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A broad range of government programs provide assistance to those who have to pay the costs of children, including family assistance, child support and foster care allowances. If the benefits provided under these programs are to be adequate, they must reflect what it actually costs to raise children, and research is therefore required to identify these costs and estimate their magnitude.
The significance of the costs of children has emerged in the recent debate about tax reform and the GST, where it was argued before the Senate Tax Committee Hearings that the government's original compensation package treated larger families less generously than smaller families and was thus both inadequate and inequitable. The cost of children - or at least that component which parents have to pay - has also been highlighted as a possible factor underlying the decline in the fertility rate in the debate over population ageing and population policy more generally (McDonald 1997). Clearly, there is an ongoing need to ensure that the best possible estimates of the costs of children are available so as to inform public debate and policy formulation on these important issues.
In Australia, the Australian Institute of Family Studies has played a leading role in undertaking and commissioning research on the costs of children, and in updating and publishing the cost estimates in Family Matters, thereby bringing the significance of the issues to the public's attention.
Two sets of estimates of the costs of children have been maintained by the Institute. The first was originally derived by Institute researcher Kerry Lovering in the 1980s and have been updated since then by movements in consumer prices (Lovering 1984). The Lovering study was the first attempt to bring together in an integrated framework a range of Australian evidence and research on the costs of children. It adopted a limited variant of the 'basket of goods' (or what is now called the budget standards) approach in which the goods and services needed by children in different families are identified and costed.
The second set of estimates was derived by Donald Lee in a research study
commissioned by the Institute in 1989, partly in response to concerns over the
incomplete coverage of the Lovering estimates. Building on research undertaken
in the United States (Espenshade 1984), the method developed by Lee used
household expenditure data to estimate the costs of children from comparisons of
the expenditures of otherwise similar households with and without children.
(Research recently commissioned by the Department of Family and Community
Services is reviewing the advantages and limitations of this second approach and
applying it to more recent expenditure data for 1993-94).
Neither of these two approaches are without its critics - the former because of
its incomplete coverage of costs, and the latter because of the difficulty of
deducing what a child actually costs from data that describes what households
choose to spend on their children. These limitations were described in detail in
an article published some time ago in Family Matters by Peter McDonald, the
Institute's Deputy Director at the time (McDonald 1990:18-22). The article began
by noting that the Institute receives many inquiries about the costs of children,
but went on to note that while the 'expectation of most of those who inquire is
that the cost of a child is a fairly straight-forward matter . . . this is far from
being the case; estimating the cost of children is a complex and highly
imprecise exercise. Therefore, estimates of the cost of children should be used
with caution' (italics added).
In response to a concern that the limitations of the cost estimates published by the Institute were making them increasingly inaccurate (possibly even misleading) as the length of time since they were originally derived increased, the Institute announced in the Autumn 1995 issue of Family Matters that it was planning to convene a small expert group to consider whether new methodologies and data should be used to produce a revised set of estimates of the costs of children. However, the workshop was postponed following the announcement in August 1995 by the Minister for Social Security that the Social Policy Research Centre (SPRC) had been commissioned to develop a set of indicative budget standards for a range of households that would, among other things, 'examine the costs of children in different family circumstances'.
This article describes that research and its findings in relation to the costs of children, and explains current research being undertaken within the SPRC to extend what has already been done.
Budget standards
The budget standards method dates back to the turn of the century to when
British social researcher Seebohm Rowntree first attempted to estimate the
extent of poverty in England by identifying what different families needed to
'maintain merely physical efficiency' and then costing a basket of goods that
was adequate to meet those needs (Rowntree 1901; Saunders 1998a). The
approach has often been referred to as the 'basket of goods method' and is in
fact the basis of the research undertaken by Kerry Lovering.
After Rowntree's studies, budget standards research spent a long time in the
doldrums, but it has recently generated renewed interest - partly because it
provides a framework for identifying needs as a basis for deriving a poverty
line and thus estimating poverty, but also because the availability of better data
and more sophisticated methods for analysing them have made the
application of the method more of a practical reality. It has also become clear
that the method has wider applicability than just to the identification of
minimum needs and poverty. Indeed, the method can, in principle, be used to
develop budgets that correspond to any standard of living (Bradshaw 1993).
