This is the fifth in a series of eight columns showing what makes your child support the irrational burden it is, doing more harm than good by turning divorce into children-for-profit, and is the basis to either lobby for reform or request a more reasonable amount it in your case. [I am not a lawyer and this is not legal advice. Use a lawyer and economics expert for your case or lobbying.] The Income Shares formula is used by 33 states. Last week, we saw how it immediately detaches from reality by denying divorce occurred, which has the effect of shifting all its financial burden onto only one party. There’s more. For Income Shares, the parents’ incomes are added and used to step into a table of child costs for that income level. That amount is split between the parents according to their share of the combined income (according to ability to pay). Sounds pretty reasonable. But that table of child costs comes from the Betson-Rothbarth estimator of child costs. It is an income equivalency model with no actual costs component, that indirectly derives a theoretical amount for what families spend on children. Economists use indirect measures when there is no direct data, to develop and test hypothesis. Estimators, such as Betson-Rothbarth, provide rough estimates only arguably appropriate as an academic convenience for the theoretical work in which it is used. For instance, when studying low income families they may be necessary if less direct data is available. But few economists would suggest their practical application in real-life without thorough field study, comparison of its outcomes with other measures, and adaptation. That has not been done. When you change the purpose of a measure, you have to change the measure. The Betson-Rothbarth estimator measures family spending on only three adult goods: tobacco, alcohol, and adult clothing. When you compare the spending on them between childless couples and couples with one child, the difference is taken to be the cost of one child. One can see why it greatly over-states child costs for most families It might have some merit for comparing between a two- and three-child family, or at low income levels, but it over-states child costs in general because, when you have children, your spending on these items declines, not only because of transferring money to expenses for the child. Spending on these items greatly declines because your interests dramatically change, you don’t have the time, because of moral pressure from friends and family, and a shift in saving needs. Many behaviors change with the coming of children, few financially motivated. There are a host of reasons why this academic convenience is inappropriate for general use. And any responsible economist will say so. Possibly the most disturbing problem with generally using an indirect estimator for child costs is that it is unnecessary. We’ve had decades of governments gathering actual family costs, and other areas of economics studying family spending. None has been applied. For other reasons, branches of the federal government have collected the actual costs of families for decades, so how much different sized families spend on each of housing, clothing, education, medical care, transportation, and food, is thoroughly documented, some, by region. There can be a trick to interpreting even these numbers. They may give the per capita cost of, say, hosing when the marginal cost should be used for our purposes. That is, a couple only needs a one-bedroom apartment at $500 a month, but with a child they need a two-bedroom apartment at $600 a month. Is the child’s share of the housing cost the per capita $200, or the marginal increase of $100? ©2008 KC Wilson To nourish children and raise them against odds is in any time, any place, more valuable than to fix bolts in cars or design nuclear weapons. - Marilyn French
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