The haunting image of starving Greek parents leaving their children in orphanages is an extreme reminder of family hardship in this depression. As years of austerity for families stretch ahead, it will be no surprise to find the European Union birthrate dropping. But that only highlights a much longer-term trend. Women in developed countries are on strike, refusing to have more babies in the countries that help them least.

For decades European families have shrunk, though they were slightly increasing in size before the crash. Alarmed governments face more older people but smaller working populations to sustain them. The Organisation for Economic Co-operation and Development average total fertility rate is 1.6 births per woman, when 2.1 is needed to stay stable. Immigration helps, but countries resist large rises. Governments start with the obvious – making older people work longer, retirement age rising with longevity. But what about the birth rate?

Here’s the saddest statistic. Most people have one child fewer than they wanted. States need more people and parents want more babies, so why are governments so bad at making life easier for motherhood? Family friendly policies are seen as lollypops for women voters, not as economic necessity. Economists search for economic growth in deregulation or “flexible labour”, making life harder for working mothers. Few look at women and children as growth potential.

The Resolution Foundation’s new research, The Price of Motherhood, shows how vital women’s work is to family finances: in 1968, men provided 70% of family incomes, women 11%; but by 2009, men brought in just 40% and women 24%. Lack of good part-time jobs means nearly half of mothers take lower-grade jobs than their qualifications – and lose out for ever. Making it easy for women to combine work and family is essential for the nation’s standard of living: babies are a long-term economic necessity too. Countries that make combining both easy, do best.

Voluminous studies from Population Europe, a network of demographers, shows how cultures, attitudes and levels of state support affect birth rates. Women rebel against motherhood in countries that make it too difficult to combine with work. Where men help least at home with their first child, where women are expected to stay home with young children – the Mediterranean, Japan, Germany and eastern European countries especially – fewer women have second children. Countries with the least childcare have low birth rates. What an irony that all the Catholic countries, imbued with traditional roles for mothers, fall well below the EU average birthrate.

The Vatican would stand a better chance of increasing its flock by preaching the value of universal childcare at low prices. That turns out to be the most decisive factor in fertility rates. Women want and need to work: if having more children prevents them, they will stop having babies. France, with its strong pro-natalist encouragement of familles nombreuses, scores high both on women’s careers and high fertility. The Nordics score top for best quality and cheapest childcare – and for babies in countries where attitudes approve of mothers working when a child is a year old. (Though they aren’t always perfect: a Swedish minister told me they worried about how to stop fathers using paternity leave to go elk hunting.)

One great Labour success was growing Britain’s birthrate. The 1990s saw births fall, hitting a record low of 1.63 babies per woman in 2001. But by 2010 births rose to their highest in 40 years, reaching two per woman. Immigrant mothers helped – but the Office for National Statistics shows births rose among British-born mothers. Why? Government childcare and tax credits were a key factor, they say. Labour was never pro-natalist: extra babies were an unintended consequence of unprecedented help for mothers. Maternity leave doubled and was better paid, with paternity leave introduced and mothers able to request flexible working hours.

Child benefit rose and child tax credits added greatly to family incomes. Childcare costs were covered up to 80% by credits, with free nurseries for three- and four-year-olds and 3,500 Sure Start children’s centres – not perfect but halfway there. The child trust fund gave new babies a nest egg. Every government signal sent a welcome to babies and young children as never before. At last, here was the cradle in the cradle-to-grave welfare state. Shamefully, the CBI arm-twisted Labour to block EU attempts to raise minimum EU maternity rights. It’s time the CBI saw more babies and more working mothers as economic gain.

The Institute for Fiscal Studies (IFS) studied whether Labour’s tax credits increased the birth rate – and found they did. Tory critics at the time said raising children’s benefits only encouraged the feckless to breed. Remember Peter Lilley’s nasty little ditty about single mothers getting pregnant to get a flat? The IFS verdict on Labour benefits said they increased the birth rate by 15%, causing another 45,000 babies to be born, not to single mothers but to working couples on lower earnings. Single mothers did not have more second children. On the contrary, the IFS found tax credits a big incentive that caused more of them to take jobs. At the time, a splash of TV ads explained the new tax credits, encouraging working mothers: the pro-children message was loud and clear.

Luckily, the Millennium birth cohort study will capture the lives of these Labour babies, and the next study can compare them with those coming after. What a tragedy to see the coalition rip out so much family support – with childcare credits cut while costs rise, children’s centres closing or stripped bare, tax credits and child benefit cut, the child trust fund abolished. Their one positive is to implement Labour’s planned free nurseries for low-income two-year-olds. But the expectation must be that the size of families will drop, as coalition austerity falls heaviest on young families.

Labour needs to boast louder of all it did as the friend of families. Any strategy for growth must include the very best childcare for all, as an economic engine. If David Cameron really does bring in tax breaks for nannies and domestic cleaners, the dead-weight cost will be so phenomenal before it creates any extra childcare that Labour can start by taking that money back to spend on making universal childcare a reality.