Considered over twenty years, that’s $25k/year or $2k/month.
That is very much inconsistent with the fact that the median household income in the US, one of the richest countries in the world, is about $50K (before taxes).
If you cut the estimate by 75%, down to about $500/mo the argument doesn’t change very substantially. That money could certainly directly save more lives and could indirectly be used to get more than one person to do good.
This includes college and the cost of time, which not everyone pays but I and most lesswrong readers probably would.
EDIT: this was too terse. More on opportunity cost:
Imagine a two-earner household where both people work full time making $32k each. This is below the median for the US, but let’s be conservative. Let’s say that after going on (unpaid) maternity leave for 6 weeks the mother goes back to work part time, and now makes $18k. The household income has gone down by $14k, which is a real cost of having kids, but this is a cost that is paid out of potential income, not actual income.
The higher your earning capacity, the higher this opportunity cost. Someone who takes the idea of “donate to charity as much as possible” seriously should probably be maximizing earning capacity, and probably earns much more than average. This means they’re more likely to put their kid in daycare, and more likely to live in areas where daycare is more expensive, so instead of an opportunity cost we’re back to having a real cost. (Daycare can range from $5k/year in the poorest states to $15k/year in the richest, it’s higher in cities, and the highest paying jobs tend to be in urban areas in expensive states.)
LW readers’ kids should get merit scholarships to college :-P
But if you’re doing your estimate for a specific subset of the population, you should mention which subset it is.
College costs are also rarely fully paid by the parents—typically a large chunk of them ends up being student loans to be repaid by the kids later. And time costs are a very fuzzy/squishy thing, you can make them anything you want them to be.
if you’re doing your estimate for a specific subset of the population, you should mention which subset it is.
Like most of us I tend to write about “people like me” vaguely defined. Is that actually a problem?
If you’d like to use the article’s estimate of $250k that doesn’t really change the argument.
College costs are also rarely fully paid by the parents
The current student loan limit is $25k while the cost of the school I attended is now $232k, both over four years. My family got financial aid, but as someone earning to give my children likely wouldn’t. The argument “don’t have kids so you have more money to give away” applies even more strongly to “work a higher paying job so you have more money to give away” so I think this cost applies broadly. This college cost is definitely on the high end, but schools are expensive all around.
There’s some relevant Mr. Money Mustache stuff on having kids “on a budget”. He suggests $300/month for a kid, which is substantially less. But I’d guess that he’s just missing something, because I expect you do much of the things he already suggests.
They’re talking about having one parent stay home. In opportunity costs that’s several thousand dollars. As my wife and I both get paid several times what daycare costs we’d pay for daycare instead. There’s also housing: a kid roughly doubles our housing needs.
(But we haven’t done this yet, and don’t know what our real costs will be.)
Like most of us I tend to write about “people like me” vaguely defined. Is that actually a problem?
I don’t know what “people like you” look like. I have no idea about your socioeconomic status or where you live or what sub-cultures you hang out in (except for LW).
It is a problem insofar you produce numbers which don’t seem to be based on much and, as it turns out, it’s quite unclear to whom they apply—and then proceed to make an argument on the basis of those numbers.
The current student loan limit is $25k
No, it is not. Even if you look at only Federal loans, the limit is over $57K.
you produce numbers which don’t seem to be based on much
The numbers are based on the article’s estimate with an attempt to account for the opportunity costs of parenting in terms of time as well as college. The argument is also not very sensitive to particular numbers. Even at $150k it would still be larger than any other expense I have. I would like better data, and intend to continue keeping track of all our spending as we have a kid, which will at least help people coming along a few years later.
Even if you look at only Federal loans, the limit is over $57K.
That’s for independent students, right? But I think here we’re talking about dependents. There are both yearly and total limits, it’s only $57k if you take more than four years by which point tuition goes up even more. The $25k number I gave is the dependent limits summed over four years ($5.5k + $6.5k + $7.5k + $7.5k). But: (a) this is all way less than the $232k total and (b) not a very good predictor of what it would look like in 20 years.
My oldest son tops his class easily in cognition. But he is also smart emough to not invest more energy in school than necessary. He has lots of pet projects (constructing a fighting vest, collecting a survival kit, organizing a fly market, exploring the suburb, planning his birthday) which don’t gain him merit in school but from which he also learns a lot.
