Incentives are powerful

If you have ever studied economics, you will know that one of its calling cries is that people respond to incentives. Indeed you can even consider economics to be the study of how and why people respond to incentives.

Since public policy is concerned with guiding choices by putting in place incentives, you’d think policy makers would be more in tune with their implications. But policy makers often fail to consider how implementation of public policy can lead to perverse incentives.

An important function of implementation of public policy is to communicate the policy. Often this means making announcements long before the details of the policy initiative is determined. And sometimes just the act of making those announcements can lead to people responding to the policy.

I recently wrote about the unintended consequences of Canada’s expansion of parental leave here. But you might be interested in another feature of this expansion that gets at my point in the blog and is based on my research with Janice Compton on birth seasonality in Canada.

On 12 October 1999 the federal government signaled that it was going to expand the parental leave provisions, but made no commitment as to the date of that expansion. Instead, the expansion was official announced in the 2000 Budget on 20 February 2000 as being effective 31 December 2000. Why are those dates important? The table below shows the quarterly trend in observed births in Canada around this window.

Quarterly Observed Births, Canada, 1997-2004

Year January-March April-


July-Septemberb,c October-December c Total
1997       84,968         92,395         89,500       81,735       348,598
1998       83,424         90,464         88,881       79,649       342,418
1999       81,890         87,875         87,772       79,712       337,249
2000       82,627         86,801         83,173       75,281       327,882
2001       81,350         87,303         86,123       78,968       333,744
2002       79,345         83,719         86,618       79,120       328,802
2003       79,299         85,486         88,856       81,561       335,202
2004       81,583         85,762         87,992       81,735       337,072

Source: Modified from Compton and Tedds, 2016

The date of this Speech was October 1999 and if we use the median gestation period of 40 weeks this accords with July 2000, the beginning of the noted temporary decline in births in Canada. The actual commitment to this expansion was not made until the following Budget, which was announced in February 2000. Again, if we use the median gestation period of 40 weeks this accords with December 2000, the end of the noted temporary decline in births. December 2000 is also notable because the new expanded parental leave policy took effect on 31 December 2000.

While this is certainly not causal evidence, the correlation is notable and suggests that Canadian women responded significantly by curtailing conceptions in the wake of the policy signal. It is also interesting to note that we do not see an immediate spike in births following the policies implementation date, showing what many women already know: it is much easier to cease conceptions than it is to recommence them.

While such a short temporary drop in births may not be concerning, it is an interesting case of how policy announcements themselves can be incentivizing and why policy makers need to pay attention to how their vague policy signals may result in unintended behaviour. Indeed, as the data becomes available, it will be interesting to see if Canadian women had a similar response to the 2015 election announcements related to expanding parental leave from the current 35 weeks to 61 weeks.



Why we should care about National Infertility Awareness Week

You might not know this but in the U.S. this week marks National Infertility Awareness Week. It is a week to talk about infertility and assisted reproduction, among other topics. I have blogged a number of times about infertility and assisted reproduction and my last piece was a contribution to the Macleans ‘charts to watch‘ in the run up to Budget 2016.

One of my main messages on this topic is that Canada can’t continue to ignore assisted reproduction.

In Canada, the prevalence of infertility has risen from 5% in 1984 to upwards of 16% in 2010 (Bushnik et al 2012, p. 1). Increasingly, these infertile couples are seeking medical help, including turning to assisted reproduction technology (ART). The Canadian Fertility and Andrology Society (CFAS) reports that the number of assisted reproduction technology clinics in Canada increased by 50% between 2001 and 2012 (the latest year for which figures are available), and the number of ART cycles reported by these clinics increased by nearly 250% over the same time frame (Gunby and Daya 2005, and Gunby n.d.). Notably, in 2012 a total of 27,356 ART cycles were reported in Canada (Gunby n.d.).

Many people seem to associate infertility as solely being an issue of older women trying to conceive, but that is seriously uninformed view. The Canadian Fertility and Andrology Society produces regular statistics on assisted reproduction and according to their data only about 12.8% of ART cycles are due to ‘advanced maternal age.’ In contrast, 30% are due to male factor infertility, 13.2% due to a tubal factor, 9.3% due to Endometriosis, and 7.8% due to PCOS, among other exogenous factors. That is, there is an underlying health issue that necessitates the need for ART. Backing that up is that the majority of women accessing ART are under the age of 35. 

The Canada Health Act does not require the provinces to cover ART as part of their medical plans as the federal government has deemed that these procedures are not medically necessary (Hughes, 2010, para. 2). As a result, most provinces cover the cost of infertility testing, but few cover the costs associated with ART.

One of the biggest side effects of ART is the incidence on multiple births. The natural rate of multiple births is about 1 in 89 birth (~1.1%), whereas in the multiple birth rate in Canada has grown to about  1 in 30 (3.3%). Further, data from the Canadian Fertility and Andrology society shows that the multiple birth rate from in vitro fertilization treatments in Canada without regulated embryo limits was around 30%. Multiple births are both risky and costly, not only to the parents but also to the health care system and to the babies themselves. ART increases the multiple birth rate through either the transfer of multiple embryos through invitro fertilization or due to super ovulation during inter uterine insemination (IUI). Despite these concerns, only Quebec and most recently Ontario regulate embryo transfers (and no province regulates IUI).

34 years have passed since the birth of the first babies conceived through IVF in Canada and in that time the federal and provincial governments in Canada have collectively and individually shown little leadership with respect to infertility, assisted reproduction treatments, and the growing multiple birth rate in Canada.

The federal government particularly needs to reexamine the asinine and difficult to enforce limits on surrogacy and embryo and sperm donation. While some Canadians have moral difficulties with medical interventions in conception, the reality is that for many couples these interventions are both medically and mentally needed. These limits force Canadians to seek treatments in other countries, like the US, that do not have such limits or lead them to breaking the law. The limits also impede access to viable treatment alternatives, including for women unable to face the possibility of yet another miscarriage.

The issue of infertility, assisted reproduction treatments, and the growing incidence of multiple births needs a fulsome, mature, and national discussion in this country and the longer the federal and provincial governments ignore this significant reproductive issue, the costlier it will become.