Wednesday, September 21, 2011

Are Children Becoming a Luxury Good in the U.S.? Cost to Raise One Jumps 40% in a Decade According to Government

I have no idea why the Department of Agriculture is tasked with this mission, but apparently they measure the cost of raising a child (excluding college costs).  According to their figures, the cost of raising an American child up to age 18 has risen from $166,000 to $227,000 in just the past decade, a gain of 40%.   Not sure how accurate that is, but it is about $12,000 a year.  I think a lot people pay that just for daycare alone, but let's go with it and read some of the implications.  While it is probably not fair to straightline it, since there are efficiencies of scale (i.e. shared costs with more than 1 child) that would extrapolate to $24,000 a year for 2 kids, and $36,000 a year for 3 kids.  If these figures are anywhere near accurate, it appears having a child in America is becoming a 'luxury good', especially with wages being pressures for those in the bottom 60-70%.

This topic interest me because I've argued quite often that the while the U.S. is probably more tax advantageous for a single person, or a married couple, for for those with children it is probably cheaper to live in much of western Europe.  While you pay more in taxes you have highly subsidized (or "free") healthcare, education, and childcare.  Plus 6 weeks of vacation. ;)

Via CNN/Money:

  • The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year (not including college), according to the U.S. Department of Agriculture. That's up nearly 40% -- or more than $60,000 -- from 10 years ago.
  • From buying groceries to paying for gas, every major expense associated with raising a child has climbed significantly over the past decade, said Mark Lino, a senior economist at the USDA. (dollar debasement is awesome...)  Food prices, in particular, have weighed on parents' budgets.
  • Another notable increase has been the cost of transportation, which soared as a result of rising gas prices. Between 2000 and 2010, consumers paid an average of 85% more per gallon at the pump, according to AAA.
  • The battered economy has also taken a toll, of course. Many employers scaled back or even did away with medical coverage in recent years, leaving many families to cover that bill, said Lino. At the same time, costs for doctors visits, medications and other health services also climbed. As a result, health care costs for families with children rose 58% over the decade, he said.
  • All of this comes at a time when incomes are shrinking and unemployment is near an all-time high. Over the past decade, median household income have fallen 7%, according to a recent report from the Census Bureau. 
  • The early years are among the toughest for parents who must find a way to afford all of those costs, plus child care.  "It takes half of my paycheck to pay for my child care -- you start to feel like, Is this even worth it?" said Anna Aasen, a mother of two from Roseburg, Ore.
  • Although housing generally represents a family's largest expense, putting more than one child in day care tips the scales.  In 2010, the cost of putting two children in child care exceeded the median annual rent payments in every single state, according to a recent report by the National Association of Child Care Resource & Referral Agencies, or NACCRRA.

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