Policies Addressing the Tempo Effect in Low-Fertility Countries WOLFGANG LUTZ VEGARD SKIRBEKK GOVERNMENTS IN MANY industrialized countries are expressing concerns about the long-term consequences of currently low fertility rates and the resulting rapid population aging for pension systems, health systems, intergenerational equity issues, global economic competitiveness, and relative global political and cultural influence. A recent UN Population Division survey of governments showed that without exception in countries where period fertility was below 1.5, respondents considered this level be too low (UN 2003; McDonald 2005). The European Commission recently initiated a high-level discussion across the EU by publishing a Green Paper on demographic trends (European Commission 2005). Several national governments have recently started to give significant public attention to the issues of low fertility and population aging. But the concern over demographic trends is not limited to governments and civil society organizations. Increasingly business leaders are concerned about the consequences for public finance and global competitiveness. A recent prominent example is a statement by the European Banking Federation in which the chief economists of more than 4,500 commercial banks in Europe highlight the economic dangers of population aging and state rather bluntly as the first of their three main recommendations: “Increasing the birth rate is particularly important” (European Banking Federation 2004). Much like the governments, the bankers, however, do not say how they hope to increase fertility. In demographic terms, the future path of population aging is determined by four forces: the current age structure of the population and the future paths of fertility, mortality, and migration. Of these, only migration and fertility are at least theoretically candidates for government policies to counteract the widespread aging trend. The current age structure is a given, and as to POPULATION AND DEVELOPMENT REVIEW 31(4): 703–723 (DECEMBER 2005) 703 704 POLICIES ADDRESSING THE TEMPO EFFECT mortality, only policies aimed at increasing life expectancy and hence reinforcing population aging are politically feasible and ethically acceptable. Continued population aging is largely programmed into the current European age structure, where low birth rates over the past two decades have resulted in a small number of children and therefore decreasing numbers of potential mothers in the future. Because of this, Europe has already developed a momentum toward population shrinking (Lutz, O’Neill, and Scherbov 2003). Possible policies aimed at increasing fertility and/or increasing immigration cannot be expected to reverse the aging trend, but they could moderate it and hence soften the expected negative consequences of population aging. Calculations based on the 15 member countries of the European Union (EU-15) in 2000 show that even in the case of a steep increase in immigration to produce a net inflow of 1.2 million persons per year, the old-age dependency ratio (defined as the population above age 65 divided by the population aged 15–64) is likely to almost double by 2050. Similarly, even a steep hypothetical increase in fertility to a TFR of 2.2 could not stop significant population aging. Taken together, higher fertility and higher immigration can only moderate the aging trend. For the EU-15, it turns out that by 2050, 100,000 additional immigrants have the same effect on moderating the increase in the old-age dependency ratio as a sustainable increase in the total fertility rate by 0.1 children per woman (Lutz and Scherbov 2003). In this article, we focus solely on the fertility component and particularly on possible policies that are aimed at affecting the tempo of fertility, that is, the timing of births over women’s life cycle. The tempo effect depresses the level of period fertility and hence lowers the number of births in a calendar year as long as the mean age of childbearing increases. Such policies may be particularly relevant if some sort of “low-fertility trap” exists as we discuss below. We summarize the demographic rationale for policies aimed at influencing the tempo of fertility, review evidence about how the timing of graduation from school affects the timing of fertility, and finally present some calculations about how hypothetical changes in the tempo of fertility induced by school reforms would influence the future paths of population aging in Austria, Bavaria, and Italy. Entering or avoiding a “low-fertility trap”? Peter McDonald recently observed that low-fertility countries tend to fall in two distinct groups, those where the TFR has stayed above 1.5 and those where it has fallen and remained below this critical level (McDonald 2005). There are currently 28 countries with TFRs below 1.5, and a recent UN compendium on national population policies indicates that the government of each of these countries considers this level of fertility too low (UN 2003). McDonald hypothesizes that it is more difficult for a country to raise fertility to, say, 1.6 once it has fallen to levels of 1.3 or 1.4 than to keep fertility WOLFGANG LUTZ / VEGARD SKIRBEKK 705 around 1.6. From this assumption he derives the policy recommendation that countries should strive to keep fertility above the critical level of 1.5. The assumption of a nonlinear dose–response relationship in the field of possible policy impacts on fertility levels is a welcome addition to the inconclusive literature on what level of fertility ought to be considered “too low” and how governments might try to influence fertility levels. One can elaborate on this hypothesis by seeking to identify nonlinear feedback mechanisms that result in a bifurcation process that makes a level of period TFR around 1.5 a watershed between different demographic regimes. It would then follow that once this Rubicon is crossed, it will be difficult to reverse this regime change. Recent work by Rindfuss et al. (2004) on social transitions in Japan supports this assumption of nonlinear, self-reinforcing processes in social change with thresholds and traps. Is it justified to call this possible mechanism of irreversible (or hardly reversible) regime change a “trap,” a term that neither McDonald nor Rindfuss uses? If a trap is defined as an unpleasant situation (governments would rather see higher fertility) into which one enters unintentionally and can only escape with great difficulty, then indeed the described demographic regime change may be called a trap. But in addition to postulating the possibility of such a low-fertility trap, it would be useful to identify the mechanisms at play in the self-reinforcing process toward lower and lower birth rates and consequent accelerating population aging and shrinking population size. We describe