The Two-Income Trap - Elizabeth Warren [7]
The average two-income family earns far more today than did the single-breadwinner family of a generation ago. And yet, once they have paid the mortgage, the car payments, the taxes, the health insurance, and the day-care bills, today’s dual-income families have less discretionary income—and less money to put away for a rainy day—than the single-income family of a generation ago. And so the Two-Income Trap has been neatly sprung. Mothers now work two jobs, at home and at the office. And yet they have less cash on hand. Mom’s paycheck has been pumped directly into the basic costs of keeping the children in the middle class.
At the same time that millions of mothers went to work, the family needed the stay-at-home mom (or a costly replacement) more than ever. The number of frail elderly, most of whom must depend on family for daily care, spiraled upward. Hospitals began discharging patients “quicker and sicker,” expecting the family to pick up the task of nursing them back to health. With Mom in the workforce, parents were faced with a painful choice between paying for expensive care and taking time off work. At the same time, the divorce rate continued its upward climb. This situation was compounded by a leaner-and-meaner business climate that closed plants and laid off workers with alarming frequency. In this tougher world, millions of two-income families learned the price of living without a safety net.
Inevitably, the Two-Income Trap affected the one-income family too. When millions of mothers entered the workforce, they ratcheted up the price of a middle-class life for everyone, including families that wanted to keep Mom at home. A generation ago, a single breadwinner who worked diligently and spent carefully could assure his family a comfortable position in the middle class. But the frenzied bidding wars, fueled by families with two incomes, changed the game for single-income families as well, pushing them down the economic ladder. To keep Mom at home, the average single-income family must forfeit decent public schools and preschools, health insurance, and college degrees, leaving themselves and their children with a tenuous hold on their middle-class dreams.
What about single-parent families, the group that has no choice about getting by on one income? Not surprisingly, they are in even worse shape than their married counterparts. But the magnitude of the problem for single-mother families shocked us. If current trends persist, more than one of every six single mothers will go bankrupt by the end of the decade.13 The usual explanations for why these women are in trouble—“deadbeat dads” who don’t pay child support, discrimination in the workplace, and so forth—cannot account for the growing distress. Today’s middle-class single mothers have better legal protection, higher salaries, more child support, and more opportunities in the workplace than their divorced counterparts of a generation ago, yet they face a much greater likelihood of financial collapse. We estimate that over the past twenty years, the number of single mothers in bankruptcy has increased more than 600 percent.
So why are these women in so much trouble? We will show that changes in the family balance sheet before a couple divorces explain much about the vulnerability of today’s single mothers. Married parents are in trouble because they have spent every last penny and then some just to buy a middle-class life for their children. As a result, today’s newly divorced mother is already teetering over a financial abyss the day she signs her divorce papers. She has nothing in the bank, and the family’s fixed costs stretched the limits of two incomes, let alone one. She hasn’t a prayer of competing with double-income families to provide her children with what have come to be seen as the basic requirements of a middle-class upbringing.
Is the only solution for all the mothers to scurry pell-mell back to the hearth? It may sound like a tidy resolution, but it won’t work. Like it or