The Two-Income Trap - Elizabeth Warren [29]
To all those critics who are calling for selfish mothers to return home, we have to ask—are you kidding? Do the math. And for all the advocates of “downshifting,” we ask just how far down these families are supposed to shift.
We should point out that the expenses we have laid out are averages, and plenty of families manage to pay less (or more). But the alternatives families have pursued in an effort to make ends meet bear some scrutiny. Consider child care. Government statistics show that the average amount a family of four spends on after-school care is lower than the $4,350 we cited above. We calculated this figure from data on families who pay for child care, but the government “average” includes children who have a grandmother or an older sibling who watches them for free. That’s a great way for those lucky families to save some money, but it doesn’t do a bit of good for the typical family that has to rely on paid child care. For them, paying less money means getting less quality, such as an unlicensed neighbor who parks several children in front of her television or an overcrowded center with barely passable facilities.
There are other ways families could save money. Families could also cut their health insurance expenses. They could drop those costs to zero by following the model of millions of other middle-class families who simply live without health insurance and pray for the best. Or they could give up the house and move into an apartment in a marginal neighborhood. There are always options, but for families with children, these options signal that their middle-class lives are slipping away.
Even if they are able to trim around the edges, families are faced with a sobering truth: Every one of those expensive items we identified—mortgage, car payments, insurance, tuition—is a fixed cost. Families must pay them each and every month, through good times and bad times, no matter what. Unlike clothing or food, there is no way to cut back from one month to the next. Short of moving out of the house, withdrawing their daughter from preschool, or canceling the insurance policy altogether, Justin and Kimberly are stuck. Fully 75 percent of their income is earmarked for recurrent monthly expenses.
If all goes well, Justin and Kimberly may squeak by. They will even get a breather in another five years or so, when the children are old enough to be left alone after school. But the spending hiatus will last for just a few years, until the older child heads off to college. At that point, the family’s budget will be squeezed harder than ever as they search for an extra $9,000 a year to cover room, board, and tuition for the local state university. If they are lucky, they will have set something aside during the intervening years, and they’ll find a way to put their kids through college. And when they hit their mid- to late fifties, Justin and Kimberly might begin to think about putting something away for their retirement (about thirty years later than a financial planner would recommend).122
This projection assumes, of course, that nothing goes wrong. With 75 percent of income earmarked for fixed expenses, today’s family has no margin for error. There is no leeway to cut back if Justin’s hours are cut or if Kimberly gets laid off. There is no room in the budget if Kimberly needs to take a few months off work to care for Grandma, or if Justin hurts his back and can’t work. The modern American family is walking on a high wire without a net; they pray there won’t be any wind. If all goes well, they will make it across safely, their