three such mechanisms, one demographic, one economic, and one related to social norms. The demographic process refers to the well-studied but in the public discussion still not fully appreciated phenomenon of negative population momentum. The dynamics of the age structure of a population imply that as a result of low fertility in past years, fewer and fewer women (potential mothers) will enter the reproductive ages in the future. The decline in this population sub-group will then exert downward pressure on the absolute number of births and the crude birth rate. It has been estimated that several countries and the EU as a whole have recently entered a period of negative population momentum, that is, the age structure implies future population shrinking even if fertility would instantly increase to replacement level (keeping mortality constant and assuming no migration) (Lutz, O’Neill, and Scherbov 2003). With historically given age structures, this negative momentum is an independent force implying fewer and fewer births in the future. The lower the fertility rates in the near term, the stronger the force of negative momentum in the long term. While this demographic component of the “low-fertility trap” is purely an accounting effect at the aggregate level, the following two mechanisms relate to behavioral effects. The economic mechanisms that could lead to a downward spiral in fertility from one generation to the next can be derived from the first part 706 POLICIES ADDRESSING THE TEMPO EFFECT of Richard Easterlin’s relative income hypothesis, which postulates that family size results from the combination of consumption aspirations (which are largely formed in the family of origin) and expected income (Easterlin 1980). According to Easterlin the post–World War II baby boom in the United States resulted from the combination of low aspirations (parents of the baby boomers were relatively poor) and high economic growth during the early postwar period leading to high expected income and general optimism. This line of reasoning can also explain the subsequent fertility decline as a combination of increased material aspirations in the next generation with a less optimistic economic outlook. Disregarding the second part of Easterlin’s hypothesis in which he assumes that expected income is a function of cohort size, which implied the unsubstantiated expectation of a second baby boom, one can directly apply the first part of the relative income argument to current and future fertility in low-fertility countries. Material aspirations of young people have been rising over recent decades as a consequence of increasing parental wealth, high consumption standards communicated by the media, and possibly even smaller family size (youngsters have to share with fewer siblings). At the same time the long-term economic outlook has been darkening in part because of the prospect of population aging. As documented in youth surveys around Europe, the expectations of people entering the labor market today are not optimistic. Youth unemployment is high in many countries (despite smaller cohorts entering the labor market); there are fewer secure jobs; and recent steps toward reforming various systems of social security (even if rather minor steps so far) have given rise to a somber view of the future among the younger generation. In contradiction to the second part of Easterlin’s hypothesis, which postulates positive effects resulting from small cohort sizes, recent findings from global surveys suggest that fewer younger people mean fewer start-ups of new enterprises and fewer jobs, given that peak entrepreneurial activity takes place in ages 25–44 years (Global Entrepreneurship Monitor 2004). Moreover, firms may move away from areas with smaller young cohorts, since fewer potential workers will be available (Shimer 2001). Hence the economic story of the “fertility trap” argument would go as follows: lower fertility leads to faster population aging and thus to deeper cuts in the welfare state, less job creation, and an expectation of lower economic growth in the future; at the same time, aspirations for personal consumption are still on the rise owing to parental wealth and fewer siblings; and the match of high aspirations and pessimism about the economic future will result in even lower fertility. This assumed economic mechanism has the potential to create a continuing downward spiral toward lower fertility. Lastly, a plausible mechanism operates in the realm of normative change with respect to ideal family size. If one assumes that the norms and expectations of the younger generation are formed by what they see around WOLFGANG LUTZ / VEGARD SKIRBEKK 707 themselves during the process of socialization, then this constitutes a direct feedback mechanism from the family size of the previous generation to the ideal family size of the next generation. Goldstein, Lutz, and Testa (2003) have proposed this hypothesis in the context of the appearance of belowreplacement fertility ideals among the younger generation in the Germanspeaking countries. Those countries were among the first to experience the decline to very low fertility levels in the late 1970s and early 1980s, which now with a generational lag could influence the norms of today’s young potential parents. This hypothesis has found empirical support in a multilevel analysis by Testa and Grilli (2004), who showed with regional European data—after controlling for a large number of social and economic factors—that fertility ideals among the young are significantly lower in areas where the fertility of the parents’ generation has already fallen to low levels. Assuming that the controls adequately cover regional peculiarities other than level of fertility a generation ago, this finding supports the possibility of a downward spiral. This follows the same logic as described by Rindfuss et al. (2004: 855): “Changes in attitudes likely create a feedback mechanism, influencing behavior; and changes in behavior likely create a feedback mechanism influencing attitudes.” Once the number of children (siblings, friends, children seen in other families) experienced during the process of socialization falls below a certain level, one’s own ideal family size becomes lower, which may result in further declining actual family size and still lower ideals in the subsequent generation. If true, these three possible mechanisms of a self-reinforcing process toward lower and lower fertility have all the characteristics of a trap. Since these kinds of low-fertility conditions have never existed before in human history, it is impossible to test empirically whether such “low-fertility trap” mechanisms are indeed relevant in determining fertility trends. One can only refer to informed reasoning with an element of speculation. But if the existence of a