#BTEditorial – Pay women to have more babies

The suggestion from a Bahamian actuary that the solution to our social security and pension woes was for our citizens to spend longer years in the workforce, while at the same time, slashing benefits to retirees was a little too much to stomach.

We get it. Our population is ageing, and the number of younger people employed and contributing to the social security system is falling.

This combination is not what social security and investment managers want to hear but it is the reality confronting not just us in Barbados but other nations in the Caribbean.

The issues are many and the solutions are far from simple.

The Central Bank of Barbados must be commended for keeping this topic on the front burner and highlighting the interconnectedness of employment, GDP growth, the population and the health status of the island’s population.

In its July edition of the Caribbean Economic Forum titled: Solving the Ageing Population Crisis in the Caribbean, we heard suggestions from an eminently qualified  panel that included Professor Emeritus Karl Theodore, Senior Consultant advisor at the Centre for Health Economics at the University of the West Indies, St. Augustine; Derek Osborne, Actuary and Partner at LifeWorks, The Bahamas; and Diane Quarless Director of the Economic Commission for Latin America and the Caribbean (ECLAC) Sub-Regional Headquarters for the Caribbean.

They outlined that Caribbean governments are struggling with the challenges associated with a population that was dominated by older persons who could no longer contribute to economic development and activity in the way they were during their pre-retirement years.

The “predicament caused not only by longer life expectancies, but also by declining birth rates, which for some countries have fallen below replacement rate,” the Central Bank observed

In this connection, it observed that the implication for the labour force, the social security system and its ability to sustain the level of benefits it currently offers were significant.

When Derek Osborne, Actuary and Partner at LifeWorks in The Bahamas floated the suggestion that we should possibly work beyond the current retirement age, which for us in Barbados is 67, there was a collective gasp.

The reality is that lifestyle diseases and cancers are snuffing out the life of many middle-aged Barbadians, some before they even reach retirement.

A cursory review of weekly death notices solidifies the assertion that an even larger number of Barbadians do not get to enjoy the fruits of their labour for any significant period after retiring from the workforce.

That then raises the question of how do we get more young people contributing to our social security system in a way that sustains it for decades to come.

There are quick fixes such as encouraging immigration but that is likely to present political and social challenges.

The problem of our low population growth did not creep up on us overnight. It has been the point of discussion for several decades.

Many middle and upper class women have been criticized for their family planning choices which invariably translated to one child or no children at all.

It is undeniable that the cost of raising a child in 2022 is a very expensive endeavour in two-parent households, and even more challenging for single parents.

Parents are considering issues such as their own financial position and if they choose to have children in their late 30s or 40s, will there be enough time to provide the financial support their children require, while also saving for a comfortable retirement.

One avenue that successive administrations have ignored is financial incentives for women and couples to have larger families.

A  recent National Geographic article suggested that the COVID-19 pandemic provided a baby boom for Nordic countries including Iceland, Finland, Sweden, Norway and Denmark. It was the opposite of what occurred in the United States, France and other rich nations.

The reason –  generous financial incentives for families. All five Nordic countries offer paid parental leave for at least 11 months, based on income from the previous year.

That can range from 53 per cent of income in Denmark to nearly 100 per cent—and as much as US$6,000 a month—in Norway. In Iceland, new parents receive 12 months of paid leave at 80 per cent of their normal income, up to about US$4,500 a month.

The economist may question whether we can afford this or if it is sustainable. Our response will be: Is the pensions and social security crisis not a greater threat?