Lost opportunity costs & child support

What are "lost opportunity costs"?

A parent who stays at home to look after the children as they are brought up is likely to suffer various financial set-backs and ongoing disadvantages for the rest of that person's life. These include:

Career break - at the very least there is likely to be a loss of earnings for several years, perhaps while the child are still at home until they enter primary school, and perhaps continuing until they leave home at 18 or 21 or whatever. In a potential career of 40 or 50 years, this could amount to perhaps a third, and so reduce lifetime earnings by that proportion.

Out-of-date skills - when that person does come back to the job market, the skills-shortfall may results in a lower income, or there may be extra cost & time to re-train in up-to-date, wanted, skills. It is a valid argument that child-rearing shows considerable skills of various sorts, but they may not be convincing to someone looking for technical skills.

Low pension - pensions take time to build to a suitable level, and gaps in the contribution to pensions may result in unrecoverable reductions in that person's income in old age. (Pension splitting on divorce is just a tactical fudge, and even stakeholder pensions are not a full solution).

These result in "lost opportunity costs" - the differences between what that person could have earned throughout the lifetime and what is actually earned as a result of bringing up the children. [1]

Can child support replace lost opportunity costs?

It is impossible to solve the issues of lost opportunity costs via child support. IMPOSSIBLE!

There may be a lost opportunity cost but no qualifying children. The children may be too old to qualify for child support. Or they may actually now be staying with the other parent. Or they may have emigrated or be dead. (There may never have been any children, just a stay at home spouse). So the child support mechanism may not even get invoked.

There may be qualifying children but no lost opportunity cost. The parents may both have pursued their careers from more or less the time of birth. So a child support formula can't assume there will be lost opportunity costs. It would obviously be wrong to build it in.

The time frame may be wrong. The lost opportunity cost may cover many years, but the child support may only cover a few of these. How can (say) 15 years of lost opportunity costs be recovered in the remaining (say) 2 or 3 years that child support has to run? It can't.

The cost is likely to be totally unsustainable. Lost opportunity costs are likely to be very high - they cover a loss of earnings over a person's lifetime, and this may amount to anywhere between £100k and £1m (or even outside this range). This can't sensible be recovered by any plausible child support formula. Even if the formula specified it, few non-resident parents could ever pay it.

However tempting it may be to try to fit lost opportunity costs into the basis for the child support amounts, it is totally out of order to do so. Lost opportunity costs need to be considered totally independently. They must not contaminate discussions about child support.

So what should replace lost opportunity costs?

We need to understand what has caused the lost opportunity costs so that we can "assign blame", or find who or what should pay. We mustn't put the responsibility onto someone who did not play a part. So why did the person concerned have children and spend the resources (time, money, etc) to support them? Here are some hypothetical views:

"There was no choice - it was out of my control. It happened to my body against my will".

Perhaps a bit like cancer. So, ideally, it should have been cut out of the body at the earliest opportunity, and flushed down the toilet. (But consider - is having babies & bringing up children like having cancer?)

"Society needs to be replaced, and needs children for the next generation".

Did society tell you this? If not, why did you believe it? If society needs you to have babies, then society will either conscript you to have babies, or will pay you sufficient for you to be a professional baby-carrier. Until then, don't make assumptions about what society wants you to do. Society can find plenty of highly skilled & motivated people from around the world who would like to work in the UK's environment and make themselves, & the UK, lots of money. (Anyway, why simply do what society "wants" you to do? It isn't a legal requirement!)

"It was expected of me to have children & bring them up".

Was it? Point to the evidence! (Perhaps for much of the 20th Century this was the indeed the case. But it is now the 21st Century, and this is certainly not the case!)

"I had a strong biological need to have children & care for them".

Ah! you mean you really, really, wanted to! Now you are being honest! What is it that people really want to do, even though it takes lots of their time, and their money, and leads to frustration, but eventually may well lead to lots of satisfaction? Ah ...!

A hobby! Having babies and bringing them up as children is a hobby!

Having babies is a hobby. Staying at home to bring them up is taking that hobby further, to the extent where it impacts on lost opportunity costs. So lost opportunity costs are really the voluntarily-incurred costs of pursuing a hobby. In answer to the heading above - why should anything replace lost opportunity costs? Who pays for people to breed & ride horses? Who pays for people to travel the world & photograph it? The person concerned! And if it becomes an 18 year task, the costs to that person will be proportionate.

"But my husband agreed that I should stay at home with the children".

OK - then sort it out with your husband! It is a matter for consenting adults in private - don't get others, such as taxpayers, involved.

"Research says that a parent should stay at home for the children".

The jury is still out - the results are not clear, and simply indicate trends, not fixed paths. But the research that suggests this only applies until the children get to school. From about 5 onwards, research says that it is best for the children if the parents work.

"The government wants parents to stay at home with their children".

Poppycock! The most generous "benefits" provided by the current government are intended to get parents (and disabled people) back to work! (Working Families Tax Credit, etc). Increasingly, the focus of future governments will be to get parents back to work once their youngest child has gone to school.

What to do?

Make it crystal clear to all adults that lost opportunities will not LATER be recoverable (at least in total) from the one that didn't take the career break - unless they come to a formal agreement, of course!

Enable lost opportunities to be minimised during a career break by better pension rules, life-long-learning, part time jobs etc.

Then people who don't like these consequences can simply not have children!

"What would happen if everyone acted like that?"

We aren't talking about everyone - we are talking about you, Mr and Mrs Typical of A House in Some Road in Your Town. Your decision to have a baby makes a difference of one baby in the world - if you choose not to have one, it won't cause the population to collapse!

Last word

From: "If men have all the power, how come women make the rules?"
Jack Kammer

"Who gets to stay with the kids?

"Phil Donahue was on the TV in the waiting room of an auto shop where I was getting an oil change. The topic was "Men who stay home with their kids". When the mechanic came to tell me my car was ready, he stopped to watch the show.

"What do you think of that?" I asked, fully expecting him to say something about child rearing not being "real man's work."

"I'd love to do that," he answered, "but my wife took that job. She didn't even ask. She just took it.""

References

The Tale of Mrs Typical
Heather Joshi, Hugh Davies, and Hilary Land
Family Policy Studies Centre
ISBN 0 907051 91 X