low-fertility trap is considered a real danger (and we currently see no reason to rule it out), then the best and safest strategy is to avoid falling into the trap by introducing policy interventions to prevent fertility from falling below a certain critical level for an extended period. We stated above that McDonald’s recommendation for governments is to prevent the TFR from falling below 1.5. But what is the recommendation for governments in countries where the TFR has already fallen below this level? The logic of the argument would suggest that in those cases, as a matter of urgency, fertility should be brought back above 1.5 before the regime change is irreversible. But is there a magic trick to raise the TFR by some 0.3 births speedily, a new policy that has not yet been tried? This magic bullet may well exist in the form of tempo policies that give period fertility a short-term upward kick. Policies that address the tempo of fertility and stop the further increase of or even lower the mean age at child- 708 POLICIES ADDRESSING THE TEMPO EFFECT bearing without necessarily affecting completed cohort fertility could be the right policy tool enabling a population to escape a possible low-fertility trap before it closes. The rationale for tempo policies Methodologically, this article follows up on two recent contributions and aims at operationalizing the policy-relevant aspects of those articles. In 2003 in an article in Science entitled “Europe’s population at a turning point,” Lutz, O’Neill, and Scherbov emphasized that the current fertility-depressing effect of an ongoing increase in the mean age at childbearing will have a significant and lasting effect on population dynamics in Europe, played out in population decline and accelerated population aging. This so-called tempo effect on fertility has recently received much attention in the demographic literature (see, e.g., Bongaarts and Feeney 1998; Kohler and Philipov 2001). This work is based on the analytical insight that period fertility is currently low in Europe for two reasons: 1) a tempo effect: women are delaying births to later ages, resulting in fewer births in the calendar years during which this delay happens; 2) a quantum effect: women are not having enough births to achieve replacement level. If women do not forgo postponed births altogether, delayed childbearing does not affect the total number of births women have over the course of their lives, but it still lowers period birth rates as long as postponement continues and hence the delay contributes to further population aging and decline. In fact not all postponed births will be recuperated, and increases in the mean age at childbearing tend to reduce the quantum of the fertility of the cohorts experiencing such increases (tempo–quantum interactions). Much of the demographic work in this context has focused on estimating fertility rates that adjust for the tempo effect, seeing it as a disturbance that should be eliminated in order to come up with a “purer” fertility measure, the tempo-adjusted TFR. Lutz, O’Neill, and Scherbov (2003) turn this approach upside down and focus on the tempo effect not as something that should be ironed out, but rather as something that could provide a point of leverage for attempts to influence the level of period birth rates. Such attempts are called tempo policies. Lutz et al. calculate that at the TFR level of the 15 member states of the European Union in 2000, a hypothetical end to postponement would instantly raise the period TFR from 1.5 to 1.8, which, cumulated over several decades, would have very significant effects in moderating future population decline and aging. Their analysis demonstrates that the changing age of childbearing represents an important facet of population dynamics in Europe that requires special attention. It is worth noting that tempo policies in the opposite direction, that is, aiming to increase the mean age at childbearing in order to speed up fertility WOLFGANG LUTZ / VEGARD SKIRBEKK 709 decline, hence lower the rate of population growth in developing countries, are already part of the demographic literature (see Bongaarts 1994) and indeed of China’s “later, longer, fewer” population policy. Goldstein, Lutz, and Scherbov (2003) explicitly address another more methodological point in this context. Stable population theory states that under conditions of below-replacement fertility, a longer mean age of a generation implies a slower shrinking of the population. This force operates in the opposite direction to the tempo effect described above. What is the balance of these two opposing effects? The authors show both analytically and through a set of alternative simulations that the tempo effect far outweighs the effect of the mean length of generations for the coming centuries. The second effect would catch up only about 250 to 300 years in the future, if it is assumed that all postponed births are later recuperated. If one also includes estimates of tempo–quantum interactions, then the relative strength of the tempo effect becomes so preponderant that the effect of mean length of generations can safely be disregarded. In other words, this feature of stable population theory does not call into question the assertion that in actual European populations, a near-term end to postponement of childbearing or even a decrease in the age at childbearing would have significant demographic consequences for reducing shrinkage of the total population and reducing population aging. In contemporary Europe (with the exception of France), explicitly pronatalist policies have met pronounced public resistance. Family policies in Europe today tend to be based on an equal-opportunity rationale and aim to help women combine childrearing with employment. So far such policies, which come in a variety of forms under differing national conditions, seem to have had little or no effect on period fertility in the countries with lowest fertility (McDonald 2002; OECD 2003; Gauthier 2002). In this context, policies explicitly addressing the timing of births may be a useful addition to the toolbox of fertility-relevant policies available to policymakers. Such tempo policies could also have other important rationales such as increasing the efficiency of the educational system (see discussion below) and improving health. In terms of health, further postponement of childbearing not only raises the risk that women will remain involuntarily childless, it also leads to burgeoning numbers of often cumbersome infertility treatments and increases the health risks associated with late pregnancies for both mothers and children. Hence, policies aimed at creating the conditions that allow women to have their children at an earlier age, or that at least do not encourage further delay, could turn out to be win-win strategies, responding