The V4’s greatest existential threat

Demographic decline and an ageing population

Filip Mazurczak
5 sierpnia 2014

Reading the headlines or listening to politicians, one might be misled to believe that an imminent Russian invasion is the biggest existential threat to the Visegrad countries. In fact, a much greater, yet less visible spectre with devastating political and economic consequences is haunting East-Central Europe: that of demographic decline and population ageing. Fortunately, there are solutions, although time is running out. Will the V4 governments act before it is too late?

Since the collapse of communism in the region in 1989, the demographic prospects of the Czech Republic, Hungary, Poland, and Slovakia have become much more bleak. In the past quarter century, birth rates have plummeted in these nations and, especially since their accession to the European Union exactly one decade ago, emigration rates have compounded.

In industrialized nations, the total fertility rate (TFR) – the projected number of children a woman will have during her childbearing years – is measured between the ages of 15 and 49; this is a synthetic number, and in Germany, for example, researchers at the Max Planck Institute have found that the number of offspring German women actually have (1.6) must be 2.1 for a population to be stable, which is higher than the TFR (1.4). The rate is minimally above two children per two parents, as not all children live to adulthood.

Under communism, the TFR in these four (then actually three, as Czechoslovakia was then one state) countries was consistently at about 2.1. Crèches were widely available, mothers received significant benefits, and female unemployment was not a major problem (on the contrary, communist governments encouraged women to work outside the home using feminist slogans).

Since then, however, the unemployment rate has skyrocketed in the region, particularly among women and the young. As part of liberal economic reforms, benefits for mothers were slashed, while crèches became decrepit. The results were predictable. According to the most recent data, the TFR in the Czech Republic is 1.46; in Hungary and Slovakia, it is 1.34; and Polish women on average have 1.3 children.

The inevitable consequence of these unsettlingly low fertility rates is that there will be fewer East-Central Europeans. Of course, a reduced population in itself has significant consequences. First of all, a nation’s international significance declines. For example, the number of MEPs a country will have in the European Parliament will be reduced.

However, deteriorating demographics have more dangerous consequences than just smaller populations. Above all, a decline in the birth rate inevitably leads to an increase in a nation’s pensioner population. Considering present demographic trends, this will also happen to the V4 countries. For example, according to the Eurostat predictions, a third of Poland’s population will be over 65 in 2060! The rest of the Visegrad states have little better prospects, and this is a disaster in the making.

As the number of working-age people decrease at the cost of those past the age of retirement, this creates a vicious cycle. On the one hand, pensioners will receive increasingly small pensions until they reach a level that can sustain no one. Meanwhile, with fewer workers (and a greater proportion of their salaries being taxed to support a ballooning pensioner population), this spells further economic decline. At the same time, this will make a society prosperous and thus make it less affordable for families to have more children, thus aggravating the demographic mess further.

 

The Czech Republic and Slovakia: ignoring the crisis

Because the Czechs and Slovaks were united under the banner of one country for 75 years, their domestic policies, not just on demographics, are often quite similar. As noted above, the Czech Republic has a marginally higher fertility rate than its three neighbours, yet prospects are still gloomy: Czech demographers are estimating that the population of their countries will shrink from 10.5 million presently, to 9.5 million by 2050, and just 6.5 million in 2100.

While Poland’s ruling officials have largely ignored the country’s demographic plight or prescribed ineffective policies (as will be noted in greater detail below), at least Poland’s demographic problems have become an important part of the political debate. It seems to be less so the case in its two southern neighbours.

Both the Czech Republic and Slovakia spend little on family policies (1.2% and 1.8% of GDP, respectively, as compared to the EU-wide average of 2.2% and upwards of 3% in the more fertile nations of the bloc), and they focus mostly on ineffective financial incentives. For instance, Czech parents have 28 weeks of leave with 70% of their income, which is a poor incentive. Furthermore, fathers are not at all encouraged to take leave, and as a consequence less than 2% do so.

Prague and Bratislava must understand that to truly impact their depressing demographics, bribing parents with modest financial rewards is not enough. Instead, these governments must make it easier for parents to balance between work and family. For instance, only 4% of Slovak children under three have access to crèches. As a consequence, the overwhelming majority of Slovak women have to either stay at home and raise a child (thus providing their family with one income less and making it less likely they will afford a second or third child), or pursue a career and be childless or stop at one child.

 

Hungary: leading the region

It is significant to note that, although Prime Minister Viktor Orbán is a controversial figure in Hungary and elsewhere, even his domestic foes have supported his pro-family policies. Indeed, Orbán, the father of five, a devout Protestant, and a conservative, has made saving his nation from the demographic abyss a key aspect of his domestic rule.

Firstly, Orbán has introduced generous breaks for large families. Those with three or more children pay virtually no taxes. Next, he has greatly increased social benefits for families. In just a couple years, Hungary went from being one of the countries that spend the least on families in the OECD to being one of those that do so the most. Now, it spends almost 4% of its GDP on the family.

This generous spending on families has particularly benefited large ones. Hungarian children from families with three or more kids have subsidized school lunches and textbooks, while the parents of three or more have seven more days of paid vacation than the average Hungarian. Hungarian families with three or more children also have preferential mortgage rates on housing.

