Source of Data

Data used to estimate expenditures on a child are from the 1990 Consumer Expenditure Survey (CE), administered by the Bureau of Labor Statistics (BLS). The CE collects information on sociodemographic characteristics and income of households as well as expenditures. The CE, ongoing since 1980, interviews about 5,000 households each quarter over a 1-year period. Each quarter is deemed an independent sample by BLS, bringing the total number of households in the 1990 survey to about 20,000.

From these households, the following husband-wife and single-parent families were selected for this study: those (1) with at least one own child age 17 or under in the household, (2) with six or fewer children, (3) with no other related or unrelated people present in the household except own children, and (4) who were complete income reporters. Complete income reporters are households that provided values for major sources of income, such as wages and salaries, self-employment income, and Social Security income. Quarterly expenditures were annualized. The sample was weighted to reflect the U.S. population.

Methodology

The CE collects overall household expenditure data for some budgetary components (housing, food, transportation, health care, and other miscellaneous goods and services) and child-specific expenditure data for other components (clothing, child care, and education). Multivariate analysis was used to estimate household and child-specific expenditures, controlling for income level, family size, and age of the younger of two children so estimates could be made for families with these varying characteristics. Regional estimates were derived by controlling for region. The

Housing expenses include shelter (mortgage interest, property taxes, or rent; maintenance and repairs; and insurance), utilities (gas, electricity, fuel, telephone, and water), and house furnishings and equipment (furniture, floor coverings, major appliances, and small appliances). It should be noted that for homeowners, housing expenses do not include mortgage principal payments; such payments are considered in the CE to be a part of savings. Therefore, total dollars allocated to housing by homeowners are underestimated in this report.

Food expenses include food and nonalcoholic beverages purchased at grocery stores, convenience stores, and specialty stores; dining out at restaurants; and school meals.

Transportation expenses include the net outlay on purchase of new and used vehicles, vehicle finance charges, gasoline and motor oil, maintenance and repairs, insurance, and public transportation.

Clothing expenses include children's apparel items such as diapers, shirts, pants, dresses, and suits; footwear; and clothing services such as dry cleaning, alteration and repair, and storage.

Health care expenses include medical and dental services not covered by insurance, prescription drugs and medical supplies not covered by insurance, and health insurance premiums not paid by employer or other organization.

Child care and education expenses include day care tuition and supplies; babysitting; and elementary and high school tuition, books, and supplies.

Other miscellaneous expenses include personal care items, entertainment, and reading materials.

three income groups of husband-wife households (1990 before-tax income under $28,900, between $28,900 and $48,900, and over $48,900) were determined by dividing the sample for the overall United States into equal thirds.

For each income level, the estimates were for husband-wife families with two children, with the younger child in one of six age categories (0-2, 3-5, 6-8, 9-11, 12-14, and 15-17 years). Households with four members (two children) were selected as the standard since this was the average size of two-parent families in 1990. The focus was on the younger child in a household since the older child was sometimes over age 17.

It should be noted that the estimates include two-parent households with and without specific expenses; so for some families, the mean estimates may be higher or lower depending on whether they incur the expense or not. This particularly applies to child care and education estimates-about 50 percent of families in the study had no expenditures for this budgetary component. Also, the estimates only cover out-ofpocket expenditures on a child made by the parents and not by others such as grandparents or friends. In addition, the three income categories were calculated for the overall United States by dividing the sample into equal thirds. Regional income categories are based on these national income categories and may not represent equal thirds in each area.

After the various overall household and child-specific expenditures were estimated, these total amounts were allocated among the four family members (husband, wife, older child, and younger child). Since the estimated expenditures for clothing and child care and education were only for children, allocations of these expenses were made by dividing the estimated expenditures by two (the number of children in the household).

Because the CE did not collect expenditures on food and health care by family member, data from other Federal studies were used to apportion these budgetary components to a child by age. Food budget shares as a percentage of total food expenditures, for the younger child in a husband-wife household with two children, were determined using the 1992 USDA food plans (8). These shares were estimated by age of the child and household income level. The food budget shares were then applied to estimated household food expenditures to determine food expenses on a child. Health care shares as a percentage of total health care expenses for the younger child in a husband-wife household with two children were calculated from the 1987 National Medical Expenditure Survey (4). These shares were estimated by age of the child and applied to estimated household health care expenditures to determine expenses on a child.

Unlike food and health care, no authoritative base exists for allocating estimated household expenditures on housing, transportation, and other miscellaneous goods and services among individual household members. Two of the most common approaches for allocating these expenses are the marginal cost method and the per capita method. The marginal cost method measures expenditures on a child as the difference in expenses between a couple with children and an

equivalent childless couple. The method depends on development of an equivalency measure; however, there is no universally accepted measure. Various measures have been proposed, each yielding different estimates of expenditures on children.3 Some of the marginal cost approaches assume that parents do not alter their expenditures on themselves after a child is added to a household. In addition, couples without children often buy homes larger than currently needed in anticipation of children. Comparing the expenditures of these couples to similar couples with a child could lead to underestimating the expenditures on a child.

For these reasons, the per capita method was used for this study. The per capita method simply allocates expenses among household members in equal proportions. Although the per capita method has its limitations, these limitations were considered less severe than those of the marginal cost approach. A major limitation of the per capita method is that expenditures for an additional child may be less than average expenditures. Because of this, adjustment formulas for cases of one child or three or more children were devised for use when estimating expenditures on a child for households of different sizes. These formulas are discussed later on. Transportation expenses resulting from employment activities are not related to expenses on a child, so these costs were excluded from the estimated household transportation expenses using data from a 1990 study by the U.S. Department of Transportation (12).

For a review of equivalency measures and estimates of expenditures on children resulting from them, see U.S. Department of Health and Human Services, Administration for Children and Families, 1990, Estimates of Expenditures on Children and Child Support Guidelines (11).

Estimated Expenditures on a Child

Estimates of family expenditures on the younger child in a husband-wife household with two children for the overall United States, urban regions of the country, and overall rural areas are presented in tables 3-9 on pp. 13-19. Income levels of households were updated to 1993 dollars using the all-items category of the CPI-U, and expenditures were updated using the CPI for the corresponding item (that is, the CPI's for housing, food, etc.). Regional estimates were updated to 1993 dollars using the regional CPI's. Given the large amount of information in the tables, the following subsections highlight the child-rearing expense estimates for the younger child in a two-child household for the overall United States by income level, budgetary component, and age of the child, as well as expense estimates by region.

Income Level

Estimated expenses on a child vary considerably by household income level (fig. 1). Depending on age of the child, the expenses range from $4,960 to $6,260 for families in the lowest income group (1993 before-tax income less than $32,000), from $6,870 to $8,300 for families in the middle income group (1993 before-tax income between $32,000 and $54,100), and from $10,210 to $11,790 for families in the highest income group (1993 before-tax income more than $54,100). On average, households in the lowest group spent 27 percent of their before-tax income on a child, those in the middle income group, 17 percent, and those in the highest income group, 13 percent. The range in these percentages would be narrower if after-tax income were considered, since a greater proportion of income in higher income households goes toward

taxes.