to individual health concerns as well as public demographic and economic concerns. What public policies could help stop the increase in the mean age at childbearing or even lead to a decrease in the near term? Strong social and economic forces work in the direction of ever-increasing mean ages at child- 710 POLICIES ADDRESSING THE TEMPO EFFECT birth. The prevailing view is that women want to finish their education, become established in a job, and find a reliable long-term partner before they enter the demanding life phase of raising children, which commits them for at least 15 to 20 years. And the standards of what is considered satisfactory establishment in a professional career as well as what partnership is reliable enough to have children seem to be rising. How could such forces favoring later childbearing be reversed? In theory, there are two ways in which childbearing could take place earlier in the life cycle: a reordering of life events (such as having children before finishing education); or maintaining the usual sequence of events but shortening the phases that precede the birth of children (such as compressing the period of education). The first strategy would require a fundamental change in the current incentive structures that young adults face when they plan for their parallel careers in education and work on the one hand, and partnership and children on the other. Changing economic incentives in combination with providing new models for successful combinations of education/work and family could well influence family formation strategies (Andersson 1999; Esping-Andersen 1999; OECD 2003), but would require significant changes in well-established norms and institutions. The second approach, trying to shorten the life phases that typically precede childbearing, seems to be a better candidate for short-term interventions with near-term effects on period fertility rates. This second strategy is the focus of rest of this article. We will discuss the possible role of education reforms as a strategy to introduce a downward force on the mean age at childbearing. For reasons entirely unrelated to the timing of births, efforts in many European countries are underway to lower the age at which young men and women finish their secondary or tertiary education without lowering educational attainment or schooling quality. Age at graduation and the timing of demographic events Studies on the timing of life events suggest that individuals tend to sequence events in adulthood according to rigid schemes: leaving school precedes entering the labor market, having a child, and other events in adulthood (Billari, Manfredi, and Valentina 2000; Blossfeld and De Rose 1992; Rindfuss, Bumpass, and St. John 1980). An increase in the school-leaving age, particularly at the tertiary level, is likely to raise the age of entering parenthood, because women usually postpone having children until they have completed their education (Black, Devereaux, and Salvanes 2004; Blossfeld and Huinink 1991). In effect, a change in the timing of one event is likely to affect the timing of subsequent events.1 WOLFGANG LUTZ / VEGARD SKIRBEKK 711 This effective incompatibility between education and childbearing seems to have become stronger over time, at least in the United States (Rindfuss, Bumpass, and St. John 1996). Hence the age of leaving school (at whatever level) and the timing of fertility seem to have become more closely linked over time. Furthermore, even in countries like Norway, where parental benefits make it easier to combine having children with being a student, enrollment in education strongly reduces the probability of childbearing (Kravdal 2001), indicating that fertility choices during education are not strongly influenced by public policies. As educational attainment has increased during recent decades, the mean age at childbirth in most European countries has increased considerably, and total fertility rates have dropped below replacement levels (Council of Europe 1999). For example, in Italy the mean age at first birth increased from 28.9 (1990) to 29.8 (1996), while the TFR fell from 1.33 to 1.19. When discussing changes in the length of education and in the average age at graduation, one must distinguish between the changing age at which a certain level of education is completed and the change in the average level of educational attainment. Educational reforms that lower the age at leaving school are underway, or are being planned, in several European countries. School regulations can affect the graduation age by 1) compressing or extending the duration of schooling required for a specific educational degree, or 2) changing the age of entering school, which for a given schooling period would alter the graduation age. Changes in the required duration of schooling are underway across Europe. The Bologna declaration (1999) harmonizes, and often shortens, European tertiary education lengths. In the Italian case it means a change from a system where students on average spend seven years in the university system (Cnvsu 2001) to a rigid system in which a bachelor’s degree is earned in three years and a Master’s degree is earned in two years, thus discouraging tendencies to spend a longer time studying than necessary.2 At the secondary level, the German Federal state of Saarland shortened the duration of the academic track from nine years to eight years in 2001, and several other Federal states, including Bavaria, are implementing similar changes. School shortening reforms are implemented in order to increase the flow of students through the system, to increase the supply of labor for the economy, and to improve the cost-effectiveness of the educational system. The possible effects of these reforms on the level of period fertility have so far not been considered. The age at entering school also varies by country; it can be as young as four or as old as seven years in Europe (UNESCO 2003). In recent years, the school entrance age has been changing to younger ages in several countries. Only seven American states required enrollment in school below age [ok?] 712 POLICIES ADDRESSING THE TEMPO EFFECT seven years in 1965; in 1992, 25 states did so (US Department of Health, Education and Welfare 1965; Education Commission of the States 1994). A recent, industry-sponsored German proposal (Lenzen 2003) suggested lowering the school entrance age to four years and reducing the typical duration of primary and secondary education to ten years, in order to lower the age at exiting the educational system. Several factors influence the time elapsed between graduation and first birth and the timing of subsequent births. These include the role of social norms related to expected entry to the labor market, financial support given to young individuals, and the degree of wage