Academic journal article Journal of Legal Economics

Expenditures on Children by Families: U.S. Department of Agriculture Estimates and Alternative Estimators

Academic journal article Journal of Legal Economics

Expenditures on Children by Families: U.S. Department of Agriculture Estimates and Alternative Estimators

Article excerpt

Data on expenditures on children are used in a variety of ways. These child-rearing expense estimates are most often used in determining state child support guidelines and foster care payments. In 1998, 52% of children lived with their original two parents; the remaining 48% of children lived with either a single parent, a parent and stepparent, or in some other arrangement (The University of Chicago News 1999). Because so many children make their primary residence with only one of their biological parents, child support has become important. The Family Support Act of 1988 required States to implement numeric child support guidelines that are to be followed and to consider economic data on the cost of raising children in these guidelines. In 1982, about 262,000 children were in foster care. By 1998, about 520,000 children were in foster care (U.S. Department of Health and Human Services 1999). Most children in foster care live in with a relative or nonrelative who is monetarily compensated by the State to help cover the cost of the children living with them.

There are many other uses of estimates of child-rearing expenses. Courts use the estimates to determine damages in malpractice cases, especially for women who give birth after undergoing surgical procedures to prevent pregnancy. These women are compensated on the cost of the child they did not expect.

Since 1960, the United States Department of Agriculture (USDA) has provided annual figures of expenditures on children. USDA is the only government department providing these estimates on an annual basis. This paper reviews the USDA methodology for estimating child-rearing expenses and discusses overall findings. Alternative methods for estimating child-rearing expenses also are reviewed and compared to the USDA figures. This should give the reader a better understanding of the USDA child-rearing expense estimates as well as how they compare to alternative estimates.

USDA Estimates of Expenditures on Children by Families

Methodology

The USDA provides annual estimates of expenditures on children from birth through age 17 by married-couple and single-parent families. (For a detailed description of the USDA methodology to estimate child-rearing expenses, see Lino 2001.) These expenditures on children are for the major budgetary components: housing, food, transportation, clothing, health care, child care and education, and miscellaneous goods and services. Items in each expenditure category are described below.

Housing expenses consist of shelter (mortgage interest, property taxes, or rent; maintenance and repairs; and insurance), utilities (gas, electricity, fuel, telephone, and water), and house furnishings and equipment (furniture, floor coverings, major appliances, and small appliances). For homeowners, housing expenses do not include mortgage principal payments; in the data used, such payments are considered to be part of savings.

Food expenses consist of food and nonalcoholic beverages purchased at grocery, convenience, and specialty stores, including purchases with food stamps; dining at restaurants; and household expenditures on school meals.

Transportation expense consists of the net outlay on purchase of new and used vehicles, vehicle finance charges, gasoline and motor oil, maintenance and repairs, insurance, and public transportation.

Clothing expenses consist of children's apparel such as diapers, shirts, pants, dresses, and suits; footwear; and clothing services such as dry cleaning, alterations and repair, and storage.

Health care expenses consists of medical and dental services not covered by insurance, prescription drugs and medical supplies not covered by insurance, and health insurance premiums not paid by the employer or other organization.

Child care and education expenses consist of day care tuition and supplies; baby-sitting; and elementary and high school tuition, books, and supplies. …

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