Should Maternity Capital Be Abandoned?

September 24, 2013

Facing a significant budget crisis, the Ministry of Finance has “found” one trillion roubles worth of spending to cut. Included in that number, however, would be funds for new mothers. As no new social programs are being announced that might help with, for instance, child care or education, this could mean cutting off an important source of income for women who have just given birth. – Ed.

Recent reports, according to which the Russian government is going to wrap up the “maternity capital” program triggered a storm of outrage. One of the main themes in the ensuing discussions was this: the state tries to take away from citizens who are not among the wealthiest whatever little was given to them during the more economically successful years. But what is the real situation, what role the maternity capital actually played to support Russian families? Based on the research that we’ve been conducting for several years we will try to dispel some common myths about it.

Our studies of social support for mothers and use of maternity capital show that Russian women consider monthly benefits and lump sum payments at the birth of the child the most important measure of state support. Number two in the order of relevance is the availability of preschool facilities. Regarding the first one there has been a real change for the better in recent years (including at the regional level), while in the second area the situation hasn’t changed much. And the maternity capital did nothing to help women with children to improve the conditions for raising and educating them while continuing working. So who found it really useful, and why?

The Russian population is very sensitive with respect to the government support measures, especially if these measures affect them personally. They (i.e. us) are also very skillful at adapting even to some measures that are clumsy, poorly organized and not really relevant to their needs, if they can get any benefit at all from such measures. And the maternity capital turned out to be exactly that.

The urban middle class tightened their belts and still managed to combine the maternity capital benefits with their own resources to slightly improve their living conditions, and sometimes to be able to pay, for example, for a private preschool. But it was not easy. The bureaucracy is putting up obstacles (if not with malice, but for lack of proper mechanisms), banks deny loans, etc. Everything is put to work: personal connections with government officials, legal assistance, own resources, help from relatives, mortgage, additional government assistance programs in the regions, purchasing apartments from relatives and all sorts of loopholes. This is what we’ve written about. Our respondents told us some intricate stories about how they managed (or did not manage) to take advantage of this benefit. The general attitude to the maternity capital can be expressed by a saying that is often heard during our interviews: “A tuft of hair from a mangy mare”.

The situation is much more difficult for lower-income families. We have not interviewed people living in rural areas, but the results of our research conducted in small towns dispel persistent myth that at least there physical capital stimulates the birth rate. Far from it.

Although the amounts of payments are quite significant, they are virtually impossible to use, because they work only when combined with the other resources. Imagine people living in a dormitory or in a communal apartment complex, each of them with their own background (eg. migrants granted citizenship recently). They just have nothing to add this maternity capital to. And they do not have enough information, social, material, time and other resources to cope with bureaucratic hurdles. For a mother with two children who doesn’t have her own transportation it is difficult even to get to the district center. Such families cannot build even a small house because part of the money will be paid to them only upon completion of construction, but the building materials and labor must be paid right now, and they cannot borrow such substantial amounts. On top of that you need roads, infrastructure, and for this you also need money. Banks turn such families down, the local authorities do not help them.

As for paying for higher education, it is generally not a given that non-urban children will be able to get it: according to parents, the high school level of education is not enough. In other words, one needs at least some initial capital, that can be added to the maternity capital. Social groups who lack the resources do not have such initial capital and therefore have little to benefit from the government program. The idea to use maternity capital to increase pensions is taken with equal skepticism by citizens representing different social groups. This is not surprising at the time of leapfrog pension reforms.

To sum up, the Russians often cannot use the maternity capital because market mechanisms to buy a home or to pay for preschool are in conflict with government regulation. Among Russian families there is a strong and growing demand for education, housing, and much more, but this demand is not met by what the state can “supply”. Moreover, bureaucrats often treat problems of families based on a “you gave birth to them – you raise them yourselves” principle. Under the influence of bureaucrats and bureaucracies demographic policies of the state largely became a fiction. Fertility, of course, may increase, but to a greater extent this is explained by the demographic waves and a general growth of the population welfare.

Thus, the question of whether to continue the program of the maternity capital, boils down to the following. If the goal is to support the middle class (and why not?), it makes sense to extend the program. Affluent segments can cope with the problems of using the maternity capital, but withdrawal of support (although it was announced that the program would be only temporary) may be perceived as just another dirty trick on the part of the state. It should be noted that we are talking about supporting families in general, not about supporting the birth rate: in middle-class families maternity capital is not an incentive to give birth to a child.

As to poor families, maternity capital could be such an incentive for an additional child. However for this to work, low-income families need to know, that is to see, that it works for others, that they will really benefit from this kind of social support. And since it does not happen, in the minds of many the maternity capital remains just a fiction. Are there alternatives to the maternity capital? It’s been often suggested to just transfer money to citizens’ accounts – outright and without delay. But when the state doesn’t trust its citizens this proposal becomes purely rhetorical. (And by the way, and the citizens reciprocate with distrust for the state, using the principle of “take while they give”).

What to do then? There are different ways. You can, for example, study the needs of people from different social groups, different regions and types of settlements. You can even try to engage mothers and fathers to discuss the program. You can enable regions to develop their own programs, provided that their goals are transparent, and the information publicly available. You can set more specific targets, and focus for example, on the availability of preschools in certain types of communities.

But best of all is to trust families to decide how to spend the money. Demographers around the world are not quite sure that social policy in general can influence the number of children born, although they are inclined to believe that a stable policy can be a positive influence. At least it allows to some extent to calculate the future and to set benchmarks. But the maternity capital is not part of such policies.