A while ago, I read Elizabeth Warren's book about the American Middle Class.
The basic premise of the book is this:
Ever since 1970, the American middle class family has been outbidding itself in a frustratingly impossible attempt to increase their standing in life.
There are a number of factors she cites, but one of the main factors is the onset of the two income family.
I will discuss some of the basics of her book. I have returned it to my library. This means I might miss one or two things, but just consider that your motivation for going out and getting the book to read for yourself.
What has happened to the middle class family in the US?
We have systematically bid up the cost of living to the point where the typical two income family today is without a doubt more unstable than the typical single income family from the 60's and 70's.
Much of the bidding up comes as a result of women entering the workforce. Warren makes a compelling case using abundant data that when women entered the workforce, the extra money that was brought into the family ended up being used to try to buy some things that weren't available to them before.
Examples of this sort of bidding up of the middle class life include:
- Increased cost for mortgages as a result of "buying" a better public school for their children. This impact is increased by the deregulation in the banking industry that led to people needing less than 20% down to purchase a house. That simple fact led to an increase in the cost of homes overall, because it made it easier for families to get into a more expensive house.
- Increased transportation costs as a result of both moving to the suburbs and needing a second car for the second worker in the family. Typically, the single income family had one car. The suburbs hadn't materialized as a haven for people attempting to escape the urban core. This meant that prior to the suburban sprawl onset, workers were more likely to work closer to home.
- Increased costs for child care due to... well, I'm sure that's fairly obvious. If you weren't a two income family, you had very little need for childcare. Additionally, the academic preschool model had not entered into the mainstream.
There are certainly other things that have gone up in cost, but overall, she makes a point of arguing against the idea that people have overconsumed or have become 30k millionaires with the need to own products that are not actually in their price range.
She does this by demonstrating that discretionary spending has not moved all that much, and neither has the tax burden that these families are shouldering.
Families that fracture
She goes on to detail the dire predicament of both men and women when a marriage which includes children ends. The essential point that I took home was that if a family with a single income broke up, then the non-working parent would be able to find work, and remain stable. Typically, a family like this thirty years ago would have been more likely to be dividing up the assets between them and beginning a new life without much financial baggage.
However, now when a two income family goes splitsville, they are not likely to be dividing any assets. Instead, they are dividing debt between them. The house needs to be sold to pay for the debt, and there are few ways to get extra income into the single parent households. The woman is almost always at a disadvantage in these situations. Even now I'm almost certain that most financial stuff is carried out through the name of the man.
What about child support and deadbeat dads?
Warren is consistent in placing the blame where it belongs- deregulation and the increased access to easy credit for families.
She also makes a specific point about arguing for Fathers when it comes to issues of child support. She says that while it might seem like we have to squeeze whatever we can out of "deadbeat Dads," we sometimes need to understand that in order to make the children more likely to be successful in life, their Father has to also be able to provide for them. She discusses the wretched bankruptcy bill and how she turned First Lady Clinton into someone who would vote against the bankruptcy bill when it was brought during the Clinton Administration. She was able to get Hillary to convince Bill to veto that bill. She does go on to note that while she was able to earn her as a convert then, when the bill came up again for Senator Clinton, she ended up voting in favor of the bill, because Clinton was of the mind that her constituency now included the banks as well.
The upshot of the bankruptcy bill is that it harms families who divorce, because sometimes it's better for the individuals (she specifically discusses the Fathers paying child support) to be able to start over so that they will be able to provide for their children.
Unfortunately, she makes the sad note that as it was then with divorce, it still is now. The single best way to regain your financial footing after a divorce is to marry again.
so it goes.
Are there any solutions?
She does have some systemic solutions. One of them involves school vouchers. Her argument for school vouchers is that if parents do not need to move to buy up into a better school system, then they will not need to increase their housing costs by moving to a more expensive area. Personally, I don't buy it, because I think that would leave a lot of families without the educational or institutional resources to leave their kids in their local schools while other kids with families that could be good role models will leave.
She also makes a specific point about arguing against increasing childcare subsidies or outright paying for childcare. She sees that as an incentive to maintain the two income family status quo. She does address for a moment the idea that we need to determine if we as a society want to see Preschool to 12th grade public education. If that's the case, then we need to make that available for all. Unfortunately, in my opinion, if we do that, we will end up with a lot of preschools that are not schools, but are instead simply daycares. I don't have a problem with daycares, it's just that they aren't preschools, so we would have equity issues.
I included the above examples, because they seem to run counter to some of the liberal or progressive opinions.
She also is in favor of somehow returning to the mortgage rules that required more careful planning for families. These rules did not price families out of homes, but they also didn't make it so that beginning families would be able to work towards home ownership instead of renting.
What she doesn't have a lot of is individual solutions. She gives a few, but they seem to be fairly obvious solutions about decision making and financial planning.
If I had to give the one take home lesson from the book, I would say that it is the precarious position of the two income family.
The typical single income family from 30+ years ago is more stable than the dual income family of today.
If you have two incomes, and one fails for some reason, then you are left to make up a two income life from a single income. Whereas if you have a single income family, the loss of a job by the single earner can be made up by a combination of a new job for the other person in the relationship, and state benefits like unemployment.
It seems like you can read up to page 120 at the Google Books link.