IGOR EFREMOV: “MATERNITY CAPITAL HAS BECOME A COUNTER-EFFECTIVE DEMOGRAPHIC INSTRUMENT”

According to the data of the Accounts Chamber, based on the results of January through September the number of families with children which received a maternity capital certificate decreased by over 100,000 or 13.5% as compared with the relevant period of the previous year. Over a half or about 55% of those who received a certificate this year are families with one baby only. By Igor Efremov’s estimates, the updated mechanism of maternity capital provision has made this useful instrument counter-effective: from 2020 a larger portion of payments have been switched over in favor of the first-born and motivation for the birth of a second baby in the same family has considerably decreased.   A multi-year decline in the number of births in Russia is not only continuing, but gaining momentum. It is a long-term trend which originated as far back as 2014-2015 and has even aggravated this year as compared with the previous one.

“The number of the issued maternity certificates is declining and is expected to decline further in the foreseeable future on the back of a decrease in the number of births in Russia over the past few years, Igor Efremov agrees with the Accounts Chamber’s data. By Igor Efremov’s estimates “this trend will continue and may even accelerate in the near future.”

However, the year 2020 saw, on the contrary, a maternity certificate boom: at year-end certificates growth nearly doubled; families with one baby received about 31% of the issued certificates.

It is to be reminded that from 2020 maternity capital can be used also by families with the first-born. However, the updated mechanism of payments includes one substantial “but”. A larger portion of financial support is transferred in favor of the first-born, while as regards the birth of a second baby in the same family, financing is provided on a residual basis.

As the RF Ministry of Labor reported earlier, in 2023 the size of the maternity capital for the first-born and a second baby would be equal to Rb589,500 and Rb779,000, respectively. However, if a family has already applied for the maternity capital for the first-born, “the size of payment for a second baby will be equal to Rb189,500.”

“After a switchover of maternity capital in favor of the first-born, there was a large number of families with the first baby, but without the second one born yet. These families received in the previous year and receive this year the entire sum of maternity capital at the birth of the second baby. But the number of such families is decreasing fast. The main maternity capital recipients are currently becoming families at the birth of their first-born,” Igor Efremov warns.

The expert believes that “a switchover of a larger portion of maternity capital to the first-born is a counter-effective demographic instrument.” “The size of maternity capital for the second child, if it was earlier received for the first-born, is too small to help families reduce barriers preventing them from giving birth to a second or any subsequent child even in regions with relatively low prices, including real estate prices,” Igor Efremov explained.

Further, the expert specified “financial incentives never work in case of the first baby, nor do they influence the parents’ decision to have a first-born”; only in some cases they may make families change their planned time frame for giving birth to a baby, but it does not actually influence the birth-rate at all,” Igor Efremov believes.

Also, as seen from the Accounts Chamber’s report over nine months of 2022 the number of individuals’ applications for disposal of maternity capital funds increased by 119,000 or 11% as compared with the same period of the previous year and was equal to nearly 1.2 mn.

Igor Efremov specified that families may apply for maternity capital long after the birth of a child. “So, the number of such applicants in a specific year may include families with children born over the past few years and for whom it has become necessary to use maternity capital right now,” Igor Efremov explained.   

The expert has noted that this year “the Russians have seen a dramatic decrease in their incomes and numerous families which have the right to maternity capital have taken advantage of receiving monthly cash payments out of it.” In addition to that, growing uncertainty even over the near future, a pickup in mortgage interest rates and a dramatic appreciation of real estate prices have made new housing less affordable and desirable to families, Igor Efremov believes.

“The way families are currently using maternity capital can be described as an effort to receive at least any advantage of it amid a shrinkage of options to utilize it for the main purpose it was meant, that is, improvement of housing conditions,” Igor Efremov says.

“To make maternity capital highly effective again, it is necessary to switch over the entire sum of maternity capital to the second child and introduce the same sum at the birth of the third child,” Igor Efremov says. According to Igor Efremov, it is worthwhile to expand options of maternity capital utilization, including by means of the secondary housing market.

Despite the fact that from January through October included controversial trends prevailed on the housing market, particularly in the regional context, housing prices on the primary market in Russia’s 70 large cities appreciated on average by 22% to Rb5.8mn.

The size of maternity capital should take into account the situation with real estate prices, the expert concludes. By his estimates, “the size of maternity capital should be equal now to around Rb950,000” to be instrumental for solution of housing issues.

However, it is to be specified that if maternity capital indexation is linked to a greater extent to a housing prices momentum, it will be important to introduce some limitations so that the size of such payments is not reduced in case of depreciation of housing square meters. All the more so since individual regions have already encountered this situation: while in some cities prices for apartments kept picking up by tens of percent, in other cities they virtually collapsed within a month.