Finally, Orbán has been particularly attentive to the Hungarian diaspora. Like Poland, Hungary is a country that historically was once much greater than it is, and so has many compatriots living in neighbouring countries. Before the 1920 Treaty of Trianon, Hungary’s territory was three times as large as what it is today. Orbán has made it easier for Magyars living in former domains in Romania or Serbia to acquire Hungarian citizenship. Hopefully, this will encourage more of them to move to the land of their ancestors (especially those living in poorer states).

Of course, there is much more that Hungary could do. Above all, while Orbán’s pro-family policies mostly favour large families, it should also strive to encourage working mothers with one or no children to have two or three by subsidizing crèches and preschools.

Nonetheless, there have already been positive results. While Hungary’s TFR is still low, it has been rising since 2012, nine months since Fidesz introduced many of its family policies. In the first five months of this year, the number of births in Hungary increased by 3% year-on-year. Previously, the number of Hungarian births had consistently fallen since the early 1990s. Given Orbán’s generous policies, it is not unreasonable that this trend will continue.

 

Poland: much ado about nothing

In 2005, when the socially conservative Law and Justice (PiS) party came to power, a focus on family values was emphasized. However, Law and Justice attempted to stop a haemorrhage using Band-Aids. They first introduced a “baby bonus”: couples that had a child would receive a onetime payment of 1,000 or 2,000 zlotys (approximately 300 and 700 dollars). Law and Justice also introduced a minor tax break on children that increased with their number.

Family policy experts criticize “baby bonuses” as ineffective. However, one need not be a specialist to reach such conclusions; common sense is sufficient. Would giving couples a onetime payment that is less than one monthly wage incite anyone to have more children?!

In 2007, after two years of incompetent rule, Law and Justice lost power in snap elections to Civic Platform (PO), a centrist party that since losing the elections in 2005 has mostly gained votes by scaring the electorate with its competitor. However much Civic Platform hates Law and Justice, in demographic policy it also does little. In 2011, Prime Minister Donald Tusk announced he would increase tax breaks for families with three or more children. However, like Orbán, President Bronisław Komorowski is also a father of five. He has repeatedly spoken about giving tax credit, rather than tax breaks, to large families, as most are poor and do not pay taxes in the first place. However, his words have yet to translate into actions.

However, Civic Platform (largely due to the influence of its conservative junior coalition partner, the agrarian Polish People’s Party) has introduced some modest pro-demographic reforms. In 2011 it liberalized the laws regulating the establishment of nurseries. Consequently, the percentage of children under three in crèches has increased modestly from about 2.5% to 5%, although this is too tiny to make a difference.

In addition, in 2012 Tusk announced he would increase maternity leave to twelve months with parents receiving 80% of their incomes. It is true that Scandinavia has similar schemes, yet they are notably different; there, fathers are required to take part of the leave to decrease job discrimination against young mothers. Poland’s plan does not.

Wiretapped conversations between many high-ranking Civic Platform officials revealing corruption and the government’s non-existent response to the scandals have eroded the party’s support. Elections will be next year, and Tusk will focus on improving his disgraced public image rather than deal with tough policy problems. Polls indicate that Law and Justice will win next year. Its boss, Jarosław Kaczyński, speaks much about family values and the need to tackle Poland’s demographic problems, although given his previous record, I wouldn’t hold my breath.

Poland’s government should enact more ambitious policies to encourage mothers to work by increasing crèches further and increasing equality in parental leave. Furthermore, since 2004, 2 million Poles have emigrated; only a handful have returned. Politicians should work to improve the labour market and increase wages so they return, and make it easier for the millions of Poles living in the former USSR in once Polish territories to immigrate.

 

Demographics: not necessarily destiny

In the 19th century, Auguste Comte presciently noted that “demographics is destiny.” He was right in that a country’s demographic situation will influence its future history. However, demographics are not destined. They can change.

For instance, as recently as the 1980s the whole world was worried about overpopulation, while developed nations feared crises similar to that in the Visegrad Group. Now, things have changed. With the exception of Sub-Saharan Africa, the developing world’s TFR has fallen remarkably. Brazil, Iran, and Thailand are just three developing nations with TFRs below 2.1.

Meanwhile, many developed countries previously faced with demographic catastrophes have recovered. One is Quebec – the formerly ultra-Catholic province went from having African-styled fertility rates in the 1960s to having the lowest in Canada two decades later. Today, Quebec’s TFR is higher than Canada’s (1.7 versus 1.5). This was due to the fact that Quebec’s Parliament enacted ambitious pro-natalist policies such as subsidizing crèche and day care tuition and introducing generous parental leave that doesn’t discriminate against women.

The Quebecois should serve as an example to the V4 states. The people of the Czech Republic, Hungary, Poland, and Slovakia cannot take comfort in the fact that OECD economic forecasts predict their region will have one of the most dynamic GDP growth rates among industrialized countries. If they do not take charge of their demographic situations soon, this growth will come to an unpleasant halt.

There is still time, but, as the less numerous East-Central Europeans born during the baby bust of the 1990s come of age and start families, it is quickly running out.

 

Filip Mazurczak studied history and Latin American literature at Creighton University and international relations at The George Washington University.

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