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For Richer, for Poorer: How Family Structures Economic Success in America

18 Nov 2014
A new AEI-IFS Study offers data to support claims that growing up with both parents leads to greater wealth, and makes policy recommendations to address the rising income inequality that the study relates to “the retreat from marriage.”

Executive Summary

The standard portrayals of economic life for ordinary Americans and their families paint a picture of stagnancy, even decline, amidst rising income inequality or joblessness. But rarely does the public conversation about the changing economic fortunes of Americans and their families look at questions of family structure. This is an important oversight because, as this report shows, changes in family formation and stability are central to the changing economic landscape of American families, to the declining economic status of men, and to worries about the health of the American dream.

This study documents five key findings about the relationships between family patterns and economic well-being in America.

  1. The retreat from marriage—a retreat that has been concentrated among lower-income Americans—plays a key role in the changing economic fortunes of American family life. We estimate that the growth in median income of families with children would be 44 percent higher if the United States enjoyed 1980 levels of married parenthood today. Further, at least 32 percent of the growth in family-income inequality since 1979 among families with children and 37 percent of the decline in men’s employment rates during that time can be linked to the decreasing number of Americans who form and maintain stable, married families.
  2. Growing up with both parents (in an intact family) is strongly associated with more education, work, and income among today’s young men and women. Young men and women from intact families enjoy an annual “intact-family premium” that amounts to $6,500 and $4,700, respectively, over the incomes of their peers from single-parent families.
  3. Men obtain a substantial “marriage premium” and women bear no marriage penalty in their individual incomes, and both men and women enjoy substantially higher family incomes, compared to peers with otherwise similar characteristics. For instance, men enjoy a marriage premium of at least $15,900 per year in their individual income compared to their single peers.
  4. These two trends reinforce each other. Growing up with both parents increases your odds of becoming highly educated, which in turn leads to higher odds of being married as an adult. Both the added education and marriage result in higher income levels. Indeed, men and women who were raised with both parents present and then go on to marry enjoy an especially high income as adults. Men and women who are currently married and were raised in an intact family enjoy an annual “family premium” in their household income that exceeds that of their unmarried peers who were raised in nonintact families by at least $42,000.
  5. The advantages of growing up in an intact family and being married extend across the population. They apply about as much to blacks and Hispanics as they do to whites. For instance, black men enjoy a marriage premium of at least $12,500 in their individual income compared to their single peers. The advantages also apply, for the most part, to men and women who are less educated. For instance, men with a high-school degree or less enjoy a marriage premium of at least $17,000 compared to their single peers.

Given the economic importance of strong and stable families, policy makers, business executives and owners, and civic leaders should experiment with a range of public and private policies to strengthen and stabilize marriage and family life in the United States. Such efforts should focus on poor and working-class Americans, who have been most affected by the nation’s retreat from marriage. Specifically:

  1. Public policy should “do no harm” when it comes to marriage. Accordingly, policymakers should eliminate or reduce marriage penalties embedded in many of the nation’s tax and transfer policies designed to serve lower-income Americans and their families.
  2. Federal and state policy should strengthen the economic foundations of middle- and lower-income family life in three ways: (a) increase the child credit to $3,000 and extend it to both income and payroll taxes; (b) expand the maximum earned income tax credit for single, childless adults to $1,000, increasing their marriageability; and (c) expand and improve vocational education and apprenticeship programs that would strengthen the job prospects of less-educated young adults.
  3. Civic institutions—joined by a range of private and public partners, from businesses to state governments to public schools—should launch a national campaign around a “success sequence” that would encourage young adults to sequence schooling, work, marriage, and then parenthood. This campaign would stress the ways children are more likely to flourish when they are born to married parents with a secure economic foundation.

For Richer, For Poorer

Family Routes to Economic Success in America

In a major address in last year, President Barack Obama called the “defining challenge of our time” the “growing inequality and lack of upward mobility that has jeopardized middle-class America’s basic bargain—that if you work hard, you have a chance to get ahead.”1 Obama is only the most prominent progressive to call attention to the increasingly unequal, and stagnant, character of much of the American economy. The Washington Center for Equitable Growth, the Economic Policy Institute, economists Alan Krueger and Lawrence Mishel, and many others have identified growing economic inequality and wage stagnation as major issues confronting middle- and lower-income Americans and their families.

From conservatives, attention has focused not only on wage stagnation among middle- and lower-income families but also on the declining share of men in the labor force, especially less-educated men. This year, speaking at the American Enterprise Institute, Congressman Paul Ryan expressed concern about “very low labor force participation rates” among childless adults in their early 20s, adding “these are people who are in the prime of their lives that need to get into the workforce.”

