Economist Writing Every Day

Last week my post was about a new article I have with Scott Winship on the “cost of thriving” today versus 1985. That paper has gotten quite a bit of coverage, including in the Wall Street Journal, which is great but also means you are going to get some pushback. Much of it comes in the form of “it just doesn’t feel like the numbers are right” (see Alex Tabarrok on this point), and that was the conclusion to the WSJ piece too.

Here’s a response of that nature from Mish Talk: “There’s no way a single person is better off today, especially a single parent with two kids based on child tax credits that will not come close to meeting daycare needs.”

He mentions daycare costs, but never comes back to it in the post (it’s mostly about housing costs). Daycare costs are undoubtedly an important cost for families with young children (though since Cass’ COTI is about married couples with one earner, they may not be as relevant). And in the CPI-U, daycare and preschool costs only getting a weight of 0.5%. Surely that’s not reality for the families that actually do pay daycare costs! If only there was an index that applied to the costs of raising children.

In fact, there already is. Since 1960, the USDA has been keeping track of the cost of raising a child. Daycare costs are definitely given much more weight: 16% of the expenditures on children got to child care and education. And much of that USDA index (recently updated by Brookings) looks similar to what COTI includes: housing, food, transportation, health care, education, but also clothing and daycare. I wrote about it in a post last year and compared that cost to various measures of income (including single-earner families and median weekly earnings). But what if we compared it to Oren Cass’ preferred measure of income, males 25 and older working full-time? Here’s the chart.

We can’t go back to 1985, since USDA typically did these reports once per decade. But if we average 1980 and 1990, it is 12.2 weeks of work to support a child. That’s the exact same number as in 2022. Yes, it’s a touch higher than 1980, about 1 more week of work, but 2022 is lower than all the other years after 1980. And also like COTI, this measure of cost is not adjusted for changes in quality. It is the actual cost from each of the years.

As a parent of two young children, I do appreciate the concerns being raised! Child care and housing is indeed expensive (though in Arkansas we are fortunate that it is less expensive than most of the country), but we can’t also ignore that food and clothing are also much cheaper. You have to look at the full basket.

And as the WSJ writer notes, today kids demand lots of berries! I feel that too. And indeed, if we look at the price of strawberries, in 1985 the median male’s weekly income could have purchased almost 700 pints of strawberries, while today it is under 500 pints. One other thing you might notice if you click on that link to price data: in the 1980s strawberries were a seasonally fruit, only available for a few months in the summer. Today you can get them year-round!

Still, fresh fruit is a small share of spending. For families with children, just 0.6% of spending goes to fresh fruit. While I can’t get the number for families with children, for all families they spend basically the same amount on fresh fruit in 1985: 0.4%. They spent almost the same amount on processed fruits too, about 0.3% of spending in 1985. Despite claims that we buy more processed foods today, processed fruit spending was just 0.2% in 2021. So in total, families are spending about the same amount on fruit, and this is a very small share of spending: less than 1% of all spending.

For parents it can certainly feel like fresh berries are consuming our entire budgets, but they just aren’t.