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How Much It Actually Costs To Raise Kids In The U.S. - YouTube
Channel: CNBC
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It's very expensive to raise
a child in the US.
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I knew it was going to be
expensive, but I didn't know
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it was going to be that
expensive.
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The free market works well
in many different sectors,
[10]
but child care is not one
of them.
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Sending an infant to
daycare in many places
[15]
across the country is
actually more expensive than
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in-state public tuition to
send them to college.
[20]
When we looked it up, it
turned out our daughter's
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daycare was more than
Stanford's tuition.
[24]
We didn't really start to
dig into it until we had a
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baby and I was on maternity
leave.
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And then the numbers really
started to hit home and it
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was like, how are we going
to do this?
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Many Americans are
struggling to make ends
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meet. More than 12.5
million children in the U.S.
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live in poverty. Even
middle-class families are
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increasingly struggling to
pay for everyday expenses.
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We stopped saving any money
altogether.
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We were living paycheck to
paycheck every month to pay
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rent in the Bay Area and
pay for child care.
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In this country, we don't
have comprehensive policies
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and so that means we are
working with piecemeal
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programs to try to help
people make ends meet.
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I think the United States
has just been very
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reluctant, very
conservative, when it comes
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to these kind of family
policies.
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Improving the social safety
net, lowering the overall
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cost of raising children in
this country is both the
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right thing to do for
American families and the
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smart thing to do for our
entire American economy.
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The fundamental issue is not
that we don't know what to
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do. We know the children
need stability.
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The way to get to stability
is making sure families have
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sufficient resources and
sufficient time.
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If we know what to do, how
do we pay for it?
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Here's why it's so expensive
to raise kids in the U.S.
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and which policies could
help Americans.
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My name is Jeniece.
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I am a mother of two
children, a four-year-old
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and a two-year-old.
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And we live right outside
San Francisco.
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I'm Darren Geeter. I'm a
producer for CNBC and
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recently just had my first
kid, my daughter Alma.
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Basically, I've been on
paternity leave for the last
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eight weeks, so I'm halfway
through.
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Everything is very expensive
in New Jersey.
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People always warn you
there's going to be a ton of
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stuff that you need to buy
for the baby, whether it
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comes with diapers or
wipes.
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And we didn't necessarily
understand how much we have
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to buy.
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If we had had two kids in
full time daycare, it would
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have been a lot more than
rent.
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So that's why it just
absolutely wasn't an option.
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And when we looked at the
numbers for full-time
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nannies in the San
Francisco area, they all
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charge about 80 grand a
year.
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We don't have concrete plans
of what we're going to do
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with child care because we
know that child care can
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range anywhere from $1,000
a month or some where it
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could be like paying a
double rent.
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The average family with at
least one child under the
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age of five typically
spends around 13% of the
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family's income on child
care, according to a
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September 2021 Treasury
Department report.
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That's about one out of
every $8.
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That's more than what the
average household spends on
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groceries and nearly double
what the government
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considers affordable for
low-income families.
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Even before the COVID-19
pandemic, the median black
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family with two kids was
spending roughly 56% of
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their annual income on
child care, a bigger share
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than any other racial
group.
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And of course, we know
during COVID, for all
[193]
families, child care
centers, school closures
[196]
were forcing parents to pay
for child care in ways that
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they never had had to
before.
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For over 20 years, the
Economic Policy Institute
[203]
has produced something
called the Family Budget
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Calculator. And in that, we
look at basic expenses
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across the country:
housing, child care if you
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have kids, healthcare,
transportation, food, other
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incidentals, like household
items, and your taxes.
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One of the things we
noticed when we were doing
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this about four or five
years ago is that child care
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became more expensive than
rent in many places across
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the country.
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The most recent report
released by the Department
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of Agriculture in 2015
estimated that for a
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middle-income household
with two parents and two
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children, it would cost
more than $233,600 to raise
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a child from birth through
age 17.
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And that's in 2015 dollars.
