Reading_Folbre - Introduction y We produce things in order...

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Unformatted text preview: Introduction y We produce things in order to care for ourselves and our families. We sometimes forget that the process of caring is also a process of produc— tion. Indeed, our language often implies that the purpose of raising and educating children is simply to produce more things. We “invest in hu— man capital” to increase our gross domestic product. But the purpose of gross domestic product, after all, is to make lives better now and for generations to come. Children look ahead. They tug us away from our immediate self—interest toward a longer—run concern for the future of something bigger and more difficult to define. Child rearing fits uncomfortably within our economic system. Parents provide services of great value directly to their children and indirectly to those who benefit from their children’s future contributions. Yet parents receive little or no economic reward. Mothers tend to pay a higher price for children than fathers do. Partly as a result, they typically earn less than men and remain more vulnerable to poverty. Children do not choose their parents or their communities. Consequently, their freedom to choose other things, such as a good education, is limited. Equal op— portunity for adults can often be satisfied by the lack of barriers, the ab» sence of discrimination. Children require the full development of their capabilities to take advantage of the opportunities they will face as adults. Most people don’t think about children in economic terms. Their mental image of the economy features individuals pursuing their self- interest within a market, buying and selling commodities that carry an 2 - Introduction explicit price tag. Parenting sits outside th tivity that people pursue for love rather others can be just as powerful an econom whatever its underlying motives, work th ketplace represents a ver the money, time, and car And childre come the w at picture because it is an ac— than for money. But love for ic motive as self-interest. And at takes place outside the mar- y important part of our economy. The value of e that parents devote to children is substantial. n are not the only ones who benefit. Children grow up to be- orkers, caregivers, and taxpayers on whom our economy de— en. It takes an ons are constrai, annel the flow cmen, parents 2 tabilizes traditiOJ of technological, public spending c " tional conflict bas age, shape the all( This book pain children in the Un It “shows how chi spend on average do and don’t deli‘ data and better ac dren. It also encc ficient institutions social—family cont ‘ Why should we and time do famil ers spend on child points of the thret about inequality focus primarily on of money income. They seldom note dependents lowers the disposable in- come of parents. Virtually all em pirical studies of income distribution that compare households of different demographic composition assume that young children can be provided for more cheaply than adults—an should pay for the assumption that ignores the value of the time devoted to their care. Would any young mother agree that it is cheaper to live alone with an Why Should We infant who requires constant care than with another adult? People generally try to do what Is spending on cl change, and oblige scribe child rearing ents because they ' will yield a flow of selfish, offering p2 ment model, howe Children whether t pets and consumer Children represe to the happiness \ selves), they provic ers. The contributi cost of the resourc United States offer a patchwork family expenditures look at cash of time. Some assign a dollar val replacements in the market, som spending, whereas others look at hours ue to time based on the cost of buying e according to the opportunity cost or lic support for child rearing often look more than others. This book develops a new way of thinking about spending on chil- use it is an ac- I. But love for f—interest. And ltSldC the mar— y. The value of 1 is substantial. grow up to be- 1r economy de— the family. But ry. Mainstream )f consumption parently, virtue :ly on measures t work. The re— h are widely ac- :e. us primarily on hey seldom note 1e disposable in— ome distribution 1position assume than adults—an :ed to their care. [V6 alone with an :lult? 3 them happy. Be— y of a theoretical L. Existing studies 'he contemporary s. Some studies of :hers look at hours the cost of buying pportunity cost or rearing often look tax benefits. Bud— ending, but public some children far t spending on chil— Introduction ' 3 dren. It takes an institutional approach, arguing that individual deci— sions are constrained and coordinated by contractual arrangements that channel the flow of resources between parents and children, men and women, parents and nonparents. Capitalist economic development de— stabilizes traditional patriarchal arrangements, and the combined forces of technological, social, and demographic changes lead to increased public spending on education and old—age security. Forms of distribu— tional conflict based on class and race or ethnicity, as well as gender and age, shape the allocation of resources to the young. This book paints a broad picture of private and public transfers to children in the United States at the beginning of the twenty-first century. It shows how children affect adult standards of living, what parents spend on average in both money and time, and what public programs do and don’t deliver. It emphasizes the need to develop new sources of data and better accounting systems for monitoring expenditures on chil— dren. It also encourages efforts to envision a more equitable and ef- ficient institutional framework for child rearing—a new and improved social—family contract. Why should we care about spending on children? How much money and time do families devote to children? How much money do taxpay- ers spend on children? These three questions, which represent the focal points of the three sections of this book, lead to a final question: who should pay for the kids? 4.5 E, § 2 Why Should We Care about Spending on Children? Is spending on Children best characterized as an investment, an ex— change, and obligation, a gift, or all of the above? Many economists de- scribe child rearing as an investment: individuals choose to become par— ents because they believe that children, like pets or consumer durables, 7 willyield a flow of future happiness. Parental altruism is, paradoxically, selfish, offering parents precious satisfaction. But the parental invest- ment model, however apt, is incomplete. We expect parents to carefor children whether they are