The Two-Income Trap - Elizabeth Warren [5]
Because they filed for bankruptcy in 2001 in northern Texas, Ruth Ann and James were among the 2,220 families interviewed as part of a Harvard University-based research project. One of us (Elizabeth) has been studying families in financial trouble since graduating from law school in 1976. I am a professor at Harvard Law School, where I teach the commercial law curriculum, which means that I specialize in the laws about debts and money. The other of us (Amelia) has an MBA from Wharton and a businessperson’s view of economics. We are both working mothers, representing two generations of families. And we have something else in common: We are mother and daughter.
The idea behind this book took root in the spring of 1999, when Elizabeth was reviewing some preliminary data from an early phase of the Consumer Bankruptcy Project. I had begun to thumb through a stack of computer printouts to verify the accuracy of the sample. All the points were checking off fine, when my attention was suddenly drawn back to a single line on the page: the number of women in the sample. In 1981, about 69,000 women had filed for bankruptcy.2 The data on my printout indicated that by 1999 that figure had jumped to nearly 500,000—an unimaginable leap. I guessed that the data had been entered wrong—maybe someone had added a couple of zeroes somewhere—or, worse still, our research team had somehow pulled way too many women into their sample, inadvertently producing a huge distortion in the numbers. Frustrated, I tossed the printout in the trash, assuming we would be forced to throw out months of work.
The research team went back into the field for more data, initiating the 2001 Consumer Bankruptcy Project, which would evolve into the largest study ever conducted about families that had failed financially. I soon learned that there was something wrong, but it wasn’t the data sampling. In just twenty years, the number of women filing petitions for bankruptcy had, in reality, increased by 662 percent.3 As I soon discovered, divorced and single women weren’t the only ones in trouble; several hundred thousand married women filed for bankruptcy along with their husbands.
Our research eventually unearthed one stunning fact. The families in the worst financial trouble are not the usual suspects. They are not the very young, tempted by the freedom of their first credit cards. They are not the elderly, trapped by failing bodies and declining savings accounts. And they are not a random assortment of Americans who lack the self-control to keep their spending in check. Rather, the people who consistently rank in the worst financial trouble are united by one surprising characteristic. They are parents with children at home. Having a child is now the single best predictor that a woman will end up in financial collapse.
Consider a few facts. Our study showed that married couples with children are more than twice as likely to file for bankruptcy as their childless counterparts. A divorced woman raising a youngster is nearly three times more likely to file for bankruptcy than her single friend who never had children.4
Over the past generation, the signs of middle-class distress have continued to grow, in good times and in bad, in recession and in boom.5 If those trends persist, more than 5 million families with children will file for bankruptcy by the end of this decade. That would mean that across the country nearly one of every seven families with children would have declared itself flat broke, losers in the great American economic game.6
Bankruptcy has become deeply