June 15, 2011

The cost of raising a child vs child support

You may have heard, it costs a lot to raise a child. A recently released report by the USDA estimates that it will cost an average of $287K to raise a child born in 2010. But as others have pointed out, the study comes up short by two measures.

First, it’s based on out of pocket expenditures, so it doesn’t include opportunity costs such as career deferral, etc. Second, it’s based on what people actually spend, not what they need to spend on raising a child.

I’d say lost income trumps the fact that some people may overindulge their children, so if anything the study's results are probably an underestimation. But let’s assume for a moment that it’s any accurate accounting of the current cost of child rearing in America. Exactly how much does it cost to raise a child these days? And what does it tell us about something else we care about... child support?

The following table from the pdf report summarizes the USDA estimates:

But if you want a more precise number for your specific circumstances, you're in luck. The USDA website provides a handy calculator that takes into account all your children, your geographic location, income, and whether or not you’re a single parent. (Homework assignment: run the calculator for yourself and compare the estimate to the cost of your chosen birth control method.)

I ran the calculator for two cases:
  1. One child, single parent, income greater than $57,600

    Result: Your child will cost $20,950 for the first year out of the box, ranging up to $25,645 (in current dollars) at 17 years old.
  2. One child, two parents, income between $57,600 and $99,730

    Result: $14,938 in year 1, up to $17,288 at 17
Question: Why does raising a child cost less if there are two parents? Maybe some of the costs aren’t capture by the data, i.e., there’s less money spent on day care when one parent stays home (I’d expect that effect to be more than cancelled out by the loss in income of the stay-at-home parent, but again, that’s not captured by the data). Or maybe, for whatever reason, more of the money that single parents spend on a place to live is attributed to child care expenses (This discrepancy is, in fact, borne out by the category break down provided by the calculator).

OK, so kids are expensive. But how do these numbers compare to what our courts are extracting as child support? To find out, I ran a few cases using the official child support guideline calculator for California.

First, I used the $57,600 income value from the USDA report for the parent who’s compelled to pay child support, assuming that this cutoff implies some basic standard for raising a child. I ran the numbers for a few combinations of custody split (percentage of the child’s time spent with either parent) and income of the primary custody holder. Then I ran a few cases being a little more generous with the income of the child support payer, using an income of $100K. For each case, I calculated the percentage of the USDA-estimated costs ($20,950 from the calculation for the single parent above) that would be covered by the CA mandated child support payment. Here are the results:

To my surprise, the numbers for the first four cases seem pretty fair, with the child support paying parent (oh why don't we just call him “Dad”) paying a large chunk of what would be predicted by the USDA survey, but not the majority. Comparing Cases 2 through 4 shows that as Dad takes less responsibility for the non-monetary costs of raising the child, he’s asked to pay more. This also seems fair to me. What bothers me is how Dad gets punished for both earning more money himself and for the mother earning less. I don’t believe his responsibilities should change due to either of these factors. Case 4 is the most confusing. Why, exactly, is Dad asked to pay Mom anything if he has 50% custody?

With a slightly larger data set, I found that correlation between Dad’s income and the child support was above 90%, while the correlation between child support and either custody or Mom’s income was less than 50% in both cases. This primary focus on Dad’s income illustrates the fundamental unfairness in our child support system in my view, and belies the fact that it isn’t really about the child in many cases. One of my biggest problems with child support is that most states base the amounts on income. As far as I understand, the logic behind child support is this: It costs a certain amount of money to raise a child, and both parents should be responsible for that amount. To me, that cost should be fixed and independent of either parent’s income.

Moral of the story: no matter how you slice it, raising a child is expensive, so think twice, or maybe three times, before having kids.