Despite Family-friendly Policies, Raising Children a Financial Stress, Study Reveals

A Danish-Hungarian study, examining 12 European countries, discovered a considerable discrepancy in resources devoted to society between parents and non-parents. Contrary to expectations, family-friendly policies do not significantly diminish this gap, the researchers of the University of Southern Denmark and the Corvinus University of Budapest found.

Incentive packages offered by family-friendly policies in Europe are by no means enough to compensate parents for the full costs of raising children, they write. When solely considering taxes and public benefits, parents appear 37% better off than non-parents. However, the narrative changes when the entire package is taken into account, including less apparent intra-household cash flows and unpaid household work.

The study, based on 2010 Eurostat data, unveils that

working-age parents contribute the equivalent of 17.5 years of average earnings to society over their lifetime, including their children. In contrast, non-parents transfer resources equivalent to only 6.6 years of earnings on average to the state and others during their working years.

Parents spend 4.7 years of average income on taxes and contributions net of benefits received, whereas non-parents dedicate 6.6 years to the same.

The study emphasizes the often overlooked contributions within families, where parents spend both money and time on their children. Mothers primarily contribute through unpaid work such as household chores and childcare, while fathers predominantly allocate resources through financial means. The study reveals that the burden of unpaid work is 1.6 times higher than that of money transfers within the family. Overall, parents’ combined contribution, factoring in both money and time, is approximately 2.66 times higher than that of non-parents.

The research suggests that despite Europe’s aging population, penalizing child-rearing in financial terms persists.

Source: Corvinus University of Budapest

“Even family-friendly policy models do not mitigate the punitive impact of the burden of raising children, which is likely to be largely borne by parents themselves through higher taxes and social security contribution,” notes Róbert Iván Gál, researcher from Corvinus University, and one of the co-authors of the study. He points out that in Sweden and Finland the gap between parents and non-parents is the largest, with a factor of three, while the lowest difference of 1.6 is calculated for Latvia.

An intriguing aspect is the metaphorical tax rate on time spent raising children, which is six times higher than the average European VAT rate. If an average European parent hypothetically became a non-parent, they could consume 31% more goods and services. The implicit tax rate on child-raising, excluding time input, stands at 31%, over two and a half times higher than the average European VAT rate.

Source: Corvinus University of Budapest

The research concludes by highlighting the undervaluation of parental contributions, particularly the often invisible and underappreciated work done by mothers within households. It suggests that

societal benefits of parenthood are shared with non-parents, resulting in higher contributions and lower rewards for those raising children.

The study calls attention to the imperfect measurement of these contributions, emphasizing that what society measures tends to be what it values, leaving crucial aspects of parental input undetected and undervalued.

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