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‘Who would give me a job with two years of work experience and a small child?’

2024-03-18 12:29:00

Should tax concessions, consideration in pension or other benefits be offered to families to motivate them to have more children as early as possible? - we heard research summaries on incentives to have children.

Budapesti Corvinus Egyetem

The average age of women having their first child has risen to over 30 years in Hungary,’ said Erzsébet Kovács University Professor at a Research Week programme in early February. András Olivér Németh (Institute of Economics, Assistant Professor) explained in his presentation the results of a publication written with Petra Németh and László Tőkés. In it, the authors examined the factors influencing the so-called total fertility rate (TTA). The research covers the 27 EU countries stressing the countries of Central and Eastern Europe, with data from the OECD, Eurostat and the World Bank. The authors used econometric methods to examine the impact of several factors that affect fertility rate: among them, demographic and economic variables (i. e. life expectancy, old-age dependency ratio, GDP growth rate, inflation rate, unemployment rate, the economic confidence index). In addition, the analysis included labour market factors (e.g. the ratio of part-time employees), higher education, and family policy variables (the share of public expenditure on family support as a share of GDP, the extent of the tax benefits going to families with two children earning the average wage, and the amount of money transfers to families).  


In addition to the general finding that the economic situation affects fertility rates, the authors’ results also showed that the impacts of these various factors are different in Western Europe and in Central and Eastern Europe. For example, variables related to the ageing of society have a greater impact in Western Europe, but, at the same time, the number of marriages and the proportion of children born out of wedlock are significant factors in Central and Eastern Europe. Regarding the economic factors in Western Europe the unemployment, while in the Central and Eastern European countries inflation has a greater impact on the fertility rates. Of the labour market indicators examined, only the prevalence of part-time work was to be found significant, and only in Western Europe, which is of course explained also by the fact that it is more prevalent in the West and has a larger variation across countries. In contrast, higher education expansion has a a positive effect on fertility rates in Central and Eastern European countries, while two of the family policy variables are insignificant in both groups of countries, and the coefficient of tax credits is significantly different from zero only in Western Europe. In other words, the positive impact of tax credits is more pronounced in Western countries, despite the recent emphasis on their use in Central and Eastern European countries, said the speaker. 


Will people raising children be compensated in their pensions? 


Then Petra Németh, Assistant Professor (Institute of Economics), talked about the advantages and disadvantages of a pension system with compensations dependent – among others – on having children.  (Eszter Szabó-Bakos, Associate Professor of the Institute of Economics is the co-author of the research). What would be the impact on society and the budget if a decision was taken later to compensate the costs of raising children in the pensions? Petra Németh pointed out: In Hungary, the current TTA is 1.5, with a life expectancy of 76 years. It is well-known that the Hungarian age tree is disproportionate – the big amount of ‘Ratkó-children’ are already retired, comparing this only 90,000 children in average are born every year. The speaker stressed that the current pension system in Hungary indirectly penalises those who have children, as Hungarian mothers tend to stay at home with their children for a long time, thus directly depriving them of earnings for years, and indirectly leading to a long-term wage gap with childless workers, which is also felt in pension payments. The initial pension of a woman with two children is on average 15 percent lower than that of a woman without children, while that of a woman with three children is 20 percent lower, Petra Németh said, referring to data from the Hungarian National Bank. Various studies on the subject show that a pension calculation based on the number of children would have a positive effect on fertility, but would reduce living standards and social welfare. In a so-called compensatory pension scheme, the pension would compensate for the costs of raising children, bringing the pensions of people with and without children closer together. However, in the long term, this compensation pension system has by no means such a positive impact – the increase in the desire to have children – would be only 1%. 


Izabella Kuncz, Assistant Professor (Institute of Economics), said in her presentation of the results of her publication written with Petra Németh and Eszter Szabó-Bakos that in 2022 within Europe the population decline at the fastest rate took place in Hungary. In 2023, personal income tax allowance for mothers under 30 years of age were introduced (from the age of 25, because up to the age of 25 everyone gets tax concessions). Last year, 0.26% of the population could have taken advantage of this new benefit as a maximum, if all the mothers in that age group had the income included in the consolidated tax base under the Regulation, or if each mother had given birth to only one child in that year. According their model, the initiative can raise the number of children by 0.97%, aka 860 newborns, in the year of its introduction. Tax concession for women between 25 and 30 years of age has a minimal budgetary impact, i.e. its macroeconomic impact is negligible. 


Kuncz also pointed out that having children later in life primarily affects women with higher qualifications, as it takes them a relatively long time to complete their education, and if they have children at the beginning of their careers, they will fall behind their childless counterparts in terms of both salary and position. So, for them, it is indeed a rational decision to postpone the arrival of the first baby. It was also said that it is absolutely necessary to increase the birth rate, but there are demographic problems, too: there are fewer women of childbearing age. 


After the presentation, students were invited to ask questions. The majority agreed that having children is influenced by a large number of factors. ‘I gave birth to my first child at the age of 30. After that, I was able to refer to 7 years of work experience in job interviews. I would be very curious to know, if someone applies for a job after childbirth with two years of work experience and a small child, which employer will hire them?’, said a young woman, adding that she hears everywhere that the question about having children under 3 years of age is an unavoidable part of a job interview with a young woman. 

The Research Management Office will continue the Research Week programme, with the next event scheduled for June 2024, for which registration is expected to start in May. 


Katalin Török 


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GEN.:2024.06.13. - 08:04:32