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A crib mobile with the elements all separated and out-of-reach from each other: baby & money being on either side of the couple
Kiersten Essenpreis for Money

Millennials have been (unfairly) mocked as the generation uninterested in conventional adult life. They’ve been criticized for being slow to adopt everything from marriage to homeownership, so it’s no surprise that people in their 20s and 30s in the U.S. are also having fewer kids than ever.

The number of new births dropped by 4% in 2020, according to data released last month. Some experts attributed the decline to the pandemic, which brought higher rates of depression and a general malaise about the future, making couples uninterested in sex and worried about...well, everything.

Yet America’s birth rate was falling long before the pandemic arrived. In fact, 2020 was the sixth straight year of fewer new babies in the U.S. Americans’ reasons for putting off children — or not having them at all — are complicated. But there’s growing recognition of the role that money plays. Nearly 3 in 5 millennials without children say they don’t have any because kids are just too expensive.

As child care has become increasingly pricey and the post-pandemic economic recovery has been unevenly distributed, is it possible that having kids is becoming a privilege that’s financially out of reach for many?

It’s increasingly expensive to raise a child in the U.S.

Having a kid is pricey, and it starts right when the baby is born. Labor costs on average are more than $4,500 per childbirth, even if you’re insured, and the price of maternity and newborn surgeries has risen by 60% over the past decade, according to the Kaiser Family Foundation.

Then comes child care, which is expensive in the U.S. almost no matter where you live. While some states provide free pre-K, there’s no federal initiative to provide free or affordable care for kids ages 0 to 3. That cost ends up falling on parents, who data show are struggling to keep up.

The average U.S. family with a working mom pays about $13,000 in child care per year for kids under 5, according to the Center for American Progress. So a household earning a median salary would have to put 17% of their gross pay toward childcare. Compare that with 7% — the share of household income spent on child care that the Department of Health and Human Services considers affordable.

It’s not only the price of child care that puts a financial burden on parents.

In general, the cost of living in the U.S. has grown as wages have remained relatively stagnant. Home prices are rising faster than wages in 80% of housing markets, according to a 2019 report from ATTOM Data Solutions. Costs for many common medical procedures have consistently climbed faster than inflation, according to the Kaiser Family Foundation. And health care spending overall continues to grow, with the annual average at $11,582 per person, according to the Center for Medicare and Medicaid Services.

“So you have a lot of forces at work to drive down fertility rates,” says Peter Muennig, a professor of health policy and management at Columbia University.

Rising costs factor into family planning, but they’re not the whole story

Most people say they want to have children, and most people say they want about two kids, says Karen Benjamin Guzzo, the associate director of the Center for Family and Demographic Research at Bowling Green State University in Ohio. However, “they also have this idea of under what conditions would I like to be a parent,” says Guzzo, who analyzes data on birth intentions as part of her research.

When it comes to those conditions, money remains a major concern. “People say they need to not be burdened by student loan debt, and they say they want to be able to afford a house,” Guzzo says.

But here’s where things get complicated. Even though there are signs that financial concerns may be influencing people’s decisions to have kids, wealthier people actually have fewer kids than lower-income earners.

In 2017, mothers in U.S. households earning under $10,000 had the highest birth rate, at about 66 births per 1,000 women. The birth rate decreased as income increases, with families making $200,000 or more per year having the lowest birth rate, at about 44 births per 1,000 women.

Plenty of research backs up those stats, showing that as educational attainment increases and as people earn more money in a country, the number of kids they have actually goes down.

There are many reasons for that, including that these people have more money for and access to family planning tools like contraception. Women's career ambitions may also play a role. Having kids has a depressive effect on women’s wages. Those with kids suffer from the “motherhood penalty,” where their earnings go down as they are either forced to step back from work completely or make choices about work that prioritize time to take care of the kids.

Delaying vs. avoiding: Are young people waiting until they're financially stable?

A few years ago, headlines bemoaned how millennials weren't reaching any of the milestones so familiar to previous generations.

But now that the oldest millennials are in their 40s, it turns out the generation wasn't rejecting those big life steps so much as pushing them back.

Researchers actually have a name for this now: "tempo distortion." It basically means our view of birth rates is obscured because families are waiting longer to have kids.

In a 2020 study, researchers said this distortion is “likely an important contributor” to what look like shrinking birth rates, but add, “it’s not the sole explanation.” In other words, birth rates are falling even after accounting for that difference in timing.

Muennig says uncertainty about the future is another negative driver of fertility rates. Long-term financial instability stemming from two recessions in just over a decade, ballooning rents and the student debt crisis is making would-be parents nervous.

Also significant? The decrease in immigration to the U.S. in recent years. Immigrants have historically had more children than those born within the country, and over the past few years the U.S. developed more restrictive immigration policies. Rates of immigration dropped even more dramatically during COVID-19, Muennig says. Fewer immigrants in the future will mean fewer kids being born in the U.S.

Can government programs (and money) help increase the birth rate?

New legislation overhauled the child tax credit this year, increasing the amount and giving parents part of the credit in monthly cash payments beginning in July. Experts predict this will help bring millions of children out of poverty. But will it encourage financially anxious parents to have more kids? Probably not.

Given that it’s only set to last one year, it’s unlikely to help the issue of child affordability in the long-term, says Elaine Maag, principal research associate in the Urban-Brookings Tax Policy Center.

“If [the child tax credit] were made permanent I think it would help encourage sort of moderate income households and those that have very volatile incomes, but I don’t expect it would reverse any [birth] trends,” she says.

Access to paid time off plays a role in people's planning as well. Countries with legally mandated parental leave policies typically have higher fertility rates than those without, Muennig says, and the U.S. is one of the only wealthy economies that doesn’t have a federal policy guaranteeing parents can take time off after their baby’s birth.

Other countries have made attempts to increase their birth rates, worried that smaller future generations will be unable to support an aging population. Some of these have worked — paid family leave, affordable childcare and monthly payments for parents in some European countries have helped a bit. But they aren't a guarantee; publicity campaigns and tax incentives in Singapore have failed to reverse a decline in births that goes back to the 1980s.

In the U.S., it's clearly hard for many average families to afford kids right now, and some government programs would help parents, experts say. But decisions about having kids are complex. Even given paid family leave, affordable child care, and other important programs, women won't necessarily decide to have more kids. Muennig says the only sustainable way to do that is with immigration.

Guzzo, at Bowling Green State University, says programs and incentives that reduce the cost of raising kids are key, even if they don't dramatically increase the birth rate.

“What can we do to make sure people are not worried that they won't be able to take leave when their kids are young?” she says. One small upside of the pandemic, she thinks, is that it’s brought to the forefront conversations about income inequality and work-life balance

“So it is possible that we could see some good news and some good policy changes that might help encourage people to have kids,” she says.

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