His perspective echoes the work of scholars like Nicholas Eberstadt and Charles Murray, who have highlighted the growing ranks of men without a college degree who do not have a job as what Eberstadt calls an “American flight from work.”

The standard portrayals of economic life for ordinary Americans and their families paint a picture of stagnancy, even decline, amidst rising income inequality or joblessness. Progressives tend to apportion blame for this state of affairs to economic shifts—for example, the decline of stable, well-paying manufacturing jobs and the rise of a winner-take-all economy—whereas conservatives are more likely to finger poorly designed public policies—such as Social Security disability benefits—that undercut work.

But how well do these narratives convey the whole story? Rarely does the public conversation about the changing economic fortunes of Americans and their families touch directly on questions of family structure. This is an important oversight, because changes in family formation and stability are central to the changing economic landscape of American families, the declining economic status of men, and worries about the health of the American dream.The interactions between the economy and patterns of family life are admittedly complex. Some see the causal chain connecting a bad economy (at least, for less-educated workers) to declines in stable married, two-parent families; to poverty and economic insecurity; and subsequently, to poor schooling, job, and family outcomes for children. From this perspective, the appropriate policy focus is on reducing poverty directly, through transfer programs, or indirectly, through enhanced job opportunities. An alternative scenario is that declines in the propensity to marry, along with normative shifts in the acceptability of nonmarital births and fatherlessness, have led to major declines in stable two-parent families, which in turn have exacerbated problems of poverty, increased inequality, and weakened opportunities for economic mobility. From this perspective, approaches that encourage stable marriages and discourage nonmarital births can be effective in any economy and can lead to new pathways that raise incomes and upward mobility. We find both sets of causal and policy claims compelling.

In this report, we describe the role that family structure has played and is playing in the shifting contours of American economic life, both for the nation as a whole and for individual women and men and their families. We explore how the nation’s retreat from marriage is linked to growing family inequality, male joblessness, and economic stagnation, especially among the ranks of less-educated Americans. We find that men and women who hail from an intact family (where both parents are present) are more likely to flourish in the contemporary workplace and to enjoy an “intact-family premium.” Likewise, men who marry continue to obtain a “marriage premium” in their earnings. Finally, both men and women enjoy a “family premium” in midlife household income if they are raised in an intact family and go on to marry, compared to their unmarried peers from nonintact families who otherwise share a similar background and personal characteristics.

Notwithstanding this report’s extensive data analysis, we do not claim that the associations we find among family structure while growing up, marriage as an adult, and economic outcomes are definitively causal. The causal effect of marriage touches on many possible empirical questions, many of which are beyond the scope of this report. Some relate to the causes of higher or lower marriage rates. What happens to economic well-being when, for example, additional marriages are stimulated by financial incentives, attitudes and orientations toward marriage, improved matching, added earnings of men, increased parental responsibility, or changes in laws concerning divorce? Others relate to individual characteristics. Even after netting out the effects of many observed differences among individuals, both marriage and economic well-being may be the result of some third factor, such as unobserved differences in personality or character, like the capacity to delay gratification. While some of the analyses herein control for unobserved differences among people, they do not capture changes in a person’s overall orientation—say, a desire to settle down—that may lead to marriage and steadier employment. Moreover, most of the evidence in this report is descriptive and does not derive from a causal model. For all these reasons, this report cannot definitively assert that adolescent family structure and adult marital status have a causal impact on individual and family economic well-being.

Furthermore, for some Americans, marriage can be a drag on their family’s economic well-being, particularly in cases where a partner is consistently unemployed or when a marriage ends in divorce. This means that marriage and an intact family life are not always associated with better economic fortunes for women, men, children, and families in the United States.

Nevertheless, the evidence is widespread and consistent enough to suggest strong, causal positive roles for being raised in an intact family and for current marriage on a range of important economic outcomes for the average American. The rest of this report will detail these findings, and is structured as follows:

  • Part 1 explores how trends in family incomes, family income inequality, and male employment diverge between those married and not married.
  • Part 2 looks at the impact of childhood family structure on men’s and women’s educational attainment, family formation, work, and income.
  • Part 3 examines the links between adult family structure and men’s and women’s work and income.
  • Part 4 explores the cumulative impact of childhood and adult family structure on men’s and women’s individual and family incomes.
  • Part 5 considers a set of policy recommendations for strengthening the economic, educational, and cultural foundations of middle- and lower-income families.

Read the article on American Enterprise Institute site
Download the PDF from AEI Website 

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