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With inflation, that number
translates to almost
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$286,000 in 2022.
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The report calculated it
would cost the hypothetical
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family of four anywhere
from $9,330 to $23,380 per
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child in one year.
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This range depends on the
age of the child and income
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of the parents. Adjusting
for inflation, that range in
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2022 would be between about
$11,400 and $28,600.
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But adjusting for inflation
may not be enough.
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Child care costs have
actually outpaced inflation.
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Child care prices surpassed
annual inflation by nearly
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4 percentage points in
2020, and that was before
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the worst of the pandemic
inflation woes.
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And that data is based on
middle-class, two-parent
[287]
households. Just think
about what that cost looks
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like when we're talking
about single parents, or if
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we're talking about
families of color on the
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struggling end of the
racial wealth gap in this
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country.
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I'd say we're middle class
for the area we're living
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in. I actually am not sure
how some people get by
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living in the Bay Area that
make less than my husband
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and I do. We cannot wait
until next year because one
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of our children is going to
public school next year and
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we might finally be able to
start saving some money
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again.
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Families that are right on
the poverty line on average,
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if they're white in this
country, have $18,000 of net
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worth. Families at the
poverty line, if they're
[325]
black in this country, on
average have at or below $0
[330]
in net worth. Just think
about what that $18,000
[333]
difference means to parents
when their second-grader
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falls off the monkey bars
and they're facing
[340]
unanticipated medical
costs.
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Policymakers acted very
swiftly in the pandemic and
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enacted policies that had
tangible positive results
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for workers and their
families.
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We do a lot of family
supports through the tax
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code, and the most
prominent example here is
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something called the Child
Tax Credit.
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The Child Tax Credit allows
parents to deduct a certain
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amount of money from their
taxes at the end of each
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year. That amount depends
on several factors:
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household income, how many
children someone has, and
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the age of the children.
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The Child Tax Credit,
enacted in 1997 with broad
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bipartisan support, was
enacted in response to slow
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wage growth, higher cost of
living, and a growing tax
[377]
burden for average
households. It was enacted
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to help reduce the tax
burden on families with
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children. To help reduce
the cost of raising kids.
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Congress temporarily
expanded the policy during
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the pandemic.
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Bill, as amended, is passed.
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The tax credit was raised to
$3,000 a year for children
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between six and 17 years
old and jumped to $3,600 a
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year for children five and
under.
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And for at least half of the
year it was paid out
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monthly. So both a kind of
substantial boost in value
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and this monthly payment.
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So you're not waiting till
the end of when you file
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taxes the next year to get
it.
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And that provided a solid
safety net to try to help
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families really make ends
meet during those tough
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times. And it helped reduce
hunger in families, very
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tangible results of those
kinds of programs.
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In 2021 alone, the expanded
Child Tax Credit was
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estimated to lift 4.1
million children above the
[431]
poverty line and to reduce
the number of children in
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poverty by more than 40%.
[436]
People who have children,
you know, that's work that
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families are doing and it's
work that they're doing on
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behalf of all of us.
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So this is a way to try to
support families doing that
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work that allows them to
choose for themselves how
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best to spend the money to
invest in their children.
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The pandemic's expanded
legislation expired in 2021.
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As of 2022, the tax credit
is back to its pre-pandemic
[461]
levels, which maxes out at
$2,000 per child with the
[465]
parents of younger children
receiving a larger subsidy.
[468]
It's kind of a way to
subsidize or support
[470]
parents, but it typically
has not included very low
[473]
income parents. We've
excluded parents who don't
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have earnings, parents with
disabilities or, for other
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reasons that aren't in the
labor force.
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From the time it was enacted
until last year's temporary
[484]
expansion, the Child Tax
Credit was actually not made
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available in full to 50% of
black children and families
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because their family's
income were too low.
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It's important to me, I
think, that we have a Child
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Tax Credit that is not
connected to a work
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requirement. To me, the
Child Tax Credit is paying
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for the work of being a
parent, which is work that
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benefits us all.