So whether he will merit scholarships to college depends a lot on whether he specializes in signalling ability or in actual ability. And currently I’d bet on the latter (which I guess will earlier or later earn him merit anyway).
Of course in-country has the advantage of being free :) But there are a few free or near-free options within the EU for german passport holders. And there’s also the possibility of winning a scholarship.
My hourly rate is $1000/hr. You owe me $1.39 for reading this comment. (Fallacy that time spent in activity X can be converted into dollars at hourly rate to arrive at realistic opportunity cost.)
Seriously in most parts of the world people have kids in order to make more money (e.g. by working more fields). That’s one big reason why birthrate inversely correlates with prosperity.
“Fallacy that time spent in activity X can be converted into dollars at hourly rate to arrive at realistic opportunity cost”
I’m not arguing that “time spent with children” should be converted to dollars and counted as a cost of raising children. Instead I’m saying we should apply that to time you would work if you didn’t have kids, but now that you have kids aren’t working. For example, here’s a post that claims raising kids is not that expensive, but they do it by having one of the parents stay home. If that parent were to work for pay instead they would bring in $X, which is a real non-fallacious opportunity cost.
“in most parts of the world people have kids in order to make more money”
I agree that child labor changes the economics of having children a lot, but I live in the US.
Instead I’m saying we should apply that to time you would work if you didn’t have kids, but now that you have kids aren’t working. For example, here’s a post that claims raising kids is not that expensive, but they do it by having one of the parents stay home.
I think that is rather missing the point of the post which has some very good suggestions about restructuring your life around having kids, of which some methods are very practical just not in line with social norms.
For most people (by which I mean >50% of the population) the post you linked to is correct. Day care is f#&@ing expensive. Where I live it is $1500 per child, per month which amounts to about ~$9/hr. That’s above minimum wage. (Sadly I’m not sure where I’d find median numbers for this.) Factor in other costs associated with working (food, gas, clothing, car maintenance, etc.) and you’d better be making >$12 or $15/hr for it to make any kind of sense. And that’s assuming you have someone else paying your rent. And that’s just where it economically breaks even—you’d have to be making more than that to make it worth spending 8-9hrs a day at a grueling job instead of playing with your kids. And it had better be 8-9 hrs—daycare doesn’t get cheaper if you do a half-day, and gets more expensive per hour if you cut down the number of days.
The median wage in the U.S. is about $13.25 (and not all Americans work). So yes, having someone watch your kids while you go off and work is the lifestyle of the rich minority.
I agree that child labor changes the economics of having children a lot, but I live in the US.
The entire debate becomes much less interesting if it’s just about your socioeconomic status and geographic location.
“Day care is f#&@ing expensive. Where I live it is $1500 per child, per month which amounts to about ~$9/hr. That’s above minimum wage. (Sadly I’m not sure where I’d find median numbers for this.)”
Here’s some 2007 data from the National Association of Child Care Resources and Referral Agencies via USA Today. I think it’s extracted from a previous version of this document. Taking a straight up median of their state-by-state numbers gives an average cost of daycare of $6499.75/year. This is very rough, but no state had numbers as high as the $18k/year you give.
“spending 8-9hrs a day at a grueling job instead of playing with your kids”
A lot of people don’t see it this way. Taking care of a young child can be similarly grueling and I know a few people who have taken jobs that only paid about the same as the cost of daycare because that’s what they preferred to do with their time.
“The median wage in the U.S. is about $13.25”
Source? It seems low to me. The median annual income for full time workers over 25 is $39,509 (US Census, 2006, via wikipedia) and if you divide that by 40 hours a week you get $19/hour. To get the median wage down to $13.25 you’d need people working about 57 hours a week.
Taking care of a young child can be similarly grueling and I know a few people who have taken jobs that only paid about the same as the cost of daycare because that’s what they preferred to do with there time.
The issue isn’t only whether you find taking care of kids “grueling”. In comparing staying at home to working, don’t think only about the immediate balance of salary vs. day care, think about the situation in the future. What will be your salary in 15 years if you stay in the workforce and if you try to re-enter the workforce after a 15-year break? What will you work skills be?
