It’s no secret the costs of raising a child has gone up substantially over the years. Many people today simply cannot afford the all-in costs of raising a child especially when the time, energy and attention commitments are factored into the equation.
As a result, advanced societies all over the globe are seeing a decline in fertility rates suggesting population declines are inevitable. This will create a headwind to economic growth because less people will be around to buy things and work in the near future.
Today, the lower fertility rates also make having kids closer in social status to owning a boat or a super luxury car than being a right of passage or natural expectation for people like it was 2-3 generations ago.
There is a name for this type of social status purchase - luxury good. So has having kids gotten so expensive and elite it’s on par with getting new Prada bag or owning a classic Ferrari convertible to joyride on the weekends?
Let’s see -
What is a Luxury Good?
In economics, superior goods or luxury goods make up a larger proportion of consumption as income rises. This is a fancy way of saying as you get more money, you tend to buy the higher end version of products creating lifestyle creep and possible overconsumption for yourself.
A classic example is a car. One can buy a practical, functional vehicle within budget for transportation (a normal good) or one can splurge on the newest, exotic and technologically advanced vehicle but pay the massive monthly payment that comes with it. (luxury good)
To qualify as a luxury good, the purchase must possess two economic characteristics: it must be scarce, and it must have a high price. The scarcity of the good can be natural or artificial but other people must recognize the good as distinguishably better than an alternative. Possession of such a good usually signifies "superiority" in resources and is usually accompanied by prestige.
Kids as a luxury good
So are kids now only a luxury good? While anyone can still have a child and be a parent, there has definitely been an attitude shift on what raising a child “appropriately” and “respectably” now means. Ask someone without kids and see what they think.
I recently re-read The 9.9 Percent: The New Aristocracy That Is Entrenching Inequality and Warping Our Culture which lays out several factors creating the socio-economic stratification in our society and how the upper-end is setting the bar and standards for all types of societal norms.
The chapter on Family lays out what society says modern upper middle class child rearing must now include -
Nannies
elite college prep tutoring / acceptance
the extracurricular activities
vacations, camps, daycare
private school tuition
Attentive parents who know the details of kids’ lives
Failure to live up to the standards gives rise to a feeling of failure as a parent. Meanwhile, those who are raising children to this standard are signaling to society “I can afford this” or worse - they are barely keeping their heads above water to keep up appearances. (Remember the car?)
Either way, the net result seems to be a growing number of people would rather not even play the game than to try and inevitably fail.
And as for shrinking group of show-offs who do have kids —-
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Thoughts? Questions? Comments?
Reach out! Maybe I’ll do a full post on the topic or as a Q&A
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