I’m not familiar with the theory behind the time value of money to appraise it, but it looks to me like your calculation here has taken my per parent figure and come out with a per couple figure, which (I’m sure unintentionally) makes it look at first read like my estimate is <50% of the true cost). But the figure of £4700 per couple is not wildly different from £4000 per couple per annum, given the uncertainty bounds I’d put on it.
Regarding the opportunity costs estimate here I’d dispute that figure with gusto. I think that estimate is inaccurate and probably inflated for two major reasons.
Firstly, I don’t think we have anything like the amount of certainty about that figure—at the very least it deserves some error bars! (Incidentally, I find this is a big problem with back-of-the-envelope calculations that come out with a single figure—the number looks much more authoritative than it should given the uncertainty regarding the factors behind it).
I was deliberately not specific as to the amount of the time cost involved because I was unable to find reliable data to make such an estimate. Brian’s essay does not provide any data from which he draws his estimate of 21 hours per week per parent in time opportunity costs (I think I am correct in believing he’s not a parent). He simply states it after a long list of the types of work that parenting involves. In his account, the following are ‘work’: “playing with your toddler…spending quality time with your kid on the weekends, taking your kid to events and friends’ houses, going to school functions…giving advice on jobs, and everything else in between.” I don’t dispute that some elements of parenting are straightforwardly work—probably unpleasant and with no immediate reward for the individual performing them. However to describe playing with your child, engaging in social activities or giving interested advice to a young person exploring future career options as ‘work’ is a little boggling to me. I suspect that for most people who would class these things as work, parenthood is unlikely to be an attractive prospect.
So I am sceptical of the apparently randomly drawn figure of the hours of work involved. Of course, I’m happy to report back with data on this in a few years.
Secondly (and this criticism also applies to Brian’s figure of 21 hours per parent per week even if it were accurate), I would dispute the assumption that each marginal hour of time can be spent in earning money at the same rate as your basic income.
Depending on your type of work, It may not be practically possible: In my case, though I can increase my earnings by taking on extra shifts, the number I can take is capped as I am not allowed to exceed a set number of hours of clinical duty per week (averaged over a period of time). In fact, just yesterday a colleague was reprimanded for having taken on locum shifts which meant he exceeded these hours, and he has had to come off the ‘on-call’ rota (with a concomitant salary cut) to allow the time to average out. For someone in a full-time salaried position (say a university research appointment), it’s not the case that working longer hours increases your pay. For most people in this position it’s unlikely to be the case that opportunities exist to find an extra 21 hours of paid work per week which will pay them at a professional wage.
In addition to the practical possibility there’s the psychological reality. I don’t know many people who can actually consistently and productively do paid work 50+ hours a week. I recall seeing data (on this blog) that suggested those who estimate their working hours much about the mid-40s were a) overestimating and b) no more productive than those who claimed to work fewer hours. Certainly at a population level an inverse relationship is observed between hours worked and productivity
So even we did work in careers that would theoretically allow us to increase our working hours by nearly 50 and be paid for it, I think it’s highly unlikely we would sustain that working pattern. (I’m sure some people can, I just know I’m not them!)
I’m not familiar with the theory behind the time value of money to appraise it, but it looks to me like your calculation here has taken my per parent figure and come out with a per couple figure, which (I’m sure unintentionally) makes it look at first read like my estimate is <50% of the true cost). But the figure of £4700 per couple is not wildly different from £4000 per couple per annum, given the uncertainty bounds I’d put on it.
No, sorry: I took the middle value of your £150-£200,000 estimate (£175,000) then divided this figure by two and used one of the many amortization schedule calculators found online to reach the £4700 figure, assuming a 5% interest rate and 50 annual periods. So £4700 is what each parent would need to pay at the end of each year, over the following 50 years, to cover the costs of having the child. (This assumes £175,000 is the present-value cost of parenthood, rather than the nominal cost.)
I have nothing to add to your comments about Brian’s estimates, and I agree with much of what you write. I relied on those estimates because I knew of no better ones. I do however think that if you believe his calculations are inflated you should, if possible, use figures that match your own estimates, rather than no estimates at all. But I grant that this may be quite complicated, since the opportunity costs of parenting may be highly sensitive to factors that vary significantly among different people, as Brian himself acknowledges in his comment.
Bernadette makes some good criticisms, and I’ve updated my piece in response. I now put the opportunity-cost figure around $100K of present value, which seems low but not obviously too low if much of the parenting time is not “work.” I also changed the opportunity cost from being about extra income to being about how much you value what you would have been doing instead.
Individual differences seem big here. While there are some people like Bernadette and Julia who give extensive thought to this issue, there are others who don’t actually care about kids as much but just go along with social custom, spousal pressure, or the results of carelessness with birth control. It’s this latter group that my piece is mainly intended to speak to. I don’t know the relative proportions of different types of people in the population.
If this is still linking to the correct Economist article, it notes that Greece is poorer than other parts of Europe but Greeks work more hours per week. However, I have not seen evidence for causation, that is if the rest of Europe worked more hours, its GDP per capita would actually fall. Has anyone seen this?
