Building an Economy that Works for Everyone

Want to fix the U.S.’s ‘Big Baby Problem’? Make having children affordable

The Atlantic recently reported on the U.S.’s ‘Big Baby Problem’. That is, how the U.S.’s record low birth rates will drive down consumption and key economic activity for food, housing and transportation purchases.

Just look at this new data from a Gallup survey released today on the average daily spending of families. Even after you control for income, age, education, and marital status, families with young kids spend more every day. These are the sort of spenders you want in a weak economy following a great deleveraging.

What are parents spending on? Not just books, toys, and games. The Department of Agriculture (weirdly enough) annually surveys the many ways we lavish our kids with spending, to the tune of about $14,000 a year. The overwhelming majority of money goes to the basics: housing, food, transportation, and education. Housing is kinda funny, because young children tend not to have their housing units, unless the parents are extremely well-off and the children are terribly misbehaved. The survey estimates the housing portion of spending by trying to account for a few factors: the cost of an extra bedroom, the cost of moving into safer communities with better schools, and the cost of buying homes with larger yards. It’s rough, but there it is.

They go on to write:

The drop in U.S. fertility rates in recent years has almost certainly had a negative effect on consumer spending (and, in turn, lower birthrates are probably an outcome of the recession). In particular, childless couples don’t need space for more kids so they’re less likely to buy homes in the suburbs, depressing demand for housing in an economy that could more bought homes.

Once again, couples and families can do whatever they want, it’s their lives. But writ large, smaller families and less household formation deprives the U.S. economy of housing and transportation spending, which has historically accounted for half of family expenditures. You can’t legislate demographics. But it doesn’t mean you shouldn’t worry about it.

There’s no doubt that a dropping birth rate and growing number of child-less families will significantly impact economic activity from Main Street all the way up to Wall Street.

You can’t legislative demographics, but you can make having children affordable. 

Our workplace policies haven’t caught up with the 21st century. Today, 40 percent of women are the primary breadwinners for their families, yet our our work-family policies assume that every household has a full-time caregiver at home. That doesn’t match reality. We need to champion policies that support working families by implementing living wages, Family and Medical Leave Insurance, heavily subsidized childcare and paid sick days.

Facing stagnated wages, a weak job market, back-breaking student debt and declining workplace benefits – it’s no wonder that more people are choosing not to have children. We need an economy that supports working families. Until then, we can’t blame people for not starting a family of their own.

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