Chart: How Much Does It Cost to Have a Kid? (Much More Than It Used To)
(Source: USDA)
These simple charts tell a couple interesting stories, including (1) the decline of food and clothing as a share of the typical family budget -- from 35% to 22% of the pie; (2) the explosion of child care, education, and health care costs -- from 6% to 24%; and (3) the consistent prominence of transportation and housing spending -- from 47% to 44%.
If you pull back the lens even further -- from children to families, and from 1960 to 1900 -- you'll find that the 100-year story of the American budget is we went from spending half our money on food and clothes to spending half of our money on housing and transportation. Today, an ever-rising share of our money goes to industries that are labor intensive and hard to make efficient or offshorable -- health care and education.
I'd say this is good news, since education is a better long-term investment than underwear. But this is also a story of global competition and productivity making tradable goods like underwear and wheat cheap, while the price of nontradable goods, such as child care and education, rise inexorably. The technical term for this is "Baumol's cost disease" -- some labor intensive industries find it hard to make their services efficient, and costs rise. In human-speak: Many of us don't mind overspending on our kids' caretakers and doctors because the price of a smart and healthy baby is practically impossible to quantify. In ten years, I'd be shocked if the fastest growing slice of the pie -- child care and and education -- weren't considerably fatter than it is today.