The Two-Income Trap (14 page)

This situation would be tough enough for the two-income family if the working world had stayed the same over the past generation. But, as anyone who watches the nightly news or reads the newspapers knows, the world did not stay the same. In the past twenty-five years, the chances that a worker will be laid off, downsized, or restructured out of a paycheck have increased substantially. One team of researchers calculated that the odds that a worker would suffer an involuntary job loss have increased by 28 percent since the 1970s.
³⁵

Growing job insecurity has been hard on single-income families, who now face a 28 percent higher chance that the breadwinner will lose his job. But for today’s dual-income family, the numbers are doubly grim, as each spouse faces a higher likelihood of a job layoff. We estimate that in a single year, roughly 6.3 percent of dual-income
families—one out of every sixteen—will receive a pink slip.
³⁶
That means that a family today with both husband and wife in the workforce is approximately
two and a half times
more likely to face a job loss than a single-income family of a generation ago.

Source:
Analysis of data in Boisjoly, Duncan, and Smeeding.

FIGURE 4.2 How risk has grown: involuntary job loss

Layoffs aren’t the only way a family can lose a paycheck. Illness, accident, or disability can have the same effect. Once again, the dual-income family has doubled its risks. Two workers, two chances for a heart attack, a bad fall, or any other medical calamity that can leave a family without income.

This statistical analysis runs contrary to most families’ assessment of the risks they face. With two incomes, most parents believe that they have built in some self-insurance against layoffs or medical problems. But they would be wrong. Two-income families are
more
likely to file for bankruptcy than their one-income counterparts.
³⁷
Moreover, dual-income families who have filed for bankruptcy are also
more
likely to cite job loss or injury as the reason for their financial collapse.
³⁸
The risks add up: In 2001, more than one million families will file for bankruptcy in the wake of a job loss, business failure, disability, or other form of income interruption.
³⁹

There is a painful irony to this. The family that sends both workers into the workforce in order to, as other researchers have claimed, “buffer them[selves] against the terrible wrenches of a changing economy”
⁴⁰
have just made themselves
more
vulnerable to those very wrenches. Twice as likely, as a matter of fact.

What about the other reasons for bankruptcy, such as family breakup and huge medical bills? At first glance, those problems don’t appear to have anything to do with the Two-Income Trap. But those risks went up too, which proved to be very, very bad timing for the middle-class family that had let go of its safety net.

Consider medical bills. The ranks of the uninsured are swelling, and the problem has seeped into the middle class. In 2001, 1.4 million Americans lost their health insurance. Of the newly uninsured, 800,000 earned more than $75,000.
⁴¹
Experts calculate that an individual is now 49 percent more likely to be without health insurance than a generation ago.
⁴²
Medical costs are escalating, and—surprise, surprise—a growing number of families are filing for bankruptcy in the wake of a catastrophic medical bill. Over the past twenty years, the number of families declaring bankruptcy in the wake of a serious illness has multiplied more than twentyfold, or
2,000 percent
.
⁴³

Demographics also pinched the family, as the number of Americans aged 85 and older (those most likely to need daily assistance) grew at a rate more than
six times
faster than that of the under-65 population.
⁴⁴
A declining birth rate and a higher divorce rate compounded the problem. Today’s elderly have fewer children to share the burden, and more are alone after a divorce. As a result, families with minor children are now almost twice as likely to be providing assistance to elderly parents than receiving it.
⁴⁵

At the same time, hospitals and insurance companies conspired to cut costs by dismissing patients “quicker and sicker.” Today, one in three individuals require at-home care after being discharged from the
hospital. That means that roughly 12 million families must step in to take care of a sick relative every year.
⁴⁶
If all the adults in the family are already committed to the workplace, well, that’s just too bad. Once again, the bankruptcy statistics confirm the story: Dual-earner couples are nearly twice as likely as single-breadwinner families to file for bankruptcy because of work lost as a result of an illness in the family.
⁴⁷

Divorce is another calamity that hits today’s two-income families with greater frequency. Pretty much everyone knows that newly-weds now face a high chance of splitting up (although the risk is slightly less than the 50/50 number that circulates as conventional wisdom).
⁴⁸
But there is a wrinkle to the statistics that hasn’t made the news reports: The Two-Income Trap has wormed its way into the sanctity of marriage.

Many commentators have held out the hope that the divorce explosion will prove temporary and that marriages may actually become more stable as the sexes stride toward equality.
She Works/He Works
offers this bit of optimism:

This theory
sounds
good, and we wish we could share in the hope-fulness.

