Do families with more children make less money?

Do families with more children make less money?

Any parent will tell you that having children is expensive. Raising children takes large quantities of clothes, food, education, toys, and the most costly thing of all, time.

Those same parents will also probably tell you their children are the best things they have made in their lives. As my wife has started saying, once you have children, you make every decision in your life with them in mind.

Women in Mongolia tend to have more children than in Western countries. In 2019 there were 2.8 children born per woman in Mongolia, significantly lower than the peak in 1965 of 7.5 children born per woman.

Let’s put this trend in perspective and compare Mongolia’s fertility rate with other countries.

We can see that it is a widespread trend for birth rates to have gone down over time since 1960. Yet around 2005, the trend in Mongolia started going up again. Mongolia today has a similar birth rate to China’s in 1979.

Other former communist countries show a similar trend. According to World Bank data, Kazakhstan, Russia, and Kyrgyzstan showed a decreasing birth rate that hit the lowest point around 2000. Since then, the birth rate in these countries has gone up.

I’m not sure what caused this “baby bump,” but it is certainly notable. I’ve been told by many Mongolians that increasing the country’s population is a matter of national security and that a high birth rate is a good thing.

When I asked why I was nearly always told the same reason. Since powerful, high population countries surround Mongolia, the country needs more people. This reason sounds quite lovely and patriotic. Unfortunately, at current birth rates, it would take hundreds of years to match even Russia’s population of 144 million, not to mention China’s 1.4 billion people.

So perhaps Mongolians have more children because of a sense of national pride or because they are freer than in the communist past. Perhaps what motivates some women is the “honored mother” medal to mothers with four or more children.

All of this got me thinking about the economics of having more or fewer children. It seems clear that families with more children probably spend less money per child or buy less expensive products than a family with fewer children.

But what about income? Do families with more children make less money? I dug into the 2019 Household Socioeconomic Survey run by the National Statistics Office to answer this. I calculated the average annual household income by the number of children. Let’s take a look.

Households with two children earn the most money on average. Households with five children earn roughly 40% less than households with two children.

Households with 0 children make the least. This is perhaps because these households are either relatively young or old enough not to have children in the house.

While this is a very clear picture, the cause isn’t clear. Do couples choose to have fewer children so both mother and father can work? On the opposite end, are mothers (or fathers) choosing the stay home to care for the children, resulting in a lower household income?

In 2020 Mongolia increased the child allowance to 100,000MNT per child under 18. It would put an average household with five children at nearly the same income as two children. The Mongolian government either wants to encourage people to have more children or support those families that choose to.

You probably have a pretty strong opinion of how many children are “right” for your family. Family planning is a very personal decision. The data reflects averages about the population and isn’t destiny for any particular family.

Mongolia’s current baby bump seems like it might deflate in the coming years. What remains is a very high percentage of young people. 31% of Mongolians were under the age of 14 in 2020. Overcrowded schools and traffic seem to be the result. We don’t know yet whether those born in the baby bump (after 2003 or so, mainly Gen Z) will end up better off than their millennial parents.

If you are interested in seeing the code used to collect or analyze the data for this article, you can find it here.

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