The Price of Parenthood: Childcare Costs and Fertility

• In Event: Maternal and Infant Health at the Crossroads: Interdisciplinary Evidence for Holistic Policy Solutions

Abstract

Developed countries across the world are experiencing a fertility crisis. For many years, fertility rates have been declining further below replacement level (2.1 births per woman). The U.S. total fertility rate has been falling since 2007, down to 1.7 births per woman in 2022 (World Bank, 2024). Low fertility rates are concerning because, without increased immigration, they can precipitate a shrinking future workforce and an aging population. These factors can contribute to slower economic growth and a greater strain on social services. 

Would-be parents cite financial reasons as a top factor inhibiting them from starting or expanding their family (Institute for Family Studies, 2024). A large cost that parents face in the early years of child-rearing is childcare. Childcare costs represent a substantial financial burden: U.S. families spend between 9 to 16% of their median income on full-time care for one child alone (U.S. Department of Labour), and public provision of childcare before school starting age is lacking across the majority of the country. High childcare costs can drive mothers out of the labor market, thus accessibility of affordable childcare is an important factor in women's career-family tradeoffs.

In this paper, I study whether the cost of childcare affects mothers’ decision to have a child, how many children to have, and when to have children. I explore these questions in the U.S. setting between the years of 2010 and 2022. I use restricted use Vital Statistics birth records data combined with SEER population estimates to calculate county-level birthrates, and county-level data on childcare prices. My empirical strategy is an instrumental variables approach that relies on hand-collected data on childcare centre regulations, which vary across state-time space. 

I find that an increase in the cost of childcare reduces birthrates; a $10 increase in the weekly price of centre based childcare for 0 to 2 year olds leads to a 3.7% decrease in the birthrate for women aged 20 to 49 relative to the mean, or roughly 2 births per $1000 women (the average weekly price of childcare in my sample is $147). The same price increase is associated with a delay in mothers’ first pregnancy by 2 months. Analysis of first, second and third birthrates reveals that second and third births appear to be more price sensitive to childcare costs. Overall, these results suggest that childcare is a salient cost for potential mothers and families, and that policies that alleviate the cost of childcare are worth exploring to help address low levels of fertility in the U.S. 

Author

• Abigail Dow, Boston University
  Presenting Author