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A first-time visitor to Earth would certainly be impressed by the effusive attention surrounding the birth of a child. The celebration of a new arrival in the family spans nearly all cultural contexts. Well-wishers shower the parents and grandparents with congratulations honoring the new arrival. We give gifts. We hold ceremonies. We forget, for the time being, negative aspects that may have surrounded the infant’s conception.
Social workers know, moreover, that the occasion of birth is the best time to get an unmarried father to acknowledge paternity and set up to collect child support. Despite society’s unwillingness to protect human life consistently from the time of conception, and despite feelings by some that infants and children interfere with adult pleasures and prosperity, most cultures still value children overall. We go to great lengths to ensure their safety. Society has put systems in place, ranging from infant car seats to “Amber alerts,” to protect children from physical hazards, predatory criminals and, even in many cases, from themselves.
With more intensive research, our alien visitor might observe that a continuous and adequate volume of new human beings is necessary for the society to survive. By nature, people are very dependent on others when they are children and again as older adults, with a period of independence and productivity in between.
We all learn in economics that human resources (people) are in many ways more important than natural resources (minerals, plants, animals, air and water) or capital resources (machines). Without enough teenagers and young and middle-age adults to invent things, produce things, move things, buy things, and put natural and capital resources to work, nothing happens. Of course, these folks do not mysteriously appear from nowhere. They have to be conceived by a pair of parents, born, nurtured, and educated to the point where they can work productively and nurture others. This aggregate of what people, and only people, can do once they are trained and nurtured is known as “human capital.”
In his recent book The Empty Cradle, Phillip Longman describes human capital at some length and emphasizes how the society depends on it.1 He joins Ben Wattenberg,2 Allan Carlson3 and Stanley Kurtz4 in warning that the steeply declining fertility rates in most of the world have threatened the supply of human capital. Longman goes on to outline some reasons why people are having fewer children, then shows how the financial incentives built into our economy systematically undervalue those who produce human capital. We will explain further in a moment.
The Gross National Product (GNP) is defined as a nation’s total output of goods and services. It is usually reported per year in U.S. dollars, for valid comparison among nations. When divided by the total population of the nation, the result is the “per capita GNP.” This calculation is intended to measure the wealth of a nation; that is, how far along the continuum of development a nation has progressed. However, Longman points out that the GNP, at least the way we calculate it, excludes the value of labor that is not reimbursed in dollars.5 Thus, it misses not only community volunteer labor and barter, but the value of homemaker services and child-rearing by parents. This phenomenon has two consequences: first, if more children are cared for outside the home by paid caregivers instead of by unpaid parents and grandparents, the per capita GNP will go up artificially, and the economy will appear to be growing. Second, if the viability of the society is threatened because not enough children are being born to sustain human capital for the next generation, would-be caregivers will simply move into other economic pursuits. Per-capita GNP will not drop and the problem will thus remain undetected until there starts to be a shortage of teens and young adults – in other words, society does not see the problem until very late in the course.
Our visitor would shortly discover that our society does not pay people in any semblance of proportion to their value to society. Professional athletes and business executives are obvious examples on the high side. Longman points out that those who produce human capital are among our most poorly compensated citizens.6 Parents labor out of love, usually with little fiscal support from outside the family. Child care tax credits help, but repay a very small fraction of the cost of raising a child. Longman’s estimates of lost earnings, career opportunity costs, and household and educational expenses total an eye-opening million dollars per child for a middle-class family. The expenditure per child is somewhat lower for larger families.
Others who help a child become a productive adult – babysitters, teachers, coaches, mentors and professors – take home far less compensation than their similarly educated peers who are doing other things. To some extent we have set this system up deliberately, so that these professions attract people who love kids and aren’t just “in it for the money.” However, an even bigger factor is that our society does not appreciate the eventual value of their work. Very little of the value added by mentors comes back to them; instead, it accrues to the society at large. The current Social Security system exacerbates the problem by calculating benefits based on a person’s lifetime earnings in the dollar-compensated economy. Those who stay at home to parent their children are doubly penalized – first by lost earnings and child care expenses per se, then again when it is time to collect Social Security. Not surprisingly, given these incentives, more and more couples are choosing to bear fewer or no children. Thus they contribute to the shortage of human capital, compounding the problem we will describe next.
