More ‘Transitory’ Non-flation: Child Care Costs Are Soaring
By Tyler Durden
As the middle class erodes in the US, we have pointed out the many things that have continued to financially squeeze what is left of The American Dream out of the average joe, from rent becoming increasingly unaffordable to healthcare premiums exploding higher. We now have another expense that is taking a toll financially on the average American family, and that is child care.
Child care expenses have climbed nearly twice as fast as overall prices since the recession ended in 2009 the WSJ reports, and coupled with lackluster wage gains, families with young children are finding themselves stretched financially.
As the WSJ points out, the cost of child care is so high that in 41 states, the cost of sending a 4 year old to full-time preschool exceeds 10% of a median family income, and full-time preschool is more expensive than the average tuition at public college in 23 states. Care for an infant even costs more than the average rent in 17 states.
Since the recession ended in 2009, the cost of child care and nursery school has increased at a 2.9% annual average, outpacing overall inflation of 1.6% during that seven year period.
According to the WSJ, it costs $245,340 to raise a child born in 2013 from birth to age 18, nearly five years worth of income for the median US household. By comparison, the cost of raising a child born in 2003 was $226,108 after adjusting for inflation.
Looking at the breakdown of costs for middle income families from 1960 to 2013, education and child care costs have exploded higher.
For Malki Karkowsky, child care costs account for almost a quarter of the family budget. Adding in rent for the family's Kensington, Md apartment, and more than half of her and her husband's month take-home pay is gone. Karkowsky 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.” Karkowsky said.
The family aspires to buy a home, but saving is difficult, even after moving to a cheaper location. The move saved $350 a month, but that doesn't even cover a week of day care.
According to the WSJ, 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.
Increased costs are a struggle for many families, especially due to the fact that adjusting for inflation, incomes are barely above pre-recession levels.
Ironically, even the Federal Reserve admitted the inflation – which they can never seem to find anywhere – is higher for low income families.
From the WSJ
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 …read more
Source: More ‘Transitory’ Non-flation: Child Care Costs Are Soaring
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