As the family goes, so goes the economy

Carolyn Moynihan
20 May 2011
Reproduced with Permission
MercatorNet

According to a New York Times editorial this week, "As Housing Goes, So Goes the Economy". It is a call to the United States government to intervene in the housing market which, nearly two years after the housing bubble burst, is still in trouble and will not, says the Times, fix itself.

That may be so in the short term, but a report published today by the Family Research Council suggests that the long-term fix for the economy must come from another quarter. Tweaking foreclosure rules may make it possible for more people to keep their homes, but it is the relationships within the home that ultimately determine prosperity. It is more the case that, "As the family goes, so goes the economy".

As we know, the family in western countries is not going very well. In its introduction the FRC report points out that people have a reduced capacity for the intimate social relationships that marriage demands.

Most American parents cannot stand each other enough to raise the children they have brought into existence. In 2008, only 45 percent of American seventeen-year-olds were in a family headed by their biological parents, leaving them weaker in their relational capacities than prior generations. The numbers are lowest among African-Americans, where only 17 percent of seventeen-year-olds have spent childhood in an intact family. Among Asian Americans the intact family is strongest, but even for them it is only 62 per cent.

Some people claim that family breakdown and the rise of cohabitation is nothing more than growing pains experienced as the family changes and becomes more diverse. Laws, social policy and the economy have to catch up with the evolution of the family, they say.

In sharp contention with that view is the title of the report: "Marriage and Economic Well-Being: The Economy of the Family Rises or Falls with Marriage". Authors Patrick F Fagan, Andrew J Kidd and Henry Potrykus have analysed federal data and academic studies and demonstrate their case convincingly: the family based on a lasting marriage (the "intact married family") outperforms other sexual partnering structures -- by a mile.

Consider a few examples:

The marriage premium

It is not difficult to understand how single parenthood, separation and divorce (especially for the custodial parent) impoverish people, creating a variety of social costs as well. But it is much harder for people today -- especially young adults -- to grasp the fact that cohabitation is not just marriage minus the wedding. In what follows I focus on the light that the report throws on this common misunderstanding.

Cohabiters who break up one or more times must have some inkling that an uncommitted relationship is a financial risk, but what they won't easily understand is what economists call the "marriage premium" -- the increase in a husband's productivity and earnings actually caused by entering marriage.

Fagan and colleagues put the marriage premium at 27 per cent, based on a study that controlled for all factors, including genetics. On average, married fathers work more hours per week than cohabiting fathers, and the economist Gary Becker in his Treatise on the Family (1991) argues "that working longer incentivises a worker to increase his productivity (to reap further income benefits)", the report notes. Young married men are more likely to be in the workforce, employed and working a full-time job than their non-married counterparts.

Interestingly, the marital advantage does not hold at the same level in the step-family, where men make about 15 per cent less, and it is outstripped by dual-earner married families, which generally earn the most income.

(The fact that the marriage premium accrues to men will immediately devalue it in the eyes of gender egalitarians, who hew to the model of "equal partners in everything". Economics, and feminism, have yet to account adequately for the value of the wife who works at home, but an Australian study indicates a reduction in the husband's earnings of 7 to 13 per cent when his wife works full-time. In any case there is a "marriage premium" for the married woman: when her household income -- family income divided by the poverty line -- is compared to that of women single through divorce or non-marriage, she comes out well ahead.)

In contrast with the employment and earning advantages of married men, the report shows that cohabiting men tend to have "less stable employment histories than single and married men. Cohabiting fathers are less likely to have consistent, full-time work than are married fathers, and are less likely to work long hours."

Cohabiting households have lower incomes than married-parent households. Mothers who cohabit have lower incomes than mothers in a married step-family, although cohabiting women work more hours as their partners' income increases. "Furthermore, cohabiting couples in the United States are 3.6 times more likely to keep separate bank accounts than married couples are."

Family structure and net worth

Married households are ahead here too:

A family's net worth is the value of all its assets minus any liabilities it holds. Married households tend to have the largest net worth, but the difference is due to more than the mere presence of two adults in the household. Data on asset formation show very significant differences in the economic strength of the married family compared to divorced, cohabiting, and always-single parent families.

The net worth advantage of marriage, which includes year to year net worth growth, is particularly strong for black couples in the US, the report notes, and even holds in much poorer countries such as Guatemala. Married couple households are the most likely of all to own a house and to have other investment and savings plans.

By contrast, cohabiters have significantly less wealth:

Poverty, welfare and child well-being

Using US Census Bureau poverty thresholds, Fagan and colleagues find that, "Poverty is principally the problem of non-intact family structures." And although single and divorced mothers feature most prominently in poverty and welfare statistics, cohabiting households also tend to be poorer.

Poverty rates are significantly higher among cohabiting families than among married families. Analysis of the 1997 and 1999 waves of the National Survey of America's Families showed that the poverty rates of cohabiting parents were 7.5-15.4 percentage points higher than those of married, two-parent families. The rate of poverty was 12.7-23.8 percent higher for single-parent families with another adult present than for married-parent families.

So, what about the children? Many studies have shown that kids are not "all right" emotionally or behaviourally in just any family structure, and the same is true for their economic mobility and well-being. Once again the data shows that children in married families fare far better than their counterparts in other familial structures. "Marriage among the very poor helps them leave poverty and keep their children from entering the 'low income state'…" In addition these children are more likely to be upwardly mobile.

With cohabiting families the trend seems to be the reverse. The report notes an increasing "likelihood that a child in a 'cohabiting intact' family will be living in poverty." And, "Nearly 25 per cent of children in cohabiting households receive public assistance (compared to less than 5 per cent of children in married-parent households)." Mothers who cohabit after a divorce tend to reduce poverty for their children, but this does not always happen: 29 per cent of mothers who cohabit after a divorce remain impoverished.

On the subject of cohabitation the report concludes:

Cohabiting relationships are frequently unstable and of short duration. Cohabitation produces weaker economic outcomes than marriage, according to all economic metrics examined in this paper. Cohabiting men have less stable employment histories than married men, and cohabiting couples earn less and are less likely to pool their incomes than married households. They also have low net worth and low net worth growth, are more likely to be poor, and create a less stable environment for children, compared to married households.

While it can be argued that economic changes have made it much more difficult for people at the lower end of the economic scale to marry -- because of the loss of the traditional male jobs -- it is also possible, if not probable, that the economy would not have left half as many people behind had marriage not been sidelined by the sexual revolution and all that went with it: recreational sex, the possibility of single parenthood on welfare, easy divorce, and the imperative that women earn their own income even when they become mothers.

It is difficult to argue with the conclusion of the Marriage and Economic Well-Being report:

Long-term income, wealth and hence poverty are largely a matter of choice in America today -- the choice of marriage and pathways to it... Choice about marriage is mainly a choice about how to handle our sexual capacities and our sexual relationships...

There is an intimate relationship between our income and wealth and our sexual culture. They rise or fall together, and thus, strange though it may seem, there is a significant connection between our sexual culture and our national economic strengths and weaknesses.


Top