9.9.03

MORE ON THAT MIDDLE CLASS SQUEEZE. Common Sense and Wonder offer some Census information about the poverty rate. Outside the Beltway finds some excerpts from The Two Income Trap (you bet I'm going to call my own number) and some comments. Going to the excerpts, a couple of paragraphs stand out. First, there's "Bankruptcy has become deeply entrenched in American life. This year, more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college. And, in an era when traditionalists decry the demise of the institution of marriage, Americans will file more petitions for bankruptcy than for divorce. Heart attacks. Cancer. College graduations. Divorce. These are markers in the lives of nearly every American family. And yet, we will soon have more friends and coworkers who have gone through bankruptcy than any one of these other life events." Looks like something for the Index of Leading Cultural Indicators.

The paragraphs I really liked, however, were these. "By the usual logic, sending a second parent into the workforce should make a family more financially secure, not less. But this reasoning ignores an important fact of two-income life. When mothers joined the workforce, the family gave up something of considerable (although unrecognized) economic value: an extra skilled and dedicated adult, available to pitch in to help save the family during times of emergency. When Junior got sick, the stay-at-home mother was there to care for him full-time, without the need to hire a nurse. If Dad was laid off, Mom could enter the workforce, bringing in a new income until Dad found another job. And if the couple divorced, the mother who had not been working outside the home could get a job and add new income to support her children. The stay-at-home mother gave her family a safety net, an all-purpose insurance policy against disaster."

You mean sex (er, gender) roles might be efficient? And farming out the childcare isn't just one more reason for Mother Jones to get angry at rich women?

"If two-income families had saved the second paycheck, they would have built a different kind of safety net — the kind that comes from having plenty of money in the bank. But families didn’t save that money. Even as millions of mothers marched into the workforce, savings declined, and not, as we will show, because families were frittering away their paychecks on toys for themselves or their children. Instead, families were swept up in a bidding war, competing furiously with one another for their most important possession: a house in a decent school district. As confidence in the school system crumbled, the bidding war for family housing intensified, and parents soon found themselves bidding up the price for other opportunities for their kids, such as a slot in a decent preschool or admission to a good college. Mom’s extra income fit in perfectly, coming at just the right time to give each family extra ammunition to compete in the bidding wars — and to drive the prices even higher for the things they all wanted.

Boy, when that Say Aggregation Principle bites you, it bites hard, doesn't it. And note the way in which school choice with government schools works. You do have school choice, provided you're willing to pay the premium for the house in the better school district. And the right preschool? No wonder the younger kids have no imagination ... they've not had the chance to develop one.

"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."

It is always instructive to watch laymen discover that there are laws of conservation in economics. Alas, the authors of the book would rather look for a miracle: "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 not, women now need those paychecks to pay the mortgage and the health insurance bills. Their incomes are committed, and calling for them to abandon those financial commitments would mean forcing them to give up their families’ spot in the middle class. No, the real solution lies elsewhere — in addressing the reasons behind the bidding war and helping all families, both dual- and single-income, to get some relief." The squeeze -- if indeed there is one -- did not happen instantaneously. It will not go away instantaneously, either. Evolution is slow.

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