flexibility, which affects the likelihood of employment (Bentolila and Ichino 2000; Planas 1999; OECD 1999, 2000). Since the net effect of these different influences is unclear from a theoretical perspective, we will examine them using empirical data from Sweden. The fertility effects of school-leaving age: The case of Sweden Women who attain higher education tend to have fewer children and to have them at a later age, but nonrandom educational sorting makes drawing conclusions about causality in this relationship difficult. Women who leave school at different ages tend to have different levels of education as well; therefore, they differ by other characteristics—such as preferences, abilities, opportunities, and family background—that affect both educational attainment and fertility decisions. To identify the causal effects of a change in the school-leaving age, we present a study based on a natural experiment3 that produces a variation in the explanatory variable (graduation age) that is uncorrelated with other influences on fertility. Skirbekk, Kohler, and Prskawetz (2004) analyzed a dataset of 863,304 nonimmigrant Swedish women born between 1946 and 1962 and made use of the fact that Swedish children are enrolled in school in the calendar year in which they become seven years old. Therefore, children who are born during two consecutive months, December and January, differ by 11 months in the age at graduating from school. This policy of the Swedish school system results in an exogenous variation in the age at completing compulsory and higher education, as parents presumably do not time the births of their children with age at school entry in mind. Birth months thus affect age at graduation in the same way as a random sorting of individuals into higher and lower school-leaving ages. The Swedish setting is, therefore, well suited to investigating the causal link between the timing of births and the variation in school-leaving age. Skirbekk et al. found that variation in the school-leaving age has a strong and consistent effect on the timing of demographic events in adult- 713 WOLFGANG LUTZ / VEGARD SKIRBEKK hood. Women who are born in January leave school at an 11-month higher age, and this results in a 4.9-month later age at first birth relative to those born in December (the previous month). Specifically, women born in January had their first child on average at age 25.3 while those born one month earlier had their first child at the average age of 24.9. Figure 1 shows this pattern for the four quarters of the mother’s birth date in the year and her age at first child; there is a clear downward slope, with women born in the first quarter being 3.1 months older when they have their first child relative to women born in the fourth quarter within a given year. The timing of the second birth is also affected by the school-leaving age. The birth interval between the first and the second child remains virtually unaffected by the variation in the age at first birth caused by different years of graduation. Women born in the first quarter of the year have only a 0.05-months shorter birth interval relative to women born in the fourth quarter of the year, indicating that there is no conscious compensation for birth-month-induced variation in the age at first birth. These findings suggest that the timing of fertility is strongly connected to the time of leaving school. A school reform that lowers the school-leaving age will, in addition to affecting the individual’s biological age at the time of school exit, also affect the social age of the social reference group (the class peers). The social age of the group would be raised because its members would assume the life cycle roles of worker and parent at an earlier biological age than would their counterparts who left school at later ages. By increasing the social age of those affected, a lower age at graduation would increase the effect of a younger school-leaving age on the timFIGURE 1 Age of mother at birth of first child for Swedish women born 1946–62 25.2 Age 25.1 25 24.9 1 2 3 Quarter of birth in calendar year 4 714 POLICIES ADDRESSING THE TEMPO EFFECT ing as well as the quantum of childbearing through tempo–quantum interactions. The impact of a more “mature” social influence at a younger biological age would heighten the probability of having children at a younger age. This could in turn imply an increase in completed cohort fertility. A change in the school-leaving age is likely to have a stronger influence on the timing of fertility than the one identified in the Swedish birth month experiment, since both biological and social age at the time of graduation influence fertility decisions. Taken together, it is plausible that a oneyear change in the school graduation age would be reflected in a unit shift in the age of entering parenthood. But we will also experiment with other assumptions. Hypothetical forecasts for Austria, Bavaria, and Italy To investigate the demographic impacts of a change in the timing of fertility resulting from a younger age at graduation, we project the consequences of fertility changes for the young cohorts in Austria, Italy, and the German Federal state of Bavaria, which with more than 12 million inhabitants is bigger than many European countries.4 To study the unconfounded fertility effects, we assume zero net migration for all three regions. Life expectancy is assumed to increase by 1.5 years per decade, for a total of 7.5 years for the 50-year duration, from 2000 to 2050. In Austria, life expectancy increases from 81.5 to 89 years for women and from 75.7 to 83.2 years for men; in Bavaria from 79.0 to 86.5 for women and 73.0 to 80.5 for men; and in Italy from 81.6 to 89.1 for women and 75.8 to 83.3 for men. We discuss five scenarios based on different assumptions about the future course of period TFR. In all cases where the effect of a school reform (resulting in an assumed lower mean age at childbearing) is being simulated, we assume that the reform first affects the female birth cohort of 1995. Hence, the effect on the period TFR will be gradual and will increase as more and more women born after 1995 enter the main reproductive ages. For the cohorts born before 1995, the rates are assumed to stay constant at the level described in the specific scenario assumptions. The assumed TFRs for the three populations and summary results of population projections based on five scenarios are given in Table 1. First, we consider a constant period TFR scenario (Scenario 1). It presents a reference case for comparison, in which all age-specific period fertility rates remain constant throughout the projection period. This scenario assumes that the current tempo effect continues. Since the mean age at childbearing cannot rise forever, it also implies that the weakening of the tempo effect will be