A budget standard is derived by specifying what is needed, in terms of the
goods and services that contribute to material consumption, by particular
households living in a particular place at a particular time in order to achieve a
specified standard of living. Having identified each item, they are then costed
and summed to arrive at the total budget required to reach the standard. In the
SPRC study, budgets were developed for a range of different households at two
separate standards - a modest but adequate standard and a low cost standard
(Saunders, Chalmers, McHugh, Murray, Bittman and Bradbury 1998).
The modest but adequate standard is one which affords full opportunity to participate in contemporary Australian society and the basic options it offers, lying between the standards of survival and decency and those of luxury. It attempts to describe the situation of households whose standard of living falls somewhere around the median standard experienced in the Australian community as a whole.
The low cost standard, in contrast, is seen as one which may require frugal and careful management of resources but still allow social and economic participation consistent with community standards, and enable the individual to fulfil community expectations in the workplace, home and in the community. Whilst not seen as a minimum standard, the low cost standard is one below which it would become increasingly difficult to maintain an acceptable standard of living because of the increased risk of deprivation and disadvantage. (For a comparison between the low cost budget standards and the Henderson poverty line, see Saunders 1998b.)
The definition of each of these two standards have emerged over the last two decades
from research on budget standards conducted in an increasing number of countries.
Most countries - certainly most industrial countries - that have developed their own
budget standards have adopted one or both of the low cost and modest but adequate
concepts, which originated in the post-war years in the United States and were later
given prominence by the Expert Committee on Family Budget Revisions (Watts 1980).
They have been used as the basis for developing budget standards in Canada and a
number of European countries, including Denmark, Norway, Sweden and the United
Kingdom, as well as in countries nearer to home such as Hong Kong and Malaysia.
Much of the practical experience gained in budget standards research undertaken in
these countries proved invaluable in guiding the SPRC study.
Having articulated in words a standard of living (low cost or modest but
adequate), the main research task is to identify the goods and services required
to achieve that standard and then cost them. This is a complex, time
consuming and tedious process that has been described by Jonathan Bradshaw
(1993) as 'a ghastly chore' - a characterisation that is probably somewhat on the
generous side! It involves identifying each and every item that a family needs
to attain and maintain a particular standard of living - everything from the
'big ticket' items like the house, car and furniture to small items like
toothpaste, teaspoons and toilet paper.
It is worth noting at this stage that, in practice, some of the most costly items in fact add rather little to the calculated budgets. This reflects the fact that many expensive items last for a long time and their cost is averaged over the assumed lifetime in deriving their contribution to the weekly household budget. For example, the low cost budget standard for a couple with two children (a 6-year-old girl and a 14-year-old boy) includes a refrigerator costing $1429. However, the fridge is assumed to last for 15 years, so that its contribution to the household's weekly budget is $1.83 ($1429 divided by the number of weeks in 15 years). This works out to be considerably less than $5.87 that the family spends on milk each week. Similarly, although the family is assumed to own a car, it is a 12 year-old Corolla and the depreciation cost of the vehicle itself is well below the weekly cost of petrol and insurance, and even lower than the cost of registration (Saunders et al. 1998, Appendix 12.A).
In determining which items to include in the budgets, a combination of both normative and behavioural criteria were used. The starting point, where they exist was a set of normative principles which specify the needs of households as determined by experts in each budget area. Some of these norms have an official or quasi-official status, being endorsed by the relevant bodies. The food budgets, for example, were developed from the nutritional guidelines of the National Health and Medical Research Council (NH&MRC), although these were modified to reflect actual Australian dietary patterns.
There were many areas where there are no normative standards from where to begin and here greater reliance was made on behavioural data - what families actually do. This makes the budgets better grounded in the reality of everyday experience and custom, but at the same time weakens the claim that the standards represent a measure of need that is independent of the resources available to meet those needs. The budget standards thus reflect a myriad of judgements and assumptions, many of them a compromise between the ideal and the practical. As a consequence, the budgets reflect a series of informed judgments regarding which items correspond to each standard, their quality and price, and how long they are assumed to last.
