The economics of having kids...
Find a Conversation
|Mon, 08-11-2003 - 4:31pm|
"...You might, then, expect American families to be luxuriating in good fortune. But, compared with people who don’t have children, people who do are in worse economic shape than they’ve ever been in. The Harvard law professor Elizabeth Warren and her daughter Amelia Warren Tyagi demonstrate, in their forthcoming book “The Two-Income Trap,” that having a child is now the best indicator of whether someone will end up in “financial collapse.” Married couples with children are twice as likely as childless couples to file for bankruptcy. They’re seventy-five per cent more likely to be late paying their bills. And they’re also far more likely to face foreclosure on their homes. Most of these people are not, by the usual standards, poor. They’re middle-class couples who are in deep financial trouble in large part because they have kids.
In the past two decades or so, the cost of having children has risen much faster than the cost of being childless. Conventional wisdom aside, this has little to do with spoiled kids, acquisitive parents, or PlayStation 2. Instead, it’s the result of two things: housing and education. According to the Federal Reserve Board, between 1983 and 1998 the price of housing for married couples with children rose seventy-nine per cent in real terms, roughly three times as much as it did for childless people. One reason is that houses are bigger now. But, according to Warren and Tyagi, the real reason is that parents get into bidding wars for homes in safe neighborhoods with good public schools.
Then, there’s college. Thirty years ago, middle-class parents could feel they’d done a good job of raising a child if he or she made it through high school—decent jobs for unskilled and semi-skilled labor were readily available. Today, such jobs are much harder to find, and college is considered a necessity. Needless to say, it is also extremely expensive.
The solution seems simple enough: have fewer kids or none at all. This may seem coldhearted, but it’s a choice that many Americans, particularly in the middle class, already find themselves making. Between 1980 and 2000, the percentage of women between forty and forty-four who had no children doubled; the percentage of women who had only one child nearly did, too. Economists have long argued that a child is analogous to a “consumer durable,” like a refrigerator. Parents invest time, energy, and money in the child, and in exchange, as the child grows up, they get what the economist Gary Becker has called “psychic income”—as opposed to the real income that children in, say, an agrarian economy could bring in when they grew strong enough to help with the harvest. Becker observed a correlation in the United States between birth rates and the business cycle. When the economy is bad, people tend to have fewer kids. When it picks up, they have more. Although there are obvious limits to this point of view (we’re evolutionarily programmed to want children but not refrigerators), it does suggest that, as with most goods, if kids are more expensive, people will accumulate fewer of them.
The problem is that while it may be economically rational for a middle-class professional to forgo having kids, the effect of a baby embargo would be economically disastrous, and not just for the producers of SpongeBob SquarePants. Parents may have to bear the costs of rearing children, but it’s society as a whole that reaps the benefits. We all gain from having more people going to college and becoming productive workers. And all of us—even those who have no children—expect that we will be taken care of by others in our old age. The United States has $6.7 trillion in debt and forty trillion in potential obligations to the elderly or soon-to-be-elderly, and we’re sticking future workers with the bill. Even if the American birth rate stays where it is, we’re headed for serious trouble. If it drops, look out.
In a sense, children are what economists like to call a “public good,” like national defense or scientific research. The essential characteristic of a public good is that everyone benefits from it even if not everyone pays for it. Government usually plays a valuable role in making sure that a public good is paid for. This doesn’t mean that the state has to take over driving the kids to soccer practice—or, God forbid, require each couple to have 3.2 “Heroes for the Homeland”—but it should certainly help spread the financial burden of raising a family. There may be some sense after all in having those taxpayers who don’t have children subsidize those who do, and there’s little sense in cutting back on programs like Head Start. All of us, it turns out, have an interest in improving public schools. It may not take a village to raise a child, but these days it seems to take a village to pay for one."
— James Surowiecki