Denmark’s Falling Birth Rate Saves Billions Annually

Gitonga Riungu

July 16, 2026
8:30 am

A new study shows that Denmark’s falling birth rate could improve public finances by 15 billion kroner annually through reduced spending on childcare and schools, even as the workforce eventually shrinks.

Fewer babies might sound like an economic problem. In Denmark, it turns out to be the opposite. At least in the short term.

Research from Aarhus University, supported by the Rockwool Foundation, calculates that if fertility falls from around 1.7 to 1.3 children per woman, the country could save 15 billion kroner a year by 2100. That is not a typo. Fewer children equals stronger public finances, according to the study.

The logic is simple. Denmark spends heavily on children: daycare, schools, healthcare, education. When fewer kids are born, those costs drop faster than the eventual loss in tax revenue from a smaller workforce decades later.

The Numbers Behind the Paradox

Professor Torben M. Andersen led the research using the DREAM model, which links population forecasts to employment, taxes, and public spending. The scenario assumes fertility drops from 1.7 to 1.3 children per woman, a decline that mirrors trends across much of Europe.

Denmark currently sits at around 1.5 children per woman, the lowest in 37 years. That is still higher than Finland or many southern European countries. But it is well below the replacement rate of 2.1 needed to maintain population without immigration.

In the first phase, fewer children mean lower costs. The savings accumulate for four to five decades. Later, when those smaller generations enter the workforce, tax revenues drop and pressure from an aging population rises. But in Denmark’s case, the early savings outweigh the later losses.

This is not true everywhere. The report notes that the effect depends heavily on how a country structures its welfare state. Denmark stands out because it invests so much in children upfront.

Short Term Gain, Long Term Questions

The analysis has sparked debate. Economists at the Ministry of Finance and the Economic Council have published similar findings. Falling fertility improves Denmark’s fiscal sustainability by roughly 0.3 percent of GDP, equivalent to billions annually.

But demographers and some economists warn that these models are too narrow. Fewer people ultimately means a smaller economy, less innovation, and potential labor shortages. Rune Lindahl-Jacobsen from the University of Southern Denmark has called for a national commission to study the fertility crisis, similar to the life expectancy review in the 1990s.

The concern is that politicians might treat the short term windfall as found money. Why reform pensions or increase the retirement age when the books already look better? Why invest in family policy when fewer children seem financially beneficial?

Denmark Is Not Alone

Across Europe, fertility rates have collapsed. Denmark is doing better than most. Iceland leads the Nordic region at 1.59 children per woman. Sweden, Norway, and Finland all trail behind Denmark.

But every country faces the same underlying challenge. Populations are aging. Birth rates are falling. The workforce is shrinking relative to retirees. Immigration has become the primary driver of population growth in Denmark, accounting for nearly all the increase to over six million residents.

The Rockwool Foundation summarized it bluntly: fewer children might be good for the economy now, but the party will end. The question is when, and whether Denmark will be ready.

What This Means for Expats and Families

For those of us living here, this debate has real implications. Denmark already offers extensive parental leave and subsidized childcare. The government recently expanded fertility treatment to cover a second child. Yet birth rates keep falling.

The reasons are familiar: later family formation, career pressures, housing costs, economic uncertainty. Young Danes are not having fewer children because they want to. Surveys show most people want two kids. Reality delivers fewer.

If policymakers see falling fertility as a fiscal win, they may not prioritize policies that actually help families. Cheaper housing. Better work life balance. More flexible parental leave. These cost money upfront, even if they might stabilize the birth rate later.

The study does not argue that falling fertility is desirable. It simply shows that in Denmark’s system, it happens to improve the budget. That is a description, not a prescription.

The Risk of Complacency

Denmark recorded a budget surplus of over 133 billion kroner in 2024. Public finances look strong. Falling fertility adds to that picture. The Economic Council and Ministry of Finance have already adjusted their forecasts downward, improving long term sustainability estimates.

But this creates a political trap. If everything looks fine on paper, why act? The demographic shift is slow. The consequences will hit future governments, not the current one.

I have watched Danish politics long enough to know how these things go. Hard decisions get postponed. Models get tweaked. Meanwhile, the fertility rate keeps dropping, and the population keeps aging. Immigration fills the gap for now, but that brings its own political tensions.

The paradox is sharp. Denmark benefits financially from fewer children while simultaneously worrying about a fertility crisis. Both things are true. The question is which one politicians will prioritize.

This study offers them an easy out: do nothing and watch the savings roll in. That works until it does not. And by then, reversing a generation of demographic decline will be far harder than preventing it now.