To help us meet the challenge this posed, the SPRC research benefited from the views provided by a Steering Committee of relevant experts in many fields including nutrition, health economics, housing, clothing needs, consumer behaviour and household budgeting. The Committee included individuals from the Australian Bureau of Statistics, the Australian Consumers Association, the Australian Institute of Health and Welfare, the Australian Institute of Family Studies, CSIRO, the Department of Social Security, ACOSS, and the Brotherhood of St Laurence. Preliminary budget estimates were discussed by a series of focus groups who provided valuable advice on where revisions were necessary, and comparisons were made with data on actual expenditure patterns using data from the latest Household Expenditure Survey to ensure that they did not deviate substantially from actual spending patterns.
The standards are thus not perfect, as this is an unobtainable objective. What can be claimed for them is that they reflect the best of the existing Australian research, expertise, data and judgments in each budget area and to this extent they are at the leading edge of what is currently possible. There is certainly scope for further refinement of the standards as new data or methods come to light, or as those who study them are prompted to think of better ways to develop them. While the budget standards are only indicative, they are still far ahead of anything else that has been developed along similar lines for Australia.
Budgets were estimated at either the low cost or modest but adequate standards for a range of household types that differed according to household size, the age and sex of children, housing tenure and the labour force status of the parent(s). A total of 46 separate budgets were derived. The magnitude of the task can be gauged from the fact that just one of these budgets (the low cost budget for a couple with two children) contains no less than 840 separate items - each of which had to be identified, priced and assigned a lifetime. The budgets were costed in Sydney (which is very important to remember when considering the housing budgets), using prices existing in major retail stores in February 1997.
The costs of children
Since a budget standard was derived for couple households with no, one, two, three and four children, and for sole parent households with one and two children, they provide a basis for estimating the costs of children.
There is no single agreed method for doing this, although three main approaches have been identified in the literature (Oldfield 1993). The methods differ primarily in the way they attempt to treat the cost of items that are consumed by the household as a whole rather than by any specific individuals (adults or children) within it. While it is relatively straightforward to decide which items of clothing or food are consumed by a child, for example, this is not so easy when it comes to the cost of housing, transport, consumer durables or furniture. What portion of the cost of a fridge should be assigned to the child or children who use it, for example?
The first approach to the treatment of these shared household costs is to ignore them. This results in a method which concentrates solely on those costs that can clearly be ascribed to children such as their food, clothing, health, personal care, schooling and leisure needs. This approach (sometimes called the individualised method) was adopted in the Lovering study, and while it produces only partial estimates of the total cost of the child, it has the advantage that the uncertainty surrounding the size of each cost components is kept to a minimum.
The second approach extends the first by also including estimates of the portion of the cost of each shared item the fridge, for example, that can be assigned to the child(ren). This method requires normative judgements to be made when allocating shared costs to individuals and is thus called the normative method. It has the advantage of being comprehensive in coverage, but is also difficult and time-consuming to apply in practice and because it requires judgements, will always be open to criticism.
The third method, called the difference method, estimates the costs of children by taking the difference in the budget standards for households with and without children, or with different numbers of children. Thus, for example, the cost of the first child is estimated by taking the difference between the budgets of a couple with one child and a couple with no children (or as the difference between a sole parent with one child and a single person). The great advantage of the difference method is simplicity; once the budgets have been derived it is straightforward to take differences to estimate the costs of children. The difference method also has the advantage that it does not include as part of the cost of the child those large cost components that would have been present even if there had been no children in the household.
Consider the case of housing. A couple (or sole parent) with one child requires
one more bedroom than a couple without children (or a single adult) and they
must thus incur higher housing costs. However, it is only the additional housing
costs that relate to the presence of the child and only these should be included in
the cost of the child. This is precisely what the difference method does. Similarly,
in the case of the fridge referred to earlier, it is only the additional cost of the
fridge in the larger family (due either to the fridge itself being bigger and hence
more expensive, or to the fact that increased usage shortens its lifetime and thus
raises the weekly cost) that enter into the calculation of the cost of the child. If the
same fridge will suffice (without adversely affecting the family's standard of
living) then the 'fridge costs' of the child are equal to zero.
