EU Family Compact: make 2+ kids affordable & compatible with work (to safeguard growth and pensions)

Facts

• EU Total Fertility Rate 1.38 (2023); 3.67 m births—record low.

• Old-age dependency ratio (65+/15–64) projected ~57% by 2050 (<<2 workers per older person).

• Working-age share to shrink across the EU this century.

• Replacement fertility ≈2.05–2.10 in low-mortality settings; with ~15–20% childlessness in many Western EU cohorts, average births among parents must be higher to reach replacement.

• Our growth model depends on labour (workers) × productivity; ageing makes euro-area potential growth ~0.8% in early 2030s as labour input turns negative.

What works (evidence)

• Universal affordable childcare (0–3) and earnings-related parental leave with non-transferable father quotas support employment and continued childbearing.

• Balanced mix (services + leave + targeted cash/tax) outperforms cash-only approaches.

Policy package (EU + national)

• Childcare guarantee (capacity + fee caps as % of income).

• 12–18 months earnings-related leave with ≥4 months reserved for fathers; flexible take-up.

• Second-child pivot: larger child benefits/credits from child #2 + second-earner tax relief; automatic indexation.

• Family-sized housing near jobs (supply fast-tracks; link vouchers to childcare slots).

Otherwise (counterfactual, data-based)

• The EU will need more net migration to stabilise the workforce; lower migration raises the cost of ageing by ~0.9 pp of GDP by 2070 vs baseline.

• Foreign workers already account for ~½ of labour-force growth post-pandemic in the euro area.

• With ageing and low fertility, Europe’s global weight declines: the EU was 5.5% of world population and ~14.7% of world GDP in 2023, and projections point downward absent higher births/productivity.

Goal

• Lift EU TFR toward ~1.6 by 2035 while raising parental employment and sustaining growth/contributor base.