The Shadow Price of Parenting and Foster Parenting (unfinished)

In Rosen’s paper, the theory is that companies simultaneously pay a price for labor, and workers pay a shadow price for a job. The shadow price that workers pay for a job is their maximum earnings potential minus their actual earnings. Workers can be excluded from certain types of jobs if the job’s shadow price exceeds their earnings potential.

This idea seems relevant to people’s decision to parent and provide foster care.

The shadow price of parenting is higher depending on your earnings potential. Two-adult households forgo a smaller share of their earnings when choosing to stay-at-home parent. Foster care requires stay-at-home parenting. School pods require stay-at-home parenting. Stay-at-home parenting sucks because you never see adults and can’t earn money.

Government programs reward market work for poor parents. However, home production of childcare is not taxed. Taxation of market work is progressive, but non-taxation of childcare is flat…but not really. Childcare for poor folks is subsidized.

The theory of compensating differentials, applied to urban economics, means you simply can’t win if your preferences match enough other individuals such that arbitrage opportunities are exhausted. It seems to be the case for my preferences in NYC.

  • Single individuals cannot stay-at-home parent since their percentage income is drastically affected.
  • Households with children only want to foster unrelated children who are >=5 years younger than their own children.
    • Makes it harder to place older foster kids
  • Many childless couples do not want children
  • Richer folks have kids starting 30. Poorer folks have kids starting 20. Assume nobody takes new unrelated kids after 60. Assume couples only willing to foster kids >=10 years younger than oldest child (allows 5 years for subsequent own children + 5-year gap between youngest and foster child).

This leaves as candidates for foster care

  • 2-adult households who want kids
  • Age 40-60 if rich for babies
  • Age 50-60 if rich for 10-yo
  • Age 30-60 if poor for babies
  • Age 40-60 if poor for 10-yo

A lot of what limits people’s ability to provide stay-at-home child care is household size.

If foster reimbursement is part of the budget, instability in placements causes budget volatility. Larger pools of foster kids and better credit can stabilize the impact of the payments.

Written on December 4, 2021