Every parent knows about the high cost of raising a child. You know it, your parents knew it, and your children will learn all about it when they grow up and become the next generation of parents. While it’s always expensive to raise a child, it really is getting more expensive every day. Today, we’re going to take a look at how our 21st century lives have changed the cost of raising a child. So, let’s dive right in!
First of all, and there is no surprise here, the cost of raising a child has gone up. A study by Mark Lino, an economist at the U.S. Department of Agriculture, tells us that in 1960 it cost $191,723 (in 2011 dollars) to raise a child from birth to 18 years old, and today that cost has risen to $234,900. While “The cost of raising a child is going up,” is not new news, what is new is what we’re spending all that money on. Lino’s study breaks down the cost of child rearing into six key areas (plus a 7th, “miscellaneous” cost). Here are the results.
HOUSING: The cost of housing has been very stable. In 1960, it was 30% of the cost of raising a child, and today it is 30%. However, just because it is stable, it doesn’t mean that nothing is happening in this category. Over the last few decades, a home has become much larger, nearly twice the size they were in the 50s. We also have multiple phone lines, cable TV and many other amenities. Even the air conditioning we take for granted today, was installed in less than 4% of American homes. Partially, because of better building techniques, but also because so much of the cost of American homes (more than half) comes from the cost of the materials used in construction.
Why does that matter? Take a look at the materials in your home, from nails and screws to paint, to countertops and home heaters, much of your home is produced offshore, often in China. While outsourcing has had a very mixed history in America, damaging some industries and impacting employment, it has also lowered the cost of… just about everything. Offshore manufacturing and outsourcing significantly lowered the cost of the materials that we use in our homes. Without this, our homes would be far more expensive and therefore, would be far smaller. The modern child is growing up with more space than a generation or two ago.
Transportation: Here too we see a small decrease, from 16% to 14%. That’s a bit surprising when you consider how much fuel has gone up on price in the last decade. Here too we benefit from offshore events. We may complain about the high cost of fuel, but it is, in fact, far less of an increase than we believe. For example, the cost of gas in 2013 and 1981 is virtually identical, when you adjust for inflation. While the cost of gas was just $0.35 in 1969, the real cost of gasoline throughout the early 1960’s was between $2.00 and $2.50. Add improved MPG and you can see how the cost of transportation has been held back, even though parents spend all day driving junior back and for t to karate class and after-school tutoring.
FOOD: Here is a real shocker, the cost of food has declined significantly, from 24% in 1960 to 16% today. Certainly, children are not eating any less! Instead, it’s a result of a dramatic change in agricultural policy. First, in the 1980s, under Ronald Reagan, the government switched from paying farmers not to grow certain crops, and thereby keep the price high enough for farmers to stay in business, to subsidizing the cost of growing certain crops, allowing farmers to stay in business. The result has been a falling price for food. Add to that America’s heavy use of farming technology and genetically modified crops, and Americans pay less for food than any other country.
CLOTHING: The cost of clothing has dropped even more than food, with a drop from 11% to 6% between 1960 and today. Which is even more surprising, since in the 1960’s children had little brand awareness when it came to clothing. Now everything is branded, and the price of shoes has gone crazy. Here too, you’ve got to look at outsourcing and offshoring as a reason why these costs have declined. Yes, your child’s clothing bill may be staggering, but it’s only half of what it might have been, if clothing was still mostly made in America.
HEALTHCARE: Of course, if some costs go down, some costs must also go up. And healthcare has increased dramatically, doubling from 4% to 8%. This is perhaps the best evidence that our longer lifetimes have a very concrete cost. It’s also a sign that the medical cots that our children will bear for their entire lives will be much more than they are today. Perhaps medical tourism will be the growth industry of their generation, with patients going to the best hospitals around the world, in order to avoid the price of US medicine.
EDUCATION: The most shocking change of all, is in the cost of education. Remember, the costs we are looking at are only from birth to age 18, and do not include collage and post graduate education. Even so, this cost rose from 2% in 1960 to 18% today. This staggering 800% rise is the most dramatic change in raising a child. This trend doesn’t arise from any single factor. Partially, it is driven by every parent’s desire to have a gifted child. Parent’s know in their heart that programs for gifted children, which are often the best of the best in their school district, are the ticket to an ivy league college when their child becomes an adult. Getting the right scores, plus the right scholarships become an obsession, even when research says that gifted programs don’t provide the educational boost they are assumed to provide. Still, just to get into those programs means choosing your home based on the performance of the school district, and buying a lot of private enrichment services.
The other half of the education puzzle is that in the 1960s one parent stayed at home and dealt with the education of the child, while the other worked. Today the two income family has become the norm, with 47% of married couples both working`. As recently as 1996, only 31% of married couples had two income earners. Paying for more education becomes a necessity when you cannot pick up your child until after work. Obviously, there are many other factors, such as changing educational standards, the need to expose children to technology, and the debated over preparing our children for international competition when the US scores so poorly in math, geography and other subjects.
What does all this mean? It means that the changing cost of raising a child is not just the result of runaway costs. It is due to the changes in our culture that we, and our parents, have created. We have financially benefited from the lower costs of outsourcing, agricultural genetic modification, industrial farming, offshore manufacturing, and technology. However, we’ve also had a high cost for more education, more healthcare, more hours of work and our desire to see and treat all children as if they are gifted. These changes drive a third of the costs of raising a child, or about $80,000. Have our children really benefited from the extra $80, 000? It’s difficult to say. However, if you spend an extra $80,000 on anything, and don’t know if there is a benefit… chances are that you’ve already answered that question. And that’s my Niccolls worth for today!