compensated by a declining quantum in order to produce a constant period TFR. WOLFGANG LUTZ / VEGARD SKIRBEKK 715 Scenario 2 refers to the hypothetical case of constant tempo-adjusted period TFR at the current level. Here we assume that period fertility immediately jumps to the level of tempo-adjusted fertility, assuming an instant end to the increase in the mean age at childbearing. These rates are then held constant over time. To estimate the tempo effect for adjusting the TFR, we apply the estimate of Lutz, Philipov, and Scherbov (2005) for a general relationship between an increase in the mean age at childbearing and the tempo effect. It shows that on average in contemporary Europe, an increase in the mean age at childbearing (over all birth orders) of 0.1 years depresses period TFR levels by 0.19 children. Lutz et al. base this estimate on data from European countries from 1980 to 2000. If we apply this estimate and take into account the changes in the mean age at childbearing,5 Austria’s tempo-adjusted fertility is 1.69 and the unadjusted TFR in 2002 is 1.41. In Bavaria, the tempo-adjusted fertility is 1.62 and the unadjusted TFR in 2002 is 1.36. In Italy, the tempo-adjusted fertility is 1.51 and the unadjusted TFR in 2000 is 1.24. Scenario 3 considers the case of a school reform that has the net effect of reducing the mean age at childbearing by two years for the cohorts born in 1995 or later. This assumption could be interpreted as a 1:1 relationship between age at graduation and age at childbirth. It is implemented by a simple downward shift in the age-specific fertility profile for the cohorts concerned. Since we do not have sufficient evidence for assuming an exact quantitative relationship between a lower age at leaving school and a lower mean age at childbearing (see discussion above), we found it safer to make the assumptions in terms of a certain assumed shift in the age pattern of fertility. There may be reason to assume that a lower schoolleaving age will not fully translate into a lower childbearing age. Hence this scenario may be viewed as a high case. The effect of a one-year decline in the mean age at childbearing would be half of the effect calculated under this scenario. Scenario 4 studies the case of a school reform that also affects the quantum of fertility. Here we investigate the likely possibility of a tempo– quantum interaction on fertility, where the cohorts affected by the school reform are not only two years younger at the time of childbearing, but also have higher cohort fertility.6 We base our estimates on Kohler, Skytthe, and Christensen (2001), who find that a one-year earlier initiation of childbearing increases cohort fertility by 3 percent. Thus our assumption of a school reform that causes a two-year drop in the age at first birth would lead to a 6 percent increase in fertility in the “reform with quantum effect” scenario. Finally, Scenario 5 looks at the case of a school reform with a quantum effect in addition to the assumptions in Scenario 2. Here we assume (as in Scenario 2) that the postponement of childbearing will end immedi- 716 POLICIES ADDRESSING THE TEMPO EFFECT TABLE 1 Assumptions about the future course of period TFR and about the mean age at childbearing in five scenarios and results for the number of births, the old-age dependency ratio, and population size, Austria, Bavaria, and Italy, 2005–2050 Scenario 2005 2020 2035 2050 Assumptions Total fertility rate and mean age at childbearing Austria S1 S2 S3 S4 S5 1.41 1.69 1.41 1.41 1.69 (28.3) (28.3) (28.3) (28.3) (28.3) 1.41 1.69 1.55 1.61 1.93 (28.3) (28.3) (27.4) (27.4) (27.4) 1.41 1.69 1.41 1.49 1.78 (28.3) (28.3) (26.3) (26.3) (26.3) 1.41 1.69 1.41 1.49 1.78 (28.3) (28.3) (26.3) (26.3) (26.3) Bavaria S1 S2 S3 S4 S5 1.36 1.62 1.36 1.36 1.36 (30.2) (30.2) (30.2) (30.2) (30.2) 1.36 1.62 1.51 1.54 1.86 (30.2) (30.2) (29.3) (29.3) (29.3) 1.36 1.62 1.37 1.45 1.73 (30.2) (30.2) (28.2) (28.2) (28.2) 1.36 1.62 1.36 1.44 1.71 (30.2) (30.2) (28.2) (28.2) (28.2) 1.24 1.51 1.24 1.24 1.51 (30.3) (30.3) (30.3) (30.3) (30.3) 1.24 1.51 1.41 1.46 1.77 (30.3) (30.3) (29.4) (29.4) (29.4) 1.24 1.51 1.24 1.32 1.61 (30.3) (30.3) (28.3) (28.3) (28.3) 1.24 1.51 1.24 1.32 1.60 (30.3) (30.3) (28.3) (28.3) (28.3) Italy S1 S2 S3 S4 S5 Results Births Austria S1 S2 S3 S4 S5 72,038 86,609 72,041 72,041 86,609 62,695 76,009 67,715 70,398 86,004 49,350 69,809 49,930 53,188 75,048 41,359 60,904 42,884 47,231 70,150 Bavaria S1 S2 S3 S4 S5 105,283 119,303 105,283 105,283 119,303 89,300 104,943 99,527 101,476 120,892 69,395 88,278 67,787 71,865 92,993 56,496 77,811 60,039 64,513 87,652 Italy S1 S2 S3 S4 S5 489,260 595,665 489,260 489,260 595,665 344,013 421,158 387,157 399,019 492,987 292,399 416,919 286,038 303,656 438,400 212,067 316,832 223,279 243,012 368,651 /continued... 717 WOLFGANG LUTZ / VEGARD SKIRBEKK TABLE 1 (continued) Scenario 2005 2020 2035 2050 Old-age dependency ratio (65+/15–64) Austria S1 0.24 S2 0.23 S3 0.23 S4 0.23 S5 0.23 0.31 0.30 0.30 0.30 0.30 0.52 0.48 0.51 0.51 0.47 0.56 0.49 0.54 0.54 0.47 Bavaria S1 S2 S3 S4 S5 0.24 0.24 0.24 0.24 0.24 0.28 0.28 0.28 0.28 0.28 0.48 0.46 0.48 0.48 0.45 0.49 0.45 0.48 0.48 0.43 Italy S1 S2 S3 S4 S5 0.28 0.28 0.28 0.28 0.28 0.34 0.33 0.34 0.34 0.33 0.52 0.49 0.52 0.52 0.48 0.69 0.60 0.67 0.66 0.57 Population size Austria S1 S2 S3 S4 S5 7,975,335 8,036,270 7,954,387 7,954,387 8,036,270 7,718,934 7,941,119 7,728,071 7,738,721 8,040,808 7,197,142 7,708,453 7,283,157 7,338,575 7,905,116 6,202,044 7,017,948 6,326,473 6,435,905 7,329,567 Bavaria S1 S2 S3 S4 S5 12,036,100 12,094,979 12,036,100 12,023,897 12,096,228 11,258,753 11,586,957 11,315,099 11,323,467 11,667,621 10,125,841 10,719,132 10,254,331 10,317,856 10,920,529 8,423,244 9,334,737 8,573,865 8,640,079 9,663,439 Italy S1 S2 S3 S4 S5 56,670,032 57,254,477 56,670,032 56,670,032 57,253,746 52,126,321 54,100,986 52,417,109 52,453,609 54,496,983 46,390,530 49,680,383 46,966,837 47,235,320 50,847,809 39,860,844 44,917,031 40,428,714 40,961,171 46,504,488 718 POLICIES ADDRESSING THE TEMPO EFFECT ately; to this assumption we add the effect of the school reform, including the effect of associated tempo–quantum interactions. Clearly, this scenario has the highest assumed future fertility rates. Table 2 presents a summary of the assumptions of the five scenarios. As the projection results in Table 1 show, the absolute number of births is declining in all scenarios in each of these countries. This is because fertility, even under the highest scenarios, will still be below replacement level and because smaller cohorts of women will enter the reproductive ages as a consequence of the low fertility in the past (the negative momentum of population growth). The old-age dependency ratio shown in the table is defined as the population above age 65 years divided by the population aged 15–64. Since