Any parent who’s ever had to shell out for summer camp, Montessori, or Fortnite coaching knows that having a kid is expensive.
And like so many things in America, from healthcare to college tuition, it’s gotten steadily more expensive in recent years, outpacing inflation, wage growth, or any other economic benchmark you want to use.
Those rising costs surely have a lot to do with the country’s steadily declining birth rate. But a recent study on the rising costs of having a child by Clever Real Estate took a closer look at the numbers and made some surprising findings.
As Costs Rose, Birth Rate Fell
Between 1960 and 2015, the cost of raising a child through age 17 rose by 16%, or about $30,000, adjusted for inflation. Over that same period, the U.S. birth rate plummeted from 23.7 per 1,000 people in 1960, to only 12.4 per 1,000 in 2015.
This trend has reached a new peak in the economically beleaguered millennial generation, who are having fewer children than Baby Boomers or Generation X, and are waiting much longer to have their first child. Just since the oldest millennials turned 18 in 1999, the birth rate has dropped a precipitous 14%.
The costs of raising a child have increased unevenly across categories like education, healthcare, and housing. The largest increase, by far, has been in education, where parents today are spending a whopping 1175% more than their predecessors. Next was daycare/nursery services, where costs have risen 175% just since 1990, followed by healthcare, where costs have gone up 155%.
There are some silver linings for families. Over the same period, the price of housing and transportation have seen only small, single-digit increases, and parents have been able to dramatically reduce their spending on food (-14%) and clothing (-39%), though it’s unclear whether those savings are due to lower costs, or represent involuntary belt-tightening in response to skyrocketing costs in other categories.
The Daycare Crisis
If there’s one area of particular crisis, it’s childcare. According to some analysts, childcare costs since 1990 have been rising twice as fast as median family wages. That means that in 2019, it would be more cost-effective for one parent to stop working, rather than paying for daycare. This can be a huge source of tension for tradition-averse millennials, many of whom are carrying tremendous student debt burdens. In the recent past, the government subsidized child daycare, but since those subsidies dried up, daycare costs have risen from $35 a week to a whopping $200 a week, or about 10% of an average family’s yearly income.
But a closer look at the childcare picture reveals some interesting complications. While the costs of daycare have skyrocketed, only about a third of parents actually use paid daycare. Looking at educational costs shows a similar pattern. Private school tuition has seen huge increases; non-religious private schools are charging 43% more than they did just 20 years ago, while Catholic private schools are charging an average of 53% more than in 1999. But overall, private school enrollment has declined almost as much as the birth rate, with 14% of K-12 students in 1960 enrolled at a private institution, down to only 8% today.
Cost Is Only the Tip of the Iceberg
The takeaway? While costs like education and daycare have seen huge increases, those increases only affect a minority of parents. In fact, among middle-income families in 2015, only 41% of them spent any money at all on education or childcare. When you exclude the huge spike in education costs from the equation, the cost of raising a child today is actually 1.74% lower than it was in 1960.
So what caused the cratering of the birth rate over the past sixty years? While economic factors have certainly been a big contributor, they’re not the whole story.
Yes, millennials in their 20s are earning less than previous generations at the same age, and they’re more likely than any other generation to live in poverty, but their smaller, delayed families are a continuation of trends that predated their generation, and took root in rosier economic times.
While people today certainly have financial reasons to delay having kids, or eschew them altogether, there are larger and more mysterious forces at work here.
Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.
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