Unfortunately, the data show otherwise. During the 1970s, a single-earner couple had about the same chances of splitting up as a dual-income couple. By the 1990s, however, a working wife was 40 percent more likely to divorce than her stay-at-home counterpart.
⁵⁰
No one really knows why the difference has emerged, although sociologists have offered a number of competing theories
.
Perhaps the combination
of working and bringing up the kids makes for a more stressful home life and leaves the two-earner couple with less time for each other. Or it may be that today’s stay-at-home wives embrace more traditional gender roles, which can make for a smoother relationship. Feminist scholars offer their own explanation, arguing that working wives see themselves as less dependent on their husbands for financial support and are therefore freer to leave a bad relationship.
⁵¹
Whatever the reason, the grim fact remains: The modern two-income family faces a greater likelihood of divorce than the one-income family from a generation ago.

There is yet another wrinkle to the family-breakup statistics that often escapes attention—the couples who never marry. A quick glance at the census figures tells the story: Over the past twenty-five years the number of children whose mothers have never married increased more than 400 percent.
⁵²
Many of these women are not really single, as the “never married” box on the census form might imply. Instead, they live for many years with a male partner. Since the 1970s the number of unmarried couples rearing children has increased
eightfold
. Today, cohabiting men and women represent more than 6 percent of all couples raising children, compared with less than 1 percent a generation ago.
⁵³
Although 6 percent may sound like a modest proportion, the odds that a child will live with a cohabiting parent add up over time. According to one estimate, approximately four in ten children will spend some time in a cohabiting family before they turn sixteen.
⁵⁴

What does this have to do with the rising divorce rate? Cohabiting relationships share many of the financial characteristics of marriage since there are two adults to share the expenses and responsibilities of running a single household. When the cohabiting couple breaks up, the consequences are much like those when a married couple divorces. Someone has to find separate housing, and any joint obligations, such as a lease or a mortgage they both signed, must be resolved. If both partners are the children’s biological parents,
custody decisions must be settled, and arrangements for visitation and child support must be worked out. But here’s the twist: The logistical consequences of splitting up may be the same, but the odds of breaking up are not. Cohabiting couples with children are more than twice as likely to split up as their married counterparts.
⁵⁵
Once again, the frailty of families with children comes to the fore. As these unmarried parents go their separate ways, the number of families left without a second adult to share the burden continues to multiply.

The list of ills—job loss, family breakup, and medical problems—is brutal, but it may also appear a bit eclectic and disjointed. After all, the divorce rate has nothing much to do with health insurance coverage; a corporate restructuring has no effect on the number of elderly folks who need help from their families.

When a family disaster makes the evening news, only one problem is in the spotlight at any given time. The
New York Times
carries a column about the terrible problems of the uninsured, or
60 Minutes
runs a story on divorce trends. Academics and other experts tend to reinforce this approach: Most of them have one highly focused area of expertise, and they usually write articles and hold forth on the talk shows about one specific category of calamity.

But families don’t experience risks in neatly segmented boxes. Whether they give it much thought or not, they all live under the shadow of multiple dangers. A woman could lose her job, she could be struck with a devastating illness, her marriage could turn sour,
and
her parents could grow too feeble to care for themselves—and it could all happen at the same time. There is no law requiring that these disasters be polite enough to wait until the previous one is resolved and the family has recovered before a new one wreaks additional havoc.

FIGURE 4.3 How risks have grown: a comparison of one-income families in the 1970s and two-income families in the 2000s

Moreover, one disaster often triggers another. A layoff may leave a family without health insurance, increasing the exposure to an exorbitant medical bill. Similarly, a job loss may actually lead to divorce; sociologists have shown that as finances deteriorate, couples tend to fight more, increasing the chances that they will split up.
⁵⁶
Among families in bankruptcy, nearly half report two of three problems—job loss, medical problems, or a family breakup—and about one in thirteen were hit by all three.
⁵⁷
We have no statistical proof of the old wives’ tale that bad things happen in threes, but there is ample evidence that disasters really do follow disasters.

If there is so little evidence that morals are declining, and so much evidence that slam-the-family risks are increasing, why does the Myth of the Immoral Debtor persist? Why don’t we collectively agree once and for all that in most cases financial misfortune is simply a matter of bad luck, and that declining morals have nothing to
do with the long lines at the bankruptcy courts? Perhaps the myth survives because it provides much-needed comfort in a dangerous world.

There is nothing glamorous or mysterious about the events that conspire to drive families into financial ruin. They are remarkably common, ordinary—and painful. For many people, reading about this litany of disasters will evoke memories that are disturbing, sometimes bitter, and sometimes very personal: That embarrassing morning when a friend was escorted out of the office during the latest round of company layoffs. The terrifying moment when the call came from the hospital emergency room. The sad day that Michelle told her husband that she wanted him to move out. For others, the list vibrates in harmony with the worries that keep them awake at night. What will happen if Grandma’s forgetfulness is actually Alzheimer’s? What if my husband’s company goes under?