feeling happy about them or not. And unlike .pets and consumer durables, children cannot be freely bought and sold. Children represent social as well as parental investments. In addition __ o the happiness we hope they will provide their parents (and them- ' selves), they provide benefits to their future fellow workers and taxpay- Is. The contributions they make to the economy can easily exceed the List of the resources devoted to raising them. Those who enjoy those 4 - Introduction contributions are not necessarily those who paid the costs. Children may not be born with a price tag attached, but they impose very real costs on their caregivers. We can estimate these costs in much the same way that we value environmental services such as clean air or a stable climate: by asking What we would have to pay for a substitute for pa- rental services if they were Withdrawn. Children are more than mere investments. None of us has a moral ob- ligation to bring children into this world. But once they are here, we share certain obligations to them. The way we specify these obligations defines an implicit social-family contract, a set of rules, norms, and eX— pectations about the opportunities children should have to develop their capabilities. This implicit social-family contract is seldom openly de- bated, but it is constantly under negotiation. Many disagreements about public policy can be boiled down to questions about who should pay for the kids—Whose kids and how much and for how long. It might be eas— ier to agree on good answers to these questions if we had a better pic- ture of What is actually being spent. Chapter 1 challenges the conventional textbook emphasis on the cir— cular flow of market exchanges between households and markets, call~ ing for more appreciation of the flow of nonmarket services that are not motivated by immediate self-interest. Child rearing involves transfers of resources within and among households and between households and the state. Individuals seldom have much control over these transfers, which are determined largely by institutional rules and social norms. Yet individuals often choose to become parents. Even when births are unplanned, individuals have some power to choose their level of commitment to their children. Chapter 2 asks how we should concep- tualize these choices. While acknowledging the contributions of Gary Becker and other proponents of the “new home economics,” it chal- lenges the assumption that families make rational, unanimous, and ef- ficient choices regarding investments in children. Though parents try to do what they think is best, they often end up making imperfect choices that have uncertain outcomes. Their behavior is better described as a commitment than an investment——a commitment with intrinsic value that can, nonetheless, prove quite costly. How Much Money and Time Do Parents Devote to Children? If parents used perfect knowledge of the future to make perfect deci- sions regarding children, there would be little reason to study parental costs. Children npose very real much the same 1 air or a stable ibstitute for pa— has a moral ob- ey are here, we 1ese obligations norms, and ex— to develop their om openly de— reements about » should pay for [t might be eas- ad a better pic- lasis on the cir— l markets, call— :es that are not ves transfers of .ouseholds and :hese transfers, )cial norms. n when births 2 their level of hould concep~ 1tions of Gary mics,” it chal— imous, and ef- parents try to )erfect choices described as a intrinsic value Ihildren? 3 perfect deci— :tudy parental Introduction - 5 spending. But parents often have no idea how much money or time their children will require, and they can never be completely confident of each other’s future contributions. These uncertainties are compounded by other dimensions of economic and political change. Who knows what child care, much less college, will cost a few years down the road? Increases in the costs and risks of rearing children have contributed to fertility decline and increases in childlessness in the United States, as well as most other affluent nations. Inequality among children remains high, and our success at educating the younger generation remains un- even. A closer look at family expenditures on children helps explain these trends. Most estimates of the proportion of family budgets devoted to chil- dren focus on relative amounts of money spent on food and clothing for persons of different ages, ignoring the value of time devoted to chil- dren’s care. But there are only twenty-four hours in a day. Time devoted to the care of children must be withdrawn from other activities, such as housework, paid work, sleep, and leisure. Chapter 3 explains debates over children and standards of living, challenging the US. poverty line and other equivalence scales that as- sume that children cost relatively little. This assumption often creates the misleading impression that a family consisting of a mother and a young child is better off economically than a two-adult family with the same income. Chapter 4 reviews studies of parental expenditures on children under age eighteen provided by the US. Department of Agri- culture, and it argues that they provide only a lower~bound, or mini~ mum, estimate of what parents actually spend while their children are under eighteen. It looks in more detail at spending on child care, an in— ‘ creasingly important component of overall spending. ' Chapter 5 brings spending on children outside the household into the picture. Since a large percentage of children in this country today live apart from at least one parent, rules of child custody, visitation, and ' support have significant effects on them. Spending on children who at- , tend college has also grown, ‘and many affluent parents leave their chil- - 'dren and grandchildren with substantial bequests. i 2. Chapter 6 moves beyond a consideration of cash expenditures to ac- ount for family time. A number of studies track the hours that parents nd others devote to children, and analysis of time diaries collected by he Child Development Supplement of the Panel Survey of Income Dy- amics' (PSID-CDS) in 1997 provides additionaldetail. Chapter 7 ex~ ,. ains how these inputs of family time can be assigned a monetary value Na L‘ omi the ecific counterfactual question: If parents were to hat would it cost society to provide replace— f adults to children? By this measure, h a similar ratio 0 ds the value of cash expenditures on ment services wit 1 time far excee the value of parenta children. Taxpayers Spend on Children? s supplemented by a complex array of publ d direct expenditures on children’s education and 8 details the relative contribution