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To attach additional work
requirements to that, sort
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of undermines this intent
of helping families in a way
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that makes sense for them.
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There are two other policies
that economists and other
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experts advocate for when
it comes to helping
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families: subsidized child
care and paid family leave.
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These policies go hand in
hand because paid family
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leave means parents can
stay home and take care of
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their children themselves.
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The U.S. is the only OECD
country that does not have a
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federal paid leave program.
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Less than a quarter of U.S.
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workers have access to paid
family leave by their
[542]
employer.
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There is a law on the books
at the federal level that
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requires employers to allow
parents to take unpaid leave
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up to 12 weeks as long as
the private employer has 50
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or more employees.
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When it's unpaid, it's not
really an option.
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It's not really a choice
that many families can take
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across this country.
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And it's not just
low-income families.
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There are many
middle-income families that
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are living paycheck to
paycheck that simply can't
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afford to take leave how it
is now.
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What we see is that black
families, Latino families,
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Native American families,
workers are less likely to
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be able to afford unpaid
leave from work than white
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workers, again reflecting
and enhancing racial
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economic disparities across
the board.
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There are some states and
localities that have passed
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paid family and medical
leave, and that provides for
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paid parental leave as one
component of that, to make
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sure that workers actually
have the option to take that
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leave.
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Each state with paid family
and medical leave sets its
[596]
laws up differently. But
typically, the law requires
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employers to provide
workers with up to 12 weeks
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of fully or partially paid
leave per year.
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The programs are often
funded by payroll taxes from
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workers, with some states
also requiring employers to
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contribute.
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Paternity leave, for me, was
16 weeks and that's full
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100% salary.
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I wouldn't be able to do
what we're doing without any
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kind of leave.
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One of the issues with
childcare in the U.S.
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is it's a patchwork system.
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We have programs that fully
subsidize for eligible
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children at child care
programs like Head Start and
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some state preschool.
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We have tax credits that
subsidize a portion of child
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care costs for higher
income families.
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And when we also have block
grants to states to help
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them expand access.
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And the problem with all of
these systems is that with
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this multitude of
approaches, we're not
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getting close to
universality or
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affordability, we're not
helping the workers in these
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sectors, and we're not
doing enough on quality.
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There's a lot of value in
having states move forward
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and do these kind of
programs, but ultimately to
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have it be something that's
available to everybody
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everywhere, you need the
federal government to be
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willing to make these kind
of investments in care
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infrastructures.
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There are so many moments
that I would have missed if
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it was back in the day
where fathers would get like
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two weeks. And those are
some things that I will
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cherish for the rest of my
life.
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Now we get a break.
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President Biden tried to
address all of these
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policies at the federal
level with his Build Back
[685]
Better infrastructure bill
that he proposed even before
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he entered the White House.
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The president doesn't talk a
lot about the Build Back
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Better bill, but that was
his proposal that included
[693]
things like an expanded
Child Tax Credit, like a
[697]
near universal child care
program that would have
[700]
capped the amount of income
people had to pay toward
[703]
child care. It included a
paid leave type program,
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really included these big
building blocks of a better
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family support program that
ran into opposition from one
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key Democrat, Senator Joe
Manchin, in West Virginia.
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One of the things that I
think is important is that
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we think about rebalancing
our investments toward
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children because it pays
for itself.
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If we were to rebalance
federal investments away
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from senior citizens and
toward children, not only
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would raising a child be
more affordable in the U.S.,
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but the children would have
sufficient resources, their
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parents would be better
able to think about how they
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want to spend their time,
whether it's that extra hour
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at work or an extra hour
playing with their kids.
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All of those things become
possible if we rebalance
[752]
federal spending toward
kids.
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We know that investing in
our children has a
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multiplier effect.
[757]
What it means for those
children's families, what it
[760]
means for those children in
adulthood, and what it means
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for the entire economy just
have incredible ripple
[768]
effects. And so investing
in children actually impacts
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Americans of all ages in
addition to our entire
[774]
economy.
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