NCPA - National Center for Policy Analysis

Is the Two-Income Family Worth It?

February 11, 2004

Two-income couples with children are saving less and incurring more debt than they did 20 years ago, according to Elizabeth Warren of Harvard Unversity and daughter Amelia Warren Tyagi.

In "The Two-Income Trap," the authors stress that the emergence of two-income families since the 1960s has led to a decline in real incomes, lower savings rates and more credit card debt. Other findings include:

  • In 1981, savings made up 11 percent of average personal income; by the year 2000, savings declined to -1 percent; meanwhile, credit card debt has risen from 4 percent in 1981 to a whopping 12 percent of average personal income.
  • Some 60,000 women filed for bankruptcy in 1981, compared to a staggering 500,000 women in 2001; more than 1 out of 6 single mothers are predicted to file for bankruptcy in this decade.
  • Married couples with children are more than twice as likely to file for bankruptcy as couples without children.

The authors note that as more individuals compete for jobs, real wages have declined. Additionally, the income gained from a second working parent is often spent on day care, second cars, and restaurant bills. Lastly, the higher nominal incomes of two-income families drive up mortgage costs as these families bid for homes in desirable suburban neighborhoods.

Source: Allan Carlson, "Rediscovering the Family," National Review, January 26, 2004; based upon Elizabeth Warren and Amelia Warren Tyagi, "The Two-Income Trap," Basic Books, September 2, 2003.

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