of social insur— ' ' ' 000. Surprisingly, the overall level of tax sub— (1 credits is comparable to the level of family But the United States rovided by many European countries. lly in its lack of public support for paid family more, its parental subsidies treat some parents “Nontraditional” families—those with h working long hours in paid em— WWAWMWRWA How Much Money Do ic subsi— Family spending i dies for parents an allowances p stands out internationa leave from work. Further far less generously than others. single parents or with two parents bot ployment——get the short end of the stick. Chapter 9 focuses on public investments in children’s health and edu— cation, placing these in the context of federal and state budgets. Here, too, significant inequalities are apparent. Though poor children benefit from transfers through means—tested programs such as Medicaid, afflu— ent children often enjoy tax—subsidized health benefits via their parents’ employers. Wealthy school districts typically have better schools than poor districts. Children from low—income families are less likely than their affluent counterparts to graduate from high school and go on to college. As a result, they seldom benefit from public subsidies for higher education. In short, public policies fall far short of the promise of equal opportunity. Who Should Pay for the Kids? Investments in children offer a hig creased public investments ‘ school and summer programs would offer espec to low—income families and their children. Fami “input” into children, and child s such as performance 0 h payoff to society as a whole. In- ly—childhood educati ially important benefits ly time is an important he reduced to mea- e value of chil— sure dren’s future trinsic value Chapter 1 stand back Because chi] familial con lic support. counting th part of a la the interge1 and the g0‘ Principle guide discr return. Cu growing ct parents by of the olc money to underrepi in low—in: they grov they will f parents were to 0 provide replace- 3 By this measure, h expenditures on lren? y of public subsi- 1’s education and )n of social insur- ll level of tax sub— the level of family tthe United States rt for paid family reat some parents lilies—those with hours in paid em- ’s health and edu~ te budgets. Here, )r children benefit 5 Medicaid, afflu- via their parents’ :tter schools than ‘e less likely than ool and go on to bsidies for higher promise of equal v as a Whole. In- :ation and after- nportant benefits 3 is an important reduced to mea- 'he value of chil— Introduction - 7 dren’s future earnings. We should recognize—and emphasize—the in- trinsic value of developing children’s capabilities. Chapter 10 explains why parents, voters, and policy makers need to , stand back and think more broadly about our social—family contract. Because children are social goods that benefit the economy as a whole, familial commitments to children deserve consistent and equitable pub- lic support. We need to develop a better system of national income ac- counting that includes the “human capital sector” of the economy as part of a larger set of nonmarket accounts. A more accurate picture of the intergenerational transfers that take place through both the family ‘ and the government could improve public debates over social policy. Principles of fairness and reciprocity—as well as efficiency—should guide discussion of what we owe our children, and what they owe us in return. Current policies have not done enough to help parents meet the growing costs of child rearing. Indeed, they have, in a sense, exploited parents by taxing the younger generation to help finance the spending of the older generation with little regard for who devoted time and money to raising those taxpayers. Current democratic rules lead to the underrepresentation of all children’s interests, particularly those living in low-income families. We should all help pay for the kids because as they grow up, we grow old. We care for them partly out of the hope that they will care for us, whether for love or money or both. $ CHAPTER ONE i ii l) 1: Children and the Economy Most economic theory'describes the production of commodities by means of commodities as a circular flow. Purchased inputs, including la- bor, are combined to produce outputs that can be sold. Dollars go in and dollars come out. But not all the inputs and outputs come with price tags attached. Somewhere along the way, babies are conceived, nurtured, educated, and launched into adulthood in a process that re- quires considerable time and effort as well as money. The production of people by means of people (and commodities) is a part of the circular flow sometimes called social reproduction.1 What we call it is less im- portant than how we picture its relationship to the economy as a whole. National income accounts are designed to reveal inputs into the sale . of all goods and services within the country. The value of final output, termed gross domestic product (GDP), provides benchmarks for eco-‘ nomic well-being and growth. The children who grow up to become workers and taxpayers are important inputs into this output. But We can also turn the accounting system around and think of goods that are _ bought and sold as inputs into the development of human capabilities. The conventional picture of the circular flow of exchanges between households and businesses can be expanded to reveal the movement of economic resources among men and women, to children, and back We tend to think of child rearing in terms of mothers, fathers, and children. The big picture of the circular flow reminds us of more com- _ex dynamics. Households are connected to businesses and govern- r l w 12 - Conceptualizing the Costs of Children ment in ways that affect—and are affected by—child rearing. In most industrialized countries today, the government taxes the working—age population to finance spending on the elderly population. Parents con tribute more than nonparents to the next generation, yet their claims on the public purse are not much greater. Mothers contribute more to child rearing than fathers do, yet they are more vulnerable to poverty in old age. Families of color in the United States raise more children than white families, but the elderly population is disproportionately white. Poverty among families With children is significantly higher than pov- erty among the elderly. Conventional macroeconomic theory treats households as consump- tion units. Businesses are the only true production units. Government simply redistributes resources. This book focuses on the production of human capabilities. From this perspective, households are ...
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