By Eric Morath
The fast-growing cost of raising children is putting extra
pressure on family budgets, causing resentment to spill over in
day-care parking lots and soccer fields and even into the 2016
election debate.
Child care expenses alone have climbed nearly twice as fast as
overall prices since the recession ended in 2009, according to
Labor Department data. Along with fast-rising housing costs and
lackluster wage gains, families with young children are finding
themselves stretched enough to draw special attention from
presidential candidates.
Democratic candidate Hillary Clinton, keen to rack up votes
among working moms, introduced a proposal to limit child-care costs
to 10% of a family's income. That would represent a dramatic cost
reduction for many families that can easily spend a fifth of their
income or more on nannies, baby sitters or child-care centers.
"It's hard to make ends meet," Mrs. Clinton said at a recent
campaign stop in Kentucky. She has proposed expanded access to Head
Start programs, universal public preschool for 4-year-olds and
child-care scholarships for parents attending college.
Republican candidate Donald Trump will need to perform well in
the suburbs, where families' concerns can dominate politics, to win
the White House. He hasn't made specific child-care proposals, but
he has called for helping the middle class through lower taxes and
a simplified tax code.
One trouble for families: As jobs have become more plentiful,
demand for child care has increased -- pushing up its cost and
partially offsetting income gains.
The cost of raising a child born in 2013 until age 18 is
projected to be $245,340, according to Agriculture Department data.
That is nearly five years of income for the median U.S. household.
By comparison, the cost of raising a child born in 2003 was
$226,108 after adjusting for inflation. The jump in overall
inflation-adjusted costs mainly reflects increases in child-care,
education and health-care expenses.
These outlays partly accounts for why many families don't feel
financially secure. An April Gallup poll found that 37% of
Americans between 30 and 49, the age when many are raising
children, said they didn't have enough money to live comfortably.
That was the highest share of any age group.
Child-care costs account for almost a quarter of Malki
Karkowsky's family budget. Add in rent for her family's Kensington,
Md., apartment, and more than half of her and her husband's monthly
take-home pay is gone, she said. The 35-year-old has a 3-year-old
son and a daughter under the age of 1. "Thankfully, we can cover
the cost of food and clothing, but not really the extras," she
said.
The family aspires to buy a home, but saving is difficult for
the nonprofit executive and her husband, a schoolteacher. The
family moved farther away from Mrs. Karkowsky's job in downtown
Washington to cut housing costs. The move saved $350 a month, "but
that doesn't even cover a week of day care," she said.
In 41 states, the cost of sending a 4-year-old to full-time
preschool exceeds 10% of a median family income -- the level the
federal government deems to be affordable -- according to data from
the left-leaning Economic Policy Institute. Full-time preschool is
more expensive than average tuition at a public college in 23
states. Care for an infant costs more than average rent in 17
states, the study found.
Since the recession ended in mid-2009, the cost of child care
and nursery school has increased at a 2.9% annual average,
outstripping overall inflation of 1.6% during that seven-year
period. Overall inflation has been modest in recent years mainly
due to lower gasoline prices. But the cost of child care
accelerated in 2014 and 2015, coinciding with the jobless rate
falling to about 5%.
To be sure, Americans stretched by child care and rent are just
the latest to feel the sting from uneven inflation in the economy.
When gas prices rise, workers with long car commutes are
disproportionately affected. Higher medical costs tend to hit older
Americans more.
That presents a test for Federal Reserve officials who set
economic policy based upon the average inflation rate experienced
in the economy. A recent analysis by the Federal Reserve Bank of
Minneapolis found that households with low incomes, more household
members or older household heads experience higher inflation on
average -- but concluded that any given individual's inflation rate
can be several percentage points different from the average
rate.
"It speaks to the challenge the Fed faces in communicating about
inflation," Minneapolis Fed Director of Research Sam
Schulhofer-Wohl said. "Even if average inflation is around 2%, you
have to be aware that many households face price changes that are
much higher or lower than inflation."
Increased costs are a struggle for many families, especially
because incomes, when adjusted for inflation, are barely above
prerecession levels. Tight budgeting "makes it challenging for them
to save and create economic security for themselves, particularly
at the bottom," said Erin Currier, director of the financial
security and mobility project at Pew Charitable Trusts.
The squeeze in some cases has parents pushing off home purchases
or college savings, creating long-term challenges.
LaToya Caldwell, 33, a shift supervisor at a Kansas City Wendy's
restaurant, works full time at $10 an hour but says she struggles
to meet even the most basic needs for her five children. Care for
her two youngest children -- when she can afford it -- accounts for
about a quarter of her take-home pay. Ms. Caldwell said that makes
it difficult to afford rent, utility bills and clothes and shoes
for her children.
"Sometimes, I can't send them to day care because I don't have
enough money," she said, forcing her to ask neighbors or family
members to watch them. Ms. Caldwell said she searched for
better-paying employment, but said, "These jobs are all that's
available."
Write to Eric Morath at eric.morath@wsj.com
(END) Dow Jones Newswires
July 01, 2016 19:38 ET (23:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.