Trump's $5,000 ‘baby bonus' will never work

Telegraph

02-05-2025

Donald Trump's plan to give women $5,000 to have children is a 'symbolic gesture' which will fail to curb the United States' crumbling birth rate, experts have warned.
The push for more babies comes amid decades of falling birth rates. The total fertility rate in 2023 was just 1.62 births per woman, well below the 2.1 required to keep the population even.
Mr Trump told reporters that a cash reward plan suggested by aides 'sounds like a good idea to me', while Elon Musk, who is thought to have at least 14 children, has previously warned 'civilisation is going to crumble' if fertility rates do not climb.
The US's pro-natal proposals are inspired by the rewards offered by a number of nations dotted around the globe, including Australia, South Korea and Hungary.
But policies have posted mixed results, with birth rates failing to significantly increase.
Gabriella Hoffman, the director of the Center for Energy and Conservation at Independent Women's Forum, questioned why the American policy was under consideration.
Ms Hoffman wrote on X: 'Baby bonuses have not worked for Hungary. Why would we replicate this here in [the US]?'
Joseph Osborne, of US legal firm Osborne & Francis, said the incentives drawn up by the Trump administration 'risk becoming symbolic gestures'.
He said: 'Global evidence suggests that baby bonuses on their own are rarely effective in reversing declining birth rates.
'Countries like South Korea and Russia have introduced generous financial incentives for over a decade, including cash payments, housing subsidies, and tax breaks. Yet, both nations remain among those with the lowest fertility rates in the world.'
Russia's birth rate of 1.41 is described as 'catastrophic' by the Kremlin, while South Korea has recorded just one yearly birth rate increase in the past decade.
Mr Osborne argues, 'these policies often fail because they treat the symptom, not the cause.'
Figures from analysts LendingTree show the average cost of raising a child to the age of 18 is $297,674, the equivalent of $29,419.
This marks a 25pc jump in costs compared with 2023 when the total stood at $237,482.
Mr Osborne said: 'People aren't simply having fewer children due to upfront costs; they're making decisions based on long-term economic pressures, such as unaffordable childcare, stagnant wages, housing insecurity, and the lack of parental leave.
'A one-time payment of $5,000 may help with early expenses, but it does little to shift these deeper structural realities. Incentives risk becoming symbolic gestures rather than sustainable solutions.'
In the US, maternity leave is inferior to other leading countries as there is no national statutory paid maternity, paternity or parental leave.
The Family and Medical Leave Act enables some employees to take up to 12 weeks unpaid maternity leave, but only 60pc of workers are eligible. States can pass their own maternity laws, but a postcode lottery as to whether mothers receive support has been a key factor harming the nation's fertility rate.
'Lump sums aren't the solution'
Oliver Chapman, chief executive of global supply chain procurement company OCI, said that while a cash perk may benefit parents in developing countries, higher earners are unlikely to be swayed.
'In developed nations, a baby bonus has only tended to result in a short-term increase in birth rates,' he said. 'Middle or upper-income families are much less likely to respond to this type of incentive, especially in the US.'
Australia rolled out a $3,000 baby bonus in 2002, and while the fertility rate increased from 1.7 to 2 in the space of six years, it soon began to slump.
By 2014 it had fallen to 1.5 and the policy was scrapped.
Stefania Marcassa, a professor of economics at Université de Cergy-Pontoise, said: 'Studies suggest that while cash transfers can influence the timing and short-term patterns of fertility – especially among disadvantaged groups – their ability to produce sustained increases in overall fertility remains limited and context-dependent.'
Rather than offer a one-off cash payment, demographics expert Paul Morland, believes the US should explore tax reliefs for parents.
'Payments are part of the solution, however, doing things through the tax system is more effective,' he said.
'A $5,000 payment is a lot of money to some people but tax relief is more relevant to higher earners and would benefit people across the income spectrum.'
Tax relief, however, can come at a greater cost to government budgets, with France spending between 3.5pc and 4pc of GDP annually on a mixture of handouts, services and tax breaks.
Families with one or two children can shave up to £1,700 a year off their tax bills, while those with three or more can save £3,400. Means-tested childcare allowances of up to £810 and a birth bonus of £892 are also offered.
France is one of Europe's most fertile countries, yet, since 2011, there has been a continuous decline despite the perks. The number of births recorded last year was the lowest since 1919.
Emmanuel Macron is pushing for a 'demographic rearmament', with adults offered greater incentives to have children.
As France struggles to plug its falling birth rate despite devoting vast sums of GDP, experts believe Mr Trump's $5,000 incentive could be a mere drop in the ocean.
'There are other ways to spend money on this, such as changing housing regulations to create more affordable homes – that might give the government more bang for its buck,' Mr Morland said.
As for Britain, the fertility rate of 1.44 is even below that of the US.
The number of children born in England and Wales has been falling for the past decade and is at its lowest since 1977, while the average age of first-time mothers is at an all-time high.
Women are thought to be choosing to prioritise careers or buying a house over having a baby, meaning many are having children later in life or not at all.
Despite the decline, cash lump sum incentives for adults to have children are not on Britain's radar.
Figures published at the end of last year showed that the number of children born to British mothers has fallen by a quarter in 15 years.
Meanwhile, the fertility rate for foreign-born mothers has jumped to 2.03 children per woman. It means Britain has a reliance on immigration to boost its birth rate, according to Sarah Harper, professor of gerontology at Oxford University.
The South Korean birth rate fell to just 0.72 children per woman in 2023, the lowest in the world. It recorded a 3.1pc jump last year but it's unclear whether the government's pro-parent policy push is behind the rebound.
Economists believe it may be down to the mini-boom of babies born in the 1990s who are now reaching their early 30s and becoming parents themselves.
The country has spent over £200bn on baby-making incentives in the past 20 years, including state-sponsored dating.
A much more radical scheme under consideration would mean cash handouts worth around £56,000 per baby.
Elsewhere, Hungary is planning to grant mothers with one child an income tax exemption until they turn 30, while those with at least two children will pay no income tax for life.
Meanwhile, another recent working paper found that a child-related transfer launched in Italy in 2022 had no impact.
With mixed results around the world, there is scepticism that a $5,000 bonus will work in the US. Rather than using a 'blunt tool' cash perk, experts believe deeper-rooted socio-economic issues need resolving.
Mr Chapman said: 'I do not see Trump's latest policy reversing declining fertility trends and increasing the birth rate.'