achieve through policy? Lucas: Demographers estimate that the maximum impact of pro-natalist policies is about 0.2 to 0.3 children per woman. So if the underlying rate would be 1.2 without policy, you can maybe get it to 1.5. That's helpful, but it's not replacement level. Luna: So the real driver is not policy but deeper social and economic structure. Lucas: Right. Things like housing affordability, labor market security, gender equality in the home — those are the foundations. If those aren't right, no amount of baby bonuses will change behavior. Luna: And Sweden actually scores well on those foundations. So if even Sweden can't sustain 1.9, what hope is there for the rest? Lucas: That's the uncomfortable question. I think the honest answer is that we don't know how to get developed-world fertility back to replacement in a sustained way. No country has done it. Israel comes closest, but that's driven by strong cultural and religious factors, not just policy. Luna: So what's the lesson for policymakers? If you're advising a government like South Korea's, what do you tell them? Lucas: I'd say three things. First, keep the policies but manage expectations — you're not going to solve this with a check. Second, focus on housing and labor market reform, because those are the binding constraints. Third, accept that you may never get back to replacement, and start planning for a smaller population. Luna: That last one is hard for politicians to say out loud. Lucas: It is. But the alternative is spending billions on policies that don't move the needle, while ignoring the demographic reality. Sweden's experiment tells us that policy can help at the margins, but it's not a silver bullet. Luna: So the takeaway might be: we need to design societies that are good for families, not just to raise the birth rate, but because it's the right thing to do. And if the birth rate stays low, we adapt. Lucas: Exactly. Sweden's policies made life better for parents and kids. That's a win regardless of the fertility outcome. The real failure would be to not try at all. Luna: And with that, I think we have a clear picture. Thanks for walking through the data, Lucas. Lucas: Always a pleasure. Next time we'll look at a very different case — one where fertility actually rose. Spoiler: it involves a war. Luna: Intriguing. See you then.