I’m not familiar with the theory behind the time value of money to appraise it, but it looks to me like your calculation here has taken my per parent figure and come out with a per couple figure, which (I’m sure unintentionally) makes it look at first read like my estimate is <50% of the true cost). But the figure of £4700 per couple is not wildly different from £4000 per couple per annum, given the uncertainty bounds I’d put on it.
Regarding the opportunity costs estimate here I’d dispute that figure with gusto. I think that estimate is inaccurate and probably inflated for two major reasons.
Firstly, I don’t think we have anything like the amount of certainty about that figure—at the very least it deserves some error bars! (Incidentally, I find this is a big problem with back-of-the-envelope calculations that come out with a single figure—the number looks much more authoritative than it should given the uncertainty regarding the factors behind it).
I was deliberately not specific as to the amount of the time cost involved because I was unable to find reliable data to make such an estimate. Brian’s essay does not provide any data from which he draws his estimate of 21 hours per week per parent in time opportunity costs (I think I am correct in believing he’s not a parent). He simply states it after a long list of the types of work that parenting involves. In his account, the following are ‘work’: “playing with your toddler…spending quality time with your kid on the weekends, taking your kid to events and friends’ houses, going to school functions…giving advice on jobs, and everything else in between.” I don’t dispute that some elements of parenting are straightforwardly work—probably unpleasant and with no immediate reward for the individual performing them. However to describe playing with your child, engaging in social activities or giving interested advice to a young person exploring future career options as ‘work’ is a little boggling to me. I suspect that for most people who would class these things as work, parenthood is unlikely to be an attractive prospect.
So I am sceptical of the apparently randomly drawn figure of the hours of work involved. Of course, I’m happy to report back with data on this in a few years.
Secondly (and this criticism also applies to Brian’s figure of 21 hours per parent per week even if it were accurate), I would dispute the assumption that each marginal hour of time can be spent in earning money at the same rate as your basic income.
Depending on your type of work, It may not be practically possible: In my case, though I can increase my earnings by taking on extra shifts, the number I can take is capped as I am not allowed to exceed a set number of hours of clinical duty per week (averaged over a period of time). In fact, just yesterday a colleague was reprimanded for having taken on locum shifts which meant he exceeded these hours, and he has had to come off the ‘on-call’ rota (with a concomitant salary cut) to allow the time to average out. For someone in a full-time salaried position (say a university research appointment), it’s not the case that working longer hours increases your pay. For most people in this position it’s unlikely to be the case that opportunities exist to find an extra 21 hours of paid work per week which will pay them at a professional wage.
In addition to the practical possibility there’s the psychological reality. I don’t know many people who can actually consistently and productively do paid work 50+ hours a week. I recall seeing data (on this blog) that suggested those who estimate their working hours much about the mid-40s were a) overestimating and b) no more productive than those who claimed to work fewer hours. Certainly at a population level an inverse relationship is observed between hours worked and productivity
http://www.economist.com/blogs/freeexchange/2013/09/working-hours.
So even we did work in careers that would theoretically allow us to increase our working hours by nearly 50 and be paid for it, I think it’s highly unlikely we would sustain that working pattern. (I’m sure some people can, I just know I’m not them!)
Thanks for the reply. You write:
No, sorry: I took the middle value of your £150-£200,000 estimate (£175,000) then divided this figure by two and used one of the many amortization schedule calculators found online to reach the £4700 figure, assuming a 5% interest rate and 50 annual periods. So £4700 is what each parent would need to pay at the end of each year, over the following 50 years, to cover the costs of having the child. (This assumes £175,000 is the present-value cost of parenthood, rather than the nominal cost.)
I have nothing to add to your comments about Brian’s estimates, and I agree with much of what you write. I relied on those estimates because I knew of no better ones. I do however think that if you believe his calculations are inflated you should, if possible, use figures that match your own estimates, rather than no estimates at all. But I grant that this may be quite complicated, since the opportunity costs of parenting may be highly sensitive to factors that vary significantly among different people, as Brian himself acknowledges in his comment.
Bernadette makes some good criticisms, and I’ve updated my piece in response. I now put the opportunity-cost figure around $100K of present value, which seems low but not obviously too low if much of the parenting time is not “work.” I also changed the opportunity cost from being about extra income to being about how much you value what you would have been doing instead.
Individual differences seem big here. While there are some people like Bernadette and Julia who give extensive thought to this issue, there are others who don’t actually care about kids as much but just go along with social custom, spousal pressure, or the results of carelessness with birth control. It’s this latter group that my piece is mainly intended to speak to. I don’t know the relative proportions of different types of people in the population.
If this is still linking to the correct Economist article, it notes that Greece is poorer than other parts of Europe but Greeks work more hours per week. However, I have not seen evidence for causation, that is if the rest of Europe worked more hours, its GDP per capita would actually fall. Has anyone seen this?