However, there are other features of the difference method that are somewhat
less attractive. One of these is that some of the cost differences may reflect
changes in the costs of household members other than children. Here, the
reliance on behavioural data can give rise to problems. If, for example, mothers
with one child (particularly a young child) tend to leave the labour force, this
will cause the mother's clothing budget to decline as fewer 'smart' clothes are
needed. The difference method will include this decline as part of the costs of
the child, causing them to be lower than otherwise. Does it make sense for the
lower clothing budget of the mother to be included (negatively) as part of the
cost of the child, or should the higher clothing costs of working women
without children be counted as part of their work-related costs?
Another limitation of the difference method (which also applies to the
normative method) relates to how housing costs vary with changes in
household size and composition. The budget standards were developed on the
normative judgement (modified in the light of feedback provided by the focus
groups) that children under the age of five and those aged between five and ten
of the same sex can share a bedroom, while others should have their own
bedroom. This implies that whether a two-child family requires a two
bedroom or three-bedroom dwelling will depend upon the age and sex
combination of the two children. Since housing costs are so high - even when
considering only the addition associated with the need for an extra bedroom -
this means that the costs of a child of a given age and sex will depend critically
upon the age and sex of other children in the household.
The example illustrates the point that there is no such thing as 'the' cost of a
child, even a child of a given age and sex assumed to be living in a household
at a given standard of living. The best that can be done is to produce estimates
that are likely to be broadly applicable to most circumstances and to be clear
about how they are derived and what limitations apply to them. These
comments apply to the results that follow and should be borne in mind.
This involved modifying the new budget standards so that their coverage and underlying assumptions more closely resembles that developed by Lovering. In the area of clothing and footwear, for example, the scope of the Lovering clothing budgets is far narrower than the budget standards in terms of the number of items included; the Lovering clothing budget for a 5-year-old girl contains just 12 separate items (some of them, like socks and underwear, in multiples), whereas the new clothing and footwear budget for a 6-year-old girl contains 49 different items. In light of these differences, the scope of the new clothing budget has been restricted so that it more closely resembles that developed and costed by Lovering.
The resulting estimates are shown in Tables 1 and 2, which compare the updated Lovering 'low income' and 'middle income' child cost estimates for the March Quarter of 1997 with the corresponding 'low cost' and 'modest but adequate' budget standards, respectively. The budget standards results were derived by adopting the same assumptions and methods that were used in Lovering's original study, although it should be noted that it was sometimes difficult to reproduce the Lovering methods precisely because of lack of information. Details of how the results in Tables 1 and 2 were produced will be provided in a forthcoming SPRC report.
|
Table 1. Estimates of the costs of children at the ‘low cost’ standard derived from the Lovering individual and limited budget standards methods(a) |
||||||||
|
Component |
Lov (C2) |
BS (G3) |
Lov (C5) |
BS (G6) |
Lov (C11) |
BS (B10) |
Lov (C15) |
BS (B14) |
|
Food |
20.29 |
19.51 |
22.40 |
24.83 |
31.10 |
32.46 |
37.34 |
42.01 |
|
Clothing & footwear |
4.29 |
5.01 |
5.06 |
6.18 |
7.03 |
4.57 |
10.79 |
6.86 |
|
Household provisions |
1.53 |
4.87 |
1.53 |
4.80 |
1.53 |
3.40 |
1.53 |
5.34 |
|
Energy (heat & gas etc.) |
4.90 |
3.19 |
4.90 |
2.71 |
4.90 |
2.08 |
4.90 |
2.71 |
|
Schooling |
- |
- |
1.63 |
1.96 |
1.63 |
11.04 |
5.75 |
12.08 |
|
Entertainments |
- |
7.08 |
3.83 |
5.78 |
3.83 |
3.55 |
9.58 |
5.78 |
|
Pocket money |
- |
- |
0.71 |
- |
1.92 |
- |
5.75 |
- |
|
Toys & gifts |
0.96 |
3.63 |
0.96 |
4.44 |
1.44 |
4.01 |
3.83 |
2.65 |
|
Total |
31.97 |
43.29 |
41.02 |
50.70 |
53.38 |
61.11 |
79.47 |
77.43 |
|
Note:(a) Lov = Lovering estimates; BS = limited budget standards estimates; C = child (age in brackets); G = girl (age in brackets); B = boy (age in brackets). Source: See text. |
