I recently had a chance to talk with an older man, relatively economically successful, married for many years and with what might be called a quiverful. He was not understanding why young men were unable to start and maintain a family with incomes in the high-five figures, when he had had two children and bought a large house by age 25 on a salary less than one tenth the size.
I asked him his salary in 1964; he recalled it as $6500. The house he recalled paying $15,000 for, about 2.5 times his annual income. According to this website, the average salary in 1964 was $6000, and the average house price was $13,050, so he was not far above average by any means. From that website, we see that gas cost $.30 a gallon, and average monthly rent was $115.
I asked about taxes; he was less certain. According to this website, he would have paid 7.25% (employer plus employee, or 3.625% out of his pocket) on a maximum annual amount of $4800; according to this publication, starting in 1964, the first $3000 earned by a married man with a wife and two children was free from income taxation. According to this history of tax rates, his marginal tax rate on the $3500 of taxable income he would have to report was 18%; his effective overall tax rate might have been about 17%, Federal. Overall, then, he would have paid a total of $769 to the Federal Government, $174 in Social Security (there was no Medicare), and about 595 in income tax, leaving him with $5731 in after-tax income.
Contrast that with a man earning slightly above the annual average salary today; that would be $55,000. Next year, he will pay $4207 in SS/Medicare taxes; his income tax liability is difficult to calculate. He can take a standard deduction of $11,600, plus an exemption for himself and his three dependents of $3800 each, for a total of $15,200; all told, $26,800 of his income is not taxable. Of the 28,200 left, he will pay about $3350 in income taxes, leaving him about $47,500 in after-tax income. Assuming he lives in Texas or Florida with no income tax, why can he not raise a family in better fashion than his forebears on this amount?
Well, let’s go back to those 1964 figures. 1964 was the last year that US Quarter Dollar coins were minted in 90% silver. One quarter from 1964 is useable now in shopping; you’ll get 25 cents worth of goods for it. Of course, it is worth more for its silver content: when I discussed this, that value was about $6.25. Meaning that one dollar in 1964 quarters is worth about $25 now. Compare, then, two slightly-above-average men from 2012 and 1964: one had after-tax income of $47,500, and one had after-tax income of $143,275. Ignoring house prices, sales taxes, and all other manner of economic drag: is it any wonder that people can no longer afford the cost of children?