One Nation, Incentivized and Disincentivized

[OneGrassRoot]

Having a baby in the United States, The New York Times reported this week, is more expensive than pretty much anywhere else on earth. This is, of course, exactly the opposite of what Americans should want, as a public policy matter. It's going to take lots more babies growing up into productive, healthy adults to get us through the country's long-term Social Security and Medicare funding difficulties.

The high cost of childbirth in the U.S. is the product of a mix of private- and public-sector decisions, not a straight-out result of government policy. But it nonetheless got a few of my HBR colleagues and me thinking about what strange and not-so-strange economic incentives Americans face relative to citizens of other nations. So here is a mostly unscientific Independence Day list — compiled with lots of help from the databases of the Organisation for Economic Co-operation and Development, a.k.a. the OECD, a.k.a. the rich nations' club — of what sort of behaviors we're collectively encouraging and discouraging.

1. We don't want our fellow citizens to have kids. It's not just the high cost of childbirth. In general, U.S. families get less help with the cost of child-rearing (in the form of tax breaks, government services, and cash handouts) than those in almost any other affluent nation. On the OECD's list, only Mexico and South Korea devote a smaller percentage of GDP to family benefits. The U.S. also has just about the least supportive parental-leave policies in the developed world. Of course, we still do have kids, and the fertility rate in the U.S. is above the OECD average. So either (a) financial incentives don't matter all that much or (b) for lots of societal and other reasons (we have more space, for example) Americans are inclined to have more kids, even though government policies discourage it. I think it's b, and the financial incentives are beginning to win — the U.S. fertility rate is now barely above the OECD average, and some surprising countries — Sweden, Norway, France, Great Britain — are now producing more babies per capita than we are.

2. We don't want our fellow citizens to go to college. Higher education costs students more in the U.S. than anywhere else in the OECD. We also have especially great universities, and lots of financial aid. But the general trend has one of skyrocketing tuition at both private and public institutions, and aid for students that, while rising, hasn't kept up. Sure enough, the level of educational attainment in the U.S., once the highest in the world, has slid toward the middle of the OECD pack.

FULL ARTICLE: http://blogs.hbr.org/fox/2013/07/one-nation-incentivized-and-disincentivized.html

[xtraxritical]

1. USA USA USA we're number one (at sucking).