Hanoi Hustle: Vietnam's Fertility Shakeup and Its Impact on Economic Growth
Vietnam drops two-child family limit policy
Vietnam, the land of the ascending dragon, pulled the plug on its two-child policy in place since 1988, abolishing the restriction for couples to decide their family size, as per the Vietnam News Agency's announcement on Wednesday. The move comes as the communist nation grapples with a continuous decline in fertility rates, fearing the economic ripples that come along, targeting to reach upper-middle-income status by 2045.
The diminishing birth rates, a characteristic trait of prosperous nations, has set alarm bells ringing in the Vietnam authorities. The authorities' ambitious plan for economic growth is jeopardized; therefore, they are taking measures to address the issue.
In the recent three years, the rate of fertility has plunged below the replacement level of 2.1, hitting historic lows. The Ministry of Health has lamented the dismal statistics, with the figure dipping from 2.11 children per woman in 2021 to 2.01 in 2022, then 1.96, and finally 1.91 last year.
The situation is particularly pertinent in Hanoi and Ho Chi Minh City, the economic bastions of Vietnam, where escalating living expenses and stagnant salaries pose significant challenges for families to expand their brood.
Tran Minh Huong, a 22-year-old office worker, stated to AFP that the new government policy won't influence her plans. "Even in Asia, where social dynamics dictate women should be married and have children, the financial burden of raising a child is enormous," she elaborated.
Deputy Health Minister Nguyen Thi Lien Huong underscored this year that convincing couples to bear more children would become increasingly challenging despite state incentives, due to the decreasing average number of children per woman, which poses long-term problems for economic growth, causing concerns regarding population aging and shrinking workforce. She advocated for a shift in societal mindset, urging people not to concentrate solely on family planning but adopt a broader perspective towards population and development.
After China
Vietnam isn't just wrestling with depleting birth rates, but it is simultaneously grappling with a gender imbalance manifested from the historical preference for male children. On Tuesday, the Ministry of Health proposed raising the current fine to $3,800 to discourage fetal sex selection, as reported by state media.
The sex ratio at birth, despite the improvement, remains imbalanced at 112 boys for every 100 girls.
Tran Thi Thuy, a 45-year-old mother of three, benefited less from state benefits upon her last child's birth due to the two-child policy. "With the two-child policy consigned to the annals, it's a positive development," she acknowledges, but admits that raising more than two children in today's climate is financially grueling and expensive. "I reckon the authorities might even have to offer incentives to entice people to bear more than two children," she proposes.
The neighboring giant, China, unleashed its one-child policy in the late 1970s to stem population growth. Since 2016, relaxations in the policy have allowed families to have three children if desired. However, the benefits have yet to materialize. China experienced declining birth rates due to the escalating cost of living, and the measures have thus far failed to reverse China's demographic decline, resulting in a third consecutive annual population decrease in 2024.
Enrichment Insights:
Economic Dynamism
- Increased Labor Force: Allowing families to have more children could potentially lead to a larger workforce in the long term, easing the challenges of an aging population. However, this would require several decades for the new generation to mature and start participating in the workforce.
- Consumer Spending: A bigger population could result in increased consumer spending, boosting domestic demand and potentially spurring economic growth, which could favor the education, healthcare, and consumer goods sectors.
- Social Security and Pension Systems: A larger and younger population could contribute more to social security and pension systems, improving the sustainability of these systems by providing more contributors.
Population Growth
- Addressing Aging Population: The decision to allow more children per family could help counterbalance Vietnam's rapidly aging population, ensuring a more stable dependency ratio, where there are fewer elderly people per working-age individual.
- Sex Ratio Imbalance: Efforts directed towards addressing the sex ratio imbalance due to prenatal gender selection after the policy change could yield a more balanced gender distribution in the population, which is essential for social stability.
- Rural vs. Urban Growth: The policy may influence population distribution between rural and urban areas differently. The urban areas might witness more growth due to improved access to education and healthcare services, magnifying urbanization challenges.
Challenges
- Resource Allocation: The increased population may strain resources such as housing, education, and healthcare. Effective resource allocation will be paramount for supporting the rising population.
- Sustainability Concerns: Environmental and sustainability issues may surface with a larger population, necessitating Vietnam to implement policies that balance growth with environmental protection.
- Gender Equality: Persistent societal preference for male children could surface, requiring ongoing efforts to promote gender equality and ensure equal opportunities for all children.
Overall, the long-term impacts that Vietnam's policy shift will have on the economy will depend on the effectiveness of policies supporting families and children, judicious utilization of resources, and the addressing of social and environmental challenges.
- The abolition of Vietnam's two-child policy opens the door for discussions on various aspects of society, including women's health, finance, business, and politics, as the government seeks to combat declining birth rates and mitigate the consequences on economic growth.
- The Ministry of Health has expressed concerns about the financial burden of raising a child, a concern that extends to the realm of health-and-wellness, especially in densely populated cities like Hanoi and Ho Chi Minh City.
- Vietnam's neighbor, China, experience similar challenges when it migrated from a one-child policy to a three-child policy, raising questions about the efficacy of various political science solutions to address population issues and their impact on finance and business.
- To address the issue of gender imbalance, the Vietnamese government seeks to increase fines for fetal sex selection, aligning itself with the general-news trend of promoting equity and gender equality within diverse societies.
