The Two-Income Trap - Elizabeth Warren [44]
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.
Bad Timing
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