The SSA link gives a median annual compensation of $27,519 but doesn’t give an hourly rate. I notice that if I divide that number by 40 hours a week and 52 weeks a year I get about $13.25; is that what you did? The SSA data includes lots of people working less than 40 hours a week, so if you want to use their numbers you need some way to connect that to hours worked. While I can’t find median hours worked, I found a mean of 33/week. Matching up the median compensation with mean hours worked is very dodgy, but lets assume it’s ok and also that this average employee gets no vacation or holidays. This gives us 33*52=1716 hours per year earning $27,519, or $16/hour. This is below the $19/hour I estimated from Census data above, which we should expect if part time workers tend to be paid less, but nowhere near as low as $13.25. And lots of people do get vacation, holidays, sick time, etc.
Sorry, I’m confused. To estimate how much people are paid per hour, you took total pay and divided it by the number of hours their kids would need to be in daycare? Dividing total pay by hours worked would make much more sense.
“very good suggestions about restructuring your life around having kids, of which some methods are very practical just not in line with social norms.”
Agree. If you’re optimizing for life satisfaction I think the MMM posts are excellent.
“the post you linked to is correct … having someone watch your kids while you go off and work is the lifestyle of the rich minority.”
I’m not saying the post is wrong or that people should put their kids in day care even if they lose money, I’m saying that this is a situation where opportunity cost argument is totally applicable. Imagine a married couple deciding between two options: (1) don’t have kids and give any extra money to effective charity (2) have kids and give any extra money to effective charity. If they choose option #1 they earn $X and $Y each and need to spend $Z to live, so they can donate $X+$Y-$Z. If they choose option #2 and they don’t earn enough for daycare to make sense then say the person earning $Y stays home full time. They also have additional costs related to having children like needing a bigger house; let’s call that $W. Now they have available to donate $X-$Z-$W.
In terms of money they actually pay, the cost of kids is just $W. But they no longer earn that $Y/year, so their money available to donate has also gone down by $Y. The “cost of kids” for this couple as measured by decreased donations to charity is $W+$Y not $W.
That is very much inconsistent with the fact that the median household income in the US, one of the richest countries in the world, is about $50K (before taxes).
The estimate looks bogus to me.
If you cut the estimate by 75%, down to about $500/mo the argument doesn’t change very substantially. That money could certainly directly save more lives and could indirectly be used to get more than one person to do good.
Does the argument change substantially if you cut the estimate down to the price of the standard unit of indulgence, a Starbucks latte?
If the price of raising children becomes arbitrarily cheap, will someone eventually buy the entire market?
This includes college and the cost of time, which not everyone pays but I and most lesswrong readers probably would.
EDIT: this was too terse. More on opportunity cost:
Imagine a two-earner household where both people work full time making $32k each. This is below the median for the US, but let’s be conservative. Let’s say that after going on (unpaid) maternity leave for 6 weeks the mother goes back to work part time, and now makes $18k. The household income has gone down by $14k, which is a real cost of having kids, but this is a cost that is paid out of potential income, not actual income.
The higher your earning capacity, the higher this opportunity cost. Someone who takes the idea of “donate to charity as much as possible” seriously should probably be maximizing earning capacity, and probably earns much more than average. This means they’re more likely to put their kid in daycare, and more likely to live in areas where daycare is more expensive, so instead of an opportunity cost we’re back to having a real cost. (Daycare can range from $5k/year in the poorest states to $15k/year in the richest, it’s higher in cities, and the highest paying jobs tend to be in urban areas in expensive states.)
LW readers’ kids should get merit scholarships to college :-P
But if you’re doing your estimate for a specific subset of the population, you should mention which subset it is.
College costs are also rarely fully paid by the parents—typically a large chunk of them ends up being student loans to be repaid by the kids later. And time costs are a very fuzzy/squishy thing, you can make them anything you want them to be.
Like most of us I tend to write about “people like me” vaguely defined. Is that actually a problem?
If you’d like to use the article’s estimate of $250k that doesn’t really change the argument.
The current student loan limit is $25k while the cost of the school I attended is now $232k, both over four years. My family got financial aid, but as someone earning to give my children likely wouldn’t. The argument “don’t have kids so you have more money to give away” applies even more strongly to “work a higher paying job so you have more money to give away” so I think this cost applies broadly. This college cost is definitely on the high end, but schools are expensive all around.
