Michigan has a fertility gap, Warren Anderson says, and regulations on childcare facilities may be making it worse.

Anderson, a professor of economics at University of Michigan Dearborn and member of the Mackinac Center’s board of scholars, joins the Overton Window Podcast to discuss how easing up on regulations could make it easier for moms and dads to have children.

Mandates for how many children a childcare facility can accept per one staff member have hit parents in the pocketbook.

“A one-infant increase in a child-to-staff ratio leads to a decrease of the cost between 10% to 20%, or about $1,000 to $2,000,” Anderson says. “So in Michigan, you have to have one adult per four infants, which is actually about the average. And then some states require five, some states have three. So if you change that by just one, if you increase it by one, then you can cut costs by 10 to 20%.”

This cap is just one way regulations contribute to the cost of having kids.

“If you have more regulations, then you actually have fewer child care facilities,” Anderson says. “You have fewer places to send your child because the regulations become more cumbersome. It's harder to navigate, so you'll just have fewer places where you have your child go while you work. That's another mechanism by which regulation works. It just leads to fewer actual openings for people to go to.”

Michigan is neither at the top nor at the bottom of regulatory burdens, and Anderson compares how different states work to ease or increase the regulatory burdens that raise costs for parents.

“If you want to be a director at one of these childcare centers in Massachusetts, you have to have 42 months experience,” he says. “Whereas in Michigan, it's about 960 hours, so say about half a year. That's a very great diifference there, but yet I know of no papers that discuss the difference in quality between Massachusetts and Michigan, even though there’s like a gap of half a year to four years. It's just like this arbitrary number that someone picked, and then it's easy to say, well, it's for the kids, when at the end of the day, it really probably doesn't matter. If anything, it just drives up costs that makes it harder to run.

The regulatory burden did not arise all at once, Anderson notes.

“If you start throwing rocks in a stream, one rock doesn't do anything, but once you get enough rocks there, it really dams it up,” says Anderson. He points to regulations on fencing around facilities and minimum square footage per child, which vary widely from among the states. “I guess the regulation varies by inch or feet by state, but it just gets there and then it doesn't leave.”

Raising the cost of bearing children seems to have a negative impact on fertility rates, and Anderson warns that the trend could have steep economic costs to the American welfare state.

“That first paper found that fertility goes down compared to what people want, and this can have lots of negative effects,” he says. “One big one is that the government has promised a lot of money in the future. And so having fewer kids increases the tax burden. In the 2025 federal budget, more than a fifth of the budget is Social Security, more than an eighth is Medicare. And then almost 20% is interest on the debt. So just those three things right there is more than 50% of the budget.”

Anderson points to deeper social problems as fertility continues to plummet.

“You also lose family ties if you don't have bigger families,” he says. “Perhaps one reason for the loneliness epidemic is just fewer kids, fewer family ties, fewer cousins, all this. And a lot of innovation comes from younger people. So you don't have as many kids, you have less innovation in the future. So this fertility issue is something that the modern economy has never faced. It's always been upward population, but now it's an aging population and then it'll be a declining population. And I'm not sure if anyone fully knows how to handle this, especially with all of these entitlement spending.”

Listen to the full conversation on The Overton Window Podcast.

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