The average American family can now expect to spend over $300,000 raising a child to the age of 17 before including college tuition. Rising costs have taken a toll—in a survey of American adults, those who have or expect to have fewer children than they want do so, in part because of the cost associated with children. The question young adults ask themselves when considering parenthood is shifting from “Do I want children?” to “Can I afford them?”. 

The costs of children begin climbing even before birth in the form of fertility treatments, hospital bills, lab tests, doctor services, and more. The typical cost of having a baby for Americans amounts to $20,000, and about $3,000 is paid out of pocket, even for Americans with insurance, making the US one of the most expensive countries in the OECD to birth a child. However, the costs don’t subside after birth. Rather once the baby is born, costs skyrocket. The US is one of the only developed countries without standardized paid parental leave. Federal policy gives new parents just 12 weeks of unpaid absence, during a time when bills are adding up in the form of diapers, strollers, toys, and more. Therefore, many parents are left in a financially vulnerable position during parental leave without income. Once parental leave ends, childcare fees start. Pre-k childcare costs, which have risen 220% in the past three decades, can now cost more than college tuition in large metropolitan areas. Couples earning the typical wage dedicate approximately 20% of their income to childcare costs, in institutions such as daycares, before public schooling becomes available. Another hefty price lies in housing. Although the housing costs of a single child are tricky to measure, parents often incur expenditures by moving to houses with more bedrooms or larger kitchens and roomier living spaces. This extra cost of housing can disincentive having a first child, or another child, especially as housing costs have skyrocketed in the last decade.  Lower-income families can spend nearly 10% of their income on housing a child, while for middle-income families, this cost is around 5%, according to the USDA. No matter their income, families need to spend more on food as their children age, and these costs can account for roughly 18% of childcare costs. All these expenses add up to one colossal bill for parents to foot. 

However, children not only represent a cost to parents but can also result in loss of income. According to a household survey by the Annie E. Casey Foundation, more than half of parents with young children have reported being late to work or leaving early because of childcare issues; 23% reported being fired for it. Issues related to childcare often result in financial instability for parents and can cause billions of dollars in economic losses across the US. The Council for a Strong America estimates that nearly 122 billion USD  is lost annually in “earnings, productivity, and tax revenue” due to childcare difficulties. Because of childcare, nearly all parents will initially experience a loss in take-home pay after birth. However, heterosexual men only experience a slight drop in earnings, and they catch up to before child birth earnings within months. For women, the loss is much larger, and their earnings often fail to recover to pre-birth levels in a phenomenon known as the motherhood penalty. Women are often financially and socially forced to make career sacrifices for childcare, such as returning to work only part-time or changing to a more flexible job, even at a lower-paid firm. These choices result in a loss of income among mothers compared to non-mothers. Among the developed world, mothers in Germany, Austria, Britain, and the United States experience the most significant motherhood penalty. American mothers can expect a 30% long-run loss of earnings due to motherhood

Despite these financial considerations, many parents cite that children bring more happiness to their lives and hence are worth the costs. However, there is no large discrepancy between parents and non-parents when comparing life satisfaction, health levels, and happiness. Some factors can affect happiness though, including income. Parents with low income, single parents, or parents living in countries with poor welfare systems report lower happiness rates on average. Hence, a dip in satisfaction among parents compared to non-parents may grow as the cost of having a child persistently and staggeringly grows, increasing expenses and reducing income. The cost of raising a child is expected to increase up to 10,000 USD annually by 2032 compared to 2016 for upper middle class income brackets, showing how quickly the cost of having a child is growing. The implications of this increase in price could reduce the viability and allure of children amongst new parents.

In nearly all developed countries, the average number of children born per woman has fallen below 2.1, the rate needed to replace the current population. A declining population has catastrophic macroeconomic implications. Falling fertility means a shrinking labor force, which lowers income and makes it difficult to support the aging population. Fertility rates have been falling for many complex reasons (including social structure, religious beliefs, economic prosperity and urbanization), however economic conditions are a contributing factor. Some states have been attempting to decrease costs for parents to increase fertility. Several states, including Vermont, New York, and New Jersey, have instituted universal pre-K programs to cut childcare fees. In May 2022, New Mexico became the first state to make childcare free to most residents, offering waivers to families of four earning up to 111,000. These policies are a good first step in helping parents support their families. However, many fertility and childcare analysts say this is insufficient to reverse the trend of falling fertility. If countries want to see increases in fertility, national governments will need to step up and reduce the price of raising a child across the board, not just in childcare, but in housing, food, education and more.

Nowadays, many Americans without offspring have decided they will never have children: 44% of non-parents between 18 and 49 are not planning to start families. The problem for many considering children is not whether they want kids, but whether they can afford them.

Featured Image Source: Vecteezy 2023 

Disclaimer: The views published in this journal are those of the individual authors or speakers and do not necessarily reflect the position or policy of Berkeley Economic Review staff, the Undergraduate Economics Association, the UC Berkeley Economics Department and faculty, or the University of California, Berkeley in general.

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