There’s some relevant Mr. Money Mustache stuff on having kids “on a budget”. He suggests $300/month for a kid, which is substantially less. But I’d guess that he’s just missing something, because I expect you do much of the things he already suggests.
They’re talking about having one parent stay home. In opportunity costs that’s several thousand dollars. As my wife and I both get paid several times what daycare costs we’d pay for daycare instead. There’s also housing: a kid roughly doubles our housing needs.
(But we haven’t done this yet, and don’t know what our real costs will be.)
I don’t know what “people like you” look like. I have no idea about your socioeconomic status or where you live or what sub-cultures you hang out in (except for LW).
It is a problem insofar you produce numbers which don’t seem to be based on much and, as it turns out, it’s quite unclear to whom they apply—and then proceed to make an argument on the basis of those numbers.
No, it is not. Even if you look at only Federal loans, the limit is over $57K.
The numbers are based on the article’s estimate with an attempt to account for the opportunity costs of parenting in terms of time as well as college. The argument is also not very sensitive to particular numbers. Even at $150k it would still be larger than any other expense I have. I would like better data, and intend to continue keeping track of all our spending as we have a kid, which will at least help people coming along a few years later.
That’s for independent students, right? But I think here we’re talking about dependents. There are both yearly and total limits, it’s only $57k if you take more than four years by which point tuition goes up even more. The $25k number I gave is the dependent limits summed over four years ($5.5k + $6.5k + $7.5k + $7.5k). But: (a) this is all way less than the $232k total and (b) not a very good predictor of what it would look like in 20 years.
“All around” meaning ‘in the US’? Tuitions are one or two orders of magnitude cheaper in continental Europe.
My oldest son tops his class easily in cognition. But he is also smart emough to not invest more energy in school than necessary. He has lots of pet projects (constructing a fighting vest, collecting a survival kit, organizing a fly market, exploring the suburb, planning his birthday) which don’t gain him merit in school but from which he also learns a lot. So whether he will merit scholarships to college depends a lot on whether he specializes in signalling ability or in actual ability. And currently I’d bet on the latter (which I guess will earlier or later earn him merit anyway).
If he gets high enough SAT scores it should compensate for the lack of silly extracurricular stuff...
Here in Germany admission to university still depends on grades.
Not if he goes to university out of the country.
Noted. A possibility that will be considerd in due time.
Of course in-country has the advantage of being free :) But there are a few free or near-free options within the EU for german passport holders. And there’s also the possibility of winning a scholarship.
My hourly rate is $1000/hr. You owe me $1.39 for reading this comment. (Fallacy that time spent in activity X can be converted into dollars at hourly rate to arrive at realistic opportunity cost.)
Seriously in most parts of the world people have kids in order to make more money (e.g. by working more fields). That’s one big reason why birthrate inversely correlates with prosperity.
“Fallacy that time spent in activity X can be converted into dollars at hourly rate to arrive at realistic opportunity cost”
I’m not arguing that “time spent with children” should be converted to dollars and counted as a cost of raising children. Instead I’m saying we should apply that to time you would work if you didn’t have kids, but now that you have kids aren’t working. For example, here’s a post that claims raising kids is not that expensive, but they do it by having one of the parents stay home. If that parent were to work for pay instead they would bring in $X, which is a real non-fallacious opportunity cost.
“in most parts of the world people have kids in order to make more money”
I agree that child labor changes the economics of having children a lot, but I live in the US.
I think that is rather missing the point of the post which has some very good suggestions about restructuring your life around having kids, of which some methods are very practical just not in line with social norms.
For most people (by which I mean >50% of the population) the post you linked to is correct. Day care is f#&@ing expensive. Where I live it is $1500 per child, per month which amounts to about ~$9/hr. That’s above minimum wage. (Sadly I’m not sure where I’d find median numbers for this.) Factor in other costs associated with working (food, gas, clothing, car maintenance, etc.) and you’d better be making >$12 or $15/hr for it to make any kind of sense. And that’s assuming you have someone else paying your rent. And that’s just where it economically breaks even—you’d have to be making more than that to make it worth spending 8-9hrs a day at a grueling job instead of playing with your kids. And it had better be 8-9 hrs—daycare doesn’t get cheaper if you do a half-day, and gets more expensive per hour if you cut down the number of days.