||||||||
|
Table 2. Estimates of the costs of children at the ‘modest but adequate’ standard derived from the Lovering individual and limited budget standards methods(a) |
||||||||
|
Component |
Lov (C2) |
BS (G3) |
Lov (C5) |
BS (G6) |
Lov (C11) |
BS (B10) |
Lov (C15) |
BS (B14) |
|
Food |
26.82 |
25.30 |
24.95 |
30.29 |
51.23 |
42.14 |
60.35 |
53.64 |
|
Clothing & footwear |
8.72 |
5.56 |
10.06 |
6.89 |
10.06 |
5.15 |
14.27 |
7.29 |
|
Household provisions |
2.07 |
8.24 |
2.07 |
8.03 |
2.07 |
6.44 |
2.07 |
9.10 |
|
Energy (heat & gas etc.) |
6.78 |
3.68 |
6.78 |
3.20 |
6.78 |
2.57 |
6.78 |
3.20 |
|
Schooling |
- |
- |
1.63 |
1.96 |
1.63 |
11.04 |
9.58 |
12.08 |
|
Entertainments |
- |
7.16 |
3.83 |
8.81 |
7.66 |
5.46 |
9.58 |
8.81 |
|
Pocket money |
- |
- |
0.96 |
- |
1.92 |
- |
19.16 |
- |
|
Toys, gifts & holidays |
3.72 |
7.25 |
3.72 |
7.79 |
6.59 |
6.91 |
10.42 |
6.06 |
|
Total |
48.11 |
57.19 |
54.00 |
66.97 |
87.94 |
79.71 |
132.21 |
100.18 |
|
Note: (a) Lov = Lovering estimates; BS = limited budget standards estimates; C = child (age in brackets); G = girl (age in brackets); B = boy (age in brackets). Source: See text. |
||||||||
The comparisons in Table 2 reveal a similar pattern to those in Table 1, although now the budget standard estimates are lower for both the teenager and the 10-year-old boy. In both cases, the difference mainly reflects lower energy and clothing costs. As before, the food costs are very similar, although the budget standards again produces higher costs of household provisions, entertainments and toys.
Overall, Tables 1 and 2 indicate that the new budget standards estimates are capable of producing quite similar results to the Lovering estimates if they are adjusted to be more comparable in scope and method. Put differently, although they were constrained by lack of data, the Lovering estimates have withstood the test of time remarkably well and the decision to continue to update them was clearly a wise one. Their main limitation, however, continues to be their incomplete coverage, and now may be the appropriate time to cease updating and publishing the Lovering estimates given their restricted coverage and the time that has elapsed since they were first developed. This is not to deny the very important contribution they have made to our understanding of the cost of children and to the design of family policy over the last 15 years.
In time, the new budget standards may provide the basis to replace the Lovering costs of children estimates by a more up to date and comprehensive set of estimates. Because the budget standards study was conducted within a tight time frame, it was decided that the difference method was the only practical option for estimating the costs of children. The results are described and analysed at length in Chapter 14 of Saunders et al. (1998) and the main features are summarised by Chalmers (1998).
The estimates are presented in Table 3, in the form of both the total costs of different children in one-child families and the incremental costs of children as family size increases. As noted earlier, these estimates were costed at February 1997 prices and refer to households living in Sydney who are renting privately.
|
Table 3: Estimates of the weekly costs of children for couple households renting privately in Sydney (February 1997) |
||
|
Low cost |
Modest but adequate |
|
|---|---|---|
|
Upper Panel |
Cost of one child (compared with the cost of a couple without children) |
|
|
Girl, aged 3 (G3) |
$77 |
$164 |
|
Girl aged 6 (G6) |
$94 |
$139 |
|
Boy aged 14 (B14) |
$118 |
$155 |
|
Lower Panel |
Incremental child costs (relative to a couple without children) |
|
|
Couple and B14 |
$118 |
$155 |
|
Couple and B14 & G6 |
$102 |
$148 |
|
Couple and B14, G6 & G3 |
$57 |
$160 |
|
Couple and B14, G6, G3 & B10 |
$72 |
$105 |
|
Note: At the low cost standard, the husband is assumed to be unemployed and the wife not in the labour force. Both are assumed to be employed full-time at the modest but adequate standard. Source: Chalmers 1998. |
||
The Table indicates that while the incremental costs of a 6-year-old girl are slightly higher than her total cost (compare line two in the upper panel with line two in the lower panel), the opposite occurs in the case of a 3-year-old girl (compare line one in the upper panel with line three in the lower panel). These differences mainly reflect the age-sex combinations of other children and what this implies for the number of bedrooms that are needed.