this ratio takes into account only adults and older persons, one would expect a delayed effect of changes in the birth scenarios. And indeed our calculations show a clear variation among scenarios beginning around 2030. After that the differences turn out to be quite sizable. In Bavaria and Italy, the lowest fertility scenarios (Scenarios 1 and 3) result in old-age dependency ratios that increase from initial levels of 0.24 and 0.28, respectively, to about 0.5 and 0.7 by 2050, whereas in the cases of a declining mean age at childbearing, assumed to be a consequence of school reform combined with an end of the tempo effect (Scenario 5), these ratios would increase less rapidly, to about 0.4 and 0.6. Table 1 also shows the changes in total population size attributable to the posited fertility changes under otherwise identical mortality and migration assumptions. For Austria, Bavaria, and Italy, none of the scenarios can stop the significant population decline that is implied by the declining number of births as described above. But the extent of decline is still surprising, even when one considers that it is occurring in a closed population (one without migration). Under all scenarios, the population of Bavaria would decline from a current level around 12 million to between 8.4 and 9.7 mil- TABLE 2 Summary description of scenarios Scenario Tempo adjustment S1 S2 S3 No Yes No S4 No S5 Yes Educational reform— 2 years younger school-leaving age No No Yes, childbearing shifts 2 years toward younger ages Yes, childbearing shifts 2 years toward younger ages Yes, childbearing shifts 2 years toward younger ages Tempo–quantum interaction No No No Yes, cohort fertility increases by 6% Yes, cohort fertility increases by 6% WOLFGANG LUTZ / VEGARD SKIRBEKK 719 lion in 2050. For Italy, the extent of decline is even more pronounced, with the population shrinking from 57 million to between 40 and 47 million by 2050. But the point of this exercise is not to look at absolute changes (for this we need realistic migration assumptions), but rather, by comparing the scenarios, to assess the relative impacts of possible school reform effects. In summary, the five scenarios presented here suggest that changes in the age at childbearing that might result from lowering the school-leaving age by two years might have significant long-term effects on population dynamics. If we compare the constant period TFR scenario (Scenario 1) with the school reform plus quantum effect scenario (Scenario 4), we see that the absolute number of births by 2020 could be 12 to 16 percent higher in the case of school reform. In terms of the old-age dependency ratio, the difference attributable to an assumed education reform is on the order of 1 to 3 percentage points in 2050. Considering what a single percentage point means in terms of expenses for social security, these are very significant long-term impacts that make a closer analysis of the effects of school reform on the mean age at childbearing a worthwhile effort. Such tempo policies will have an even more significant long-term demographic effect if the mechanisms of the hypothesized “low-fertility trap” are at work. In this case, pushing period fertility above a certain critical level can help to avoid the feedback mechanisms that would tend to pull the quantum of fertility to lower and lower levels, with additionally severe consequences for the speed and extent of population aging. Discussion Population policies aimed at affecting the tempo of fertility are a new concept, and possibly a powerful and socially acceptable way to increase period fertility rates where these rates are considered to be too low. As discussed in Lutz, O’Neill, and Scherbov (2003) and Goldstein, Lutz, and Scherbov (2003), this concept is based on a sound demographic rationale, but is far from mature in terms of its possible social implementation. In this article we focused on education reforms that would lead to a more efficient school system, with a younger mean graduation age as one possible form of tempo policy. Such reforms are currently being discussed as a possible means to improve the supply of skilled young labor and to reduce the social cost of education. If these reforms would also help stop the trend toward rising mean ages at childbearing, which is desirable for individual health reasons, they would also represent a potentially significant aggregate demographic gain. The purpose of this article was to propose the approach and initiate a discussion that we hope will result in many more attempts to substantiate our claim and will also address factors other than length of education that might affect the tempo of childbearing. 720 POLICIES ADDRESSING THE TEMPO EFFECT In discussing school reforms aimed at lowering the age at graduation, one often hears the argument that students would be less mature when leaving school and their human capital would be lower. While maturity is difficult to measure, the human capital argument can be evaluated and seems to be misguided. Surveys show that countries with a one- to two-year earlier exit from secondary school often have the same or higher human capital levels than countries with higher graduation ages (Mullis et al. 1998). A recent study revealed no differences in earnings or higher education attainment in a cohort of German students who, owing to a school reform, obtained the same lower secondary school degree with almost a year less schooling (Pischke 2003). Likewise, school length does not affect student performance in Switzerland, where students obtain the same degree after 12, 12.5, or 13 years depending on their canton of residence (Skirbekk 2006). Instead, school inefficiencies that in some countries lead to lower human capital levels are likely to be caused by such factors as the organization of schooling, the number of hours taught per year, the type of teaching strategies applied, and the age at which students are separated into academic or vocational training (Braathe and Ongstad 2001; Eurydice 2000; Weiss 1995). Low period fertility is not only of concern in Europe. Several Asian countries have TFRs below 1.5 and are confronted with the prospect of significant population aging as a consequence. The concern about low fertility has been particularly pronounced in Japan, South Korea, and Singapore. In recent years the governments of these countries have implemented policy packages, including tax cuts, housing support, and cash benefits, that are explicitly pronatalist in a way that would make them not easily acceptable in contemporary Western Europe. But so far period fertility rates seem to remain unaffected by such measures, or else the forces tending toward lower and lower fertility overwhelm whatever positive effect such policies might have. In South Korea, the total fertility rate recently fell below 1.2 