The median wage in the U.S. is about $13.25 (and not all Americans work). So yes, having someone watch your kids while you go off and work is the lifestyle of the rich minority.
The entire debate becomes much less interesting if it’s just about your socioeconomic status and geographic location.
“that’s assuming you have someone else paying your rent”
This falls on both sides of the question.
“Day care is f#&@ing expensive. Where I live it is $1500 per child, per month which amounts to about ~$9/hr. That’s above minimum wage. (Sadly I’m not sure where I’d find median numbers for this.)”
Here’s some 2007 data from the National Association of Child Care Resources and Referral Agencies via USA Today. I think it’s extracted from a previous version of this document. Taking a straight up median of their state-by-state numbers gives an average cost of daycare of $6499.75/year. This is very rough, but no state had numbers as high as the $18k/year you give.
Minor:
“spending 8-9hrs a day at a grueling job instead of playing with your kids”
A lot of people don’t see it this way. Taking care of a young child can be similarly grueling and I know a few people who have taken jobs that only paid about the same as the cost of daycare because that’s what they preferred to do with their time.
“The median wage in the U.S. is about $13.25”
Source? It seems low to me. The median annual income for full time workers over 25 is $39,509 (US Census, 2006, via wikipedia) and if you divide that by 40 hours a week you get $19/hour. To get the median wage down to $13.25 you’d need people working about 57 hours a week.
The issue isn’t only whether you find taking care of kids “grueling”. In comparing staying at home to working, don’t think only about the immediate balance of salary vs. day care, think about the situation in the future. What will be your salary in 15 years if you stay in the workforce and if you try to re-enter the workforce after a 15-year break? What will you work skills be?
Agreed, though in both of the cases I’m thinking of the jobs weren’t ones where you build up long-term skills.
Or a lot of people with part-time jobs who are making less than $19/hour. Which matches observation pretty well.
Social security administration:
http://www.ssa.gov/oact/cola/central.html
The SSA link gives a median annual compensation of $27,519 but doesn’t give an hourly rate. I notice that if I divide that number by 40 hours a week and 52 weeks a year I get about $13.25; is that what you did? The SSA data includes lots of people working less than 40 hours a week, so if you want to use their numbers you need some way to connect that to hours worked. While I can’t find median hours worked, I found a mean of 33/week. Matching up the median compensation with mean hours worked is very dodgy, but lets assume it’s ok and also that this average employee gets no vacation or holidays. This gives us 33*52=1716 hours per year earning $27,519, or $16/hour. This is below the $19/hour I estimated from Census data above, which we should expect if part time workers tend to be paid less, but nowhere near as low as $13.25. And lots of people do get vacation, holidays, sick time, etc.
Yes, I divided by 40 hrs per week because that was the daycare hours under consideration.
Sorry, I’m confused. To estimate how much people are paid per hour, you took total pay and divided it by the number of hours their kids would need to be in daycare? Dividing total pay by hours worked would make much more sense.
“very good suggestions about restructuring your life around having kids, of which some methods are very practical just not in line with social norms.”
Agree. If you’re optimizing for life satisfaction I think the MMM posts are excellent.
“the post you linked to is correct … having someone watch your kids while you go off and work is the lifestyle of the rich minority.”
I’m not saying the post is wrong or that people should put their kids in day care even if they lose money, I’m saying that this is a situation where opportunity cost argument is totally applicable. Imagine a married couple deciding between two options: (1) don’t have kids and give any extra money to effective charity (2) have kids and give any extra money to effective charity. If they choose option #1 they earn $X and $Y each and need to spend $Z to live, so they can donate $X+$Y-$Z. If they choose option #2 and they don’t earn enough for daycare to make sense then say the person earning $Y stays home full time. They also have additional costs related to having children like needing a bigger house; let’s call that $W. Now they have available to donate $X-$Z-$W.
In terms of money they actually pay, the cost of kids is just $W. But they no longer earn that $Y/year, so their money available to donate has also gone down by $Y. The “cost of kids” for this couple as measured by decreased donations to charity is $W+$Y not $W.