However, these figures are net of tax and thus would require a somewhat higher gross income, implying that the modest but adequate standard is somewhat above the implied Lee standard. (It is perhaps also worth noting that the budget standards tend to fall in the second quintile of expenditure for all households with one child - see Saunders et al. 1988, Figure 12.1 - implying that they are not high overall, at least when compared with the expenditures of all one-child families.)
|
Table 4. Comparison of the costs of a child in one-child families using the Lee and modest but adequate methods ($ per week in February/March 1997) (a) |
|||||||
|
Expenditure item |
Lee, child aged 2-4 |
Budget standards, girl aged 3 |
Lee, child aged 5-7 |
Budget standards, girl aged 6 |
Lee, child aged 11-13 |
Budget standards, boy aged 14 |
|
|---|---|---|---|---|---|---|---|
|
Food |
28 |
25 |
29 |
30 |
45 |
54 |
|
|
Transport |
36 |
3 |
38 |
3 |
45 |
3 |
|
|
Recreation |
26 |
-1 |
39 |
9 |
37 |
17 |
|
|
Household goods |
30 |
88 |
27 |
46 |
31 |
27 |
|
|
Housing and energy |
17 |
32 |
21 |
32 |
30 |
32 |
|
|
Clothing |
15 |
12 |
18 |
14 |
24 |
15 |
|
|
Other(b) |
15 |
5 |
12 |
5 |
30 |
5 |
|
|
Total |
167 |
164 |
184 |
139 |
242 |
155 |
|
|
Notes: (a) All figures have been rounded to the nearest dollar. The budget standards assume that the household is renting privately. ‘Other’ includes health and personal care expenses. |
|||||||
Another striking difference is in the area of transport costs, where the Lee estimates are between $35 and $40 a week above the budget standards figures. It is not clear why the Lee transport costs appear so high, although the low cost budget standards figures for transport reflect the use of the difference method; families are assumed to own a car whether or not they have children and so the additional costs they incur when there is a child present depends only upon the extra distances travelled in order to meet the needs of the child (to go to school, or the child care centre, or to visit the doctor) , and these involve relatively low extra costs.
The Lee cost estimates for housing and energy seem very low and are well below the corresponding budget standards estimates, while the reverse is true in the case of recreational expenses. It is only in the areas of food and clothing (where the problems of shared consumption largely disappear) that the two sets of estimates are consistently close together. This reinforces the earlier conclusion that these pure individual cost items are capable of quite precise estimation, whatever method is used.
Summary
The comparisons presented in Tables 1-4 reveal that although there are many broad similarities between the child cost estimates that have been published by the Australian Institute of Family Studies and those produced from the new SPRC budget standards research, there are also a number of significant differences in the size and composition of some of the estimates.
It would appear on the face of it that there is a good case for replacing the Lovering estimates by the budget standards, which are both more up to date and more comprehensive in their coverage. Some of the differences between the Lee and budget standard costs shown in Table 4 are striking and, at the very least, suggest that more work is required to reconcile the observed differences.
It is important to emphasise that the budget standard estimates reported here
have been derived from the difference method which is not the most ideal way
of calculating the costs of children from a budget standard for the household.
Research is currently underway within the SPRC which is applying the
normative method to produce better estimates of the costs of children and a
report is planned for release later this year that will summarise those results.
Concluding comments
There is no ideal way to derive the costs of children, nor will any estimate ever
be free of criticism. To expect otherwise is to fail to understand the inherent
difficulties of the task. This does not mean that we should throw up our hands
in despair, but rather that in striving to improve on our understanding of the
concept of 'the costs of children', and in trying to develop better ways to
estimate them, we should acknowledge that there will always be imperfections
in what can practically be achieved. This is no different from many other areas
where research cannot provide a perfect answer and, like elsewhere, to strive
for this ideal often helps to elucidate the issues by shedding light on why it is
unattainable.