despite new pronatalist measures. In Singapore, the prime minister set up a special task force under his personal supervision to deal with the issue of low fertility because past pronatalist policy packages did not result in fertility increases and period fertility continued to fall. With a high political priority assigned to the issue and the evident failure of previous measures, those Asian countries might consider the option of tempo-related policies. In those countries, childbearing remains almost universally within wedlock and marriage is typically postponed until the couple can afford an apartment, which means that they must first begin earning money in the labor market. In this context providing student couples who are ready to marry and have children with subsidized campus housing and childcare to enable them to achieve their childbearing desires might result in an increase in student fertility. During study time, young parents may have more flexibility for arranging their time and accommodating childcare than in the case of both WOLFGANG LUTZ / VEGARD SKIRBEKK 721 partners trying to improve their status within highly competitive companies. Thinking of such possible policies in terms of the tempo effect in addition to the usual cohort perspective might lead to effective fertility-enhancing measures. Finally, this article introduced the hypothesis of a “low-fertility trap.” If the social and economic mechanisms assumed under this hypothesis are at work and have the potential to exert a so-far-unexpected strong pull toward lower and lower fertility, the consequences for the countries concerned would be severe. Although more empirical work is needed to study the different elements of this hypothesis, we see no reason to dismiss the hypothesis on grounds of implausibility. Viewed in a long-term perspective, the record of demographic transitions demonstrates that the balance of births and deaths can be disturbed for many decades because fertility is strongly embedded in the system of social norms, and demographic regimes can be very persistent once they are well established. Many decades of birth rates only sluggishly adjusting to declining mortality rates resulted in historically unprecedented population growth. One cannot rule out the possibility that analogous forces of social momentum, once a new low-fertility regime has been established, will result in decades of “undershooting” birth rates, resulting in historically unprecedented population aging and fertility-induced decline. Notes The authors thank Statistics Austria, Yvonne Tollmann at the Bayerisches Landesamt für Statistik und Datenverarbeitung, and the Italian National Institute of Statistics (ISTAT) for providing the data for the population projections. The authors acknowledge the financial support provided by the European Commission’s Research Training Network entitled “Demographic Sustainability and European Integration,” Contract No. HPRN-CT-2001-00234. 1 In the three regions we examine below, almost everyone attends compulsory primary schooling, over 90 percent attend at least some secondary schooling, and an increasing share of the population, currently about 20 to 30 percent, attend tertiary education (Eurostat 2005). Hence, education reforms that affect schooling up to secondary levels will affect a larger part of the population. On the other hand, late childbearing is particularly pronounced among the highly educated, and policy options to alter the university graduation age may be highly effective for the university educated. 2 Information available at «htttp://www. bologna-berlin2003.de/pdf/bologna_ declaration.pdf». 3 For a discussion of the use of natural experiments, see Rosenzweig and Wolpin (2000). 4 Sources of data: Statistics Austria, Bayerisches Landesamt für Statistik und Datenverarbeitung, and the Italian National Institute of Statistics. 5 The annual rise in the mean age at childbearing in Austria is estimated to be 0.15 years, which is calculated as the average change from 1997 to 2000. Bavaria’s annual rise in the mean age at childbearing is 0.138 years, which is calculated as the average annual change from 2001 to 2002. 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Findings from cantonbased variation in Swiss educational length,” Swiss Journal of Economics and Statistics 142(1). 724 POLICIES ADDRESSING THE TEMPO EFFECT Skirbekk, V., H.-P. Kohler, and A. Prskawetz. 2004. “Birth month, school graduation and the timing of births and marriages,” Demography 41(3): 547–568. Testa, M. R. and L. Grilli. 2004. “The effects of childbearing regional contexts on ideal family size in Europe: A multilevel analysis,” European Demographic Research Papers No. 4. Vienna: Vienna Institute of Demography of the Austrian Academy of Sciences. United Nations. 2003. World Population Policies. New York: United Nations, Department of Economic and Social Affairs. UNESCO. 2003. Global Education Digest 2003: Comparing Education Statistics Across the World. New York: United Nations Educational, Scientific and Cultural Organisation «http://portal. unesco.org/uis/TEMPLATE/pdf/ged/GED_EN.pdf». US Department of Health, Education and Welfare. 1965. State Law on Compulsory Attendance. Washington, DC: US Department of Health, Education and Welfare, Office of Education. Weiss, A. 1995. “Human capital vs. signalling explanations of wages,” Journal of Economic Perspectives 9(4): 133–154. Policies Addressing the Tempo Effect in Low-Fertility Countries WOLFGANG LUTZ VEGARD SKIRBEKK The possible negative consequences of current low fertility levels are causing increasing concern, particularly in countries where the total fertility rate is below 1.5. Social inertia and self-reinforcing processes may make it difficult to return to higher levels once fertility has been very low for some time creating a possible “low-fertility trap.” Policies explicitly addressing the fertility-depressing effect of increases in the mean age at childbearing (the tempo effect) may be a way to push up period fertility to somewhat higher levels and help escape the “low-fertility trap” before it closes. Reforms in the school system may affect the timing of childbearing by reducing the age at completion of education. A more efficient school system, which provides the same qualifications with a younger school-leaving age, is potentially capable of increasing period fertility and hence exerting a rejuvenating effect on the age composition, even if the levels of cohort fertility remain unchanged. Such policies may also have a positive effect on completed cohort fertility. WOLFGANG LUTZ is Leader, World Population Program, International Institute for Applied Systems Analysis, Laxenburg, Austria. VEGARD SKIRBEKK is a Research Scholar, World Population Program, International Institute for Applied Systems Analysis, Laxenburg, Austria.