It seems likely that interest in the costs of children will continue to grow, both amongst the public generally and amongst those responsible for the development of policies that affect the wellbeing of families and children. To inform our understanding of the issues and to provide an improved basis on which to decide whether and how to intervene, we need to continue to update the available estimates of the costs of children and to search for improved methods.
The new budget standards represent a step along this path, and while they provide the basis to estimate better the costs of children, there are good reasons to explore also different methodologies and other approaches to the issue. It was noted earlier that a budget standard refers to a particular household living in a particular place at a particular point in time. These 'particulars' are important and there is already a need to improve upon some of them.
For example, in relation to household type, the SPRC research included only a limited range of children and there is a good case for extending the research to include very young children and youth. (Some European countries already estimate the costs of childbirth and pregnancy.) The estimates presented here also refer only to the costs of children in couple households. Budget standards have been estimated for a single woman as well as for female sole-parent households with one and two children. In principle, these can be used to derive estimates of the costs of children in sole-parent families, although using the single woman as the benchmark from which to estimate child costs is more problematic given the different behavioural patterns of single women and single mothers.
In addition to expanding the range of household types, there is also a strong case to re-price the budgets in areas other than Sydney, and preliminary work along these lines has already indicated that this can make a major difference to the budgets, as well as to the costs of children (Saunders 1998c). There is also a need to update the budgets so that they reflect changes in price (as a result of the introduction of a GST, for example), and how this should be done is currently under consideration. Over the longer term, new budgets will need to be developed in response to changes in community norms and patterns of behaviour.
Finally, it is important to emphasise that the budget standards approach is only capable of providing an indication of the direct budgetary costs of children - what it costs from the family purse (and wallet!) to maintain a child at a given material standard of living. There are equally important indirect costs of children associated with the foregone earnings of those who assume responsibility for caring for children within the home. Although the budget standards described here do incorporate the work-related costs of parents (including child care costs) they do not include estimates of the loss in earnings associated with caring for children within the home. Neither is any account taken of the many and varied benefits associated with child-rearing. These important factors would need to be incorporated into any comprehensive assessment of the value - as opposed to the cost - of children.
References
Bradshaw, J. ed. (1993), Budget Standards for the United Kingdom, Avebury,
Aldershot.
Chalmers, J. (1998), 'Using budget standards to estimate the costs of children', Budget Standards Unit Newsletter No. 4, Social Policy Research Centre, University of New South Wales, p. 6.
Espenshade, T. (1984), Investing in Children: New Estimates of Parental Expenditures, The Urban Institute Press, Washington DC.
Lovering, K. (1984), Cost of Children in Australia, Working Paper 8, Institute of Family Studies, Melbourne.
McDonald, P. (1990), 'The costs of children: a review of methods and results', Family Matters, no. 27, November, pp. 18-22.
McDonald, P. (1997), 'Gender equity, social institutions and the future of fertility', Working Papers in Demography No 69. Research School of Social Sciences, Australian National University, Canberra.
Oldfield, N. (1993), 'The cost of a child', in J. Bradshaw (ed.) Budget Standards for the United Kingdom, pp. 177-195.
Rowntree, B. S. (1901), Poverty: A Study of Town Life, Macmillan, London.
Saunders, P. (1998a), 'Household budgets and income distribution over the longer term: evidence for Australia', Discussion Paper No. 89, Social Policy Research Centre, University of New South Wales.
Saunders, P. (1998b), 'Budget standards and the poverty line', Australian Economic Review, vol. 32, no. 1, pp. 43-61.
Saunders, P. (1998c), 'Using Budget Standards to Assess the Well-Being of Families', Discussion Paper No. 93, Social Policy Research Centre, University of New South Wales.
Saunders, P., Chalmers, J., McHugh, M., Murray, C., Bittman, M. and Bradbury, B. (1998), Development of Indicative Budget Standards for Australia, Policy Research Paper No. 74, Department of Social Security, Canberra.
Watts, H.W. (1980), New American Budget Standards: Report of the Expert Committee on Family Budget Revisions, Special Report Series, Institute for Research on Poverty, University of Wisconsin, Madison.
Peter Saunders is the Director of the Social Policy Research Centre, University
of New South Wales.
'A guide to calculating the costs of children'
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