Chapter 4 Marriage & the Family Economic Issues and Applications

1. Chapter 4 Marriage & the FamilyEconomic Issues and Applications • Race & family structure • the marriage premium • divorce

5. Race and family structure • % married has fallen for all women • especially Black women • especially 1970s • driven by “never married” more than divorce

6. % children in 2-parent families • drop is steeper for Black children • sharp drop in 1970s

7. Why? rational choice • gains to marriage have fallen and/or • quality of single life is better • must be true • especially for Black men and women • especially in 1970s

8. 3 possible explanations • marriage market • women’s wages • welfare system

9. marriage market • less-skilled men have fared worse in labor markets since 1970s • lower real wages • higher unemployment • affects Black men more • lower levels of education

10. result: • women less willing to marry men w/out job prospects • is it true? • explains some but not all of marriage decline

11. incarceration • 20% of Black men between 35-39 have been in prison • (3% white men) • more than have been to college

12. women’s wages • as women and men are more alike, • gains to specialization fall • gender earnings gap • smaller for Black women • less gains to specialization

13. wages for all women have risen, • increasing gains to being single, • decreasing supply of women to marriage • decreasing marriage • wage increase for Black women has been larger

14. The welfare system • AFDC • cash welfare benefits • (replaced by TANF in 1996) • mostly for low-income single-mother families • AFDC payments are very low • an attractive option only to those w/ limited job skills

15. impact of welfare • for low-skilled women • welfare may be more attractive than marriage OR work • incentive for out-of-wedlock children • incentive for divorce • Black women have lower education levels

16. evidence • not a lot • family trends increased in 1970s, • but real value of welfare benefits fell at same time • % Black children on welfare has been stable

17. Male Earnings & Marriage • we observe that married men earn more than unmarried men • 10-25% more when controlling for other differences (like age, education…) • “male marriage premium”

19. Why the premium? • employer discrimination • view married men more favorably • unlikely under competition

20. division of labor • marriage productivity effect • married men have wife to specialize in nonmarket work (better focus on market work)

21. selection bias • marriage selectivity effect • men who are married differ from those who are not • responsible, motivated, etc. • qualities that lead to marriage also lead to job success

22. marriage premium has fallen since 1970 • less division of labor in HH • decline in marriage overall • marriage/unmarried not as different

23. evidence about 2 effects • both seem to be important • controlling for selection bias makes premium smaller

24. evidence supports productivity effect • premium larger for men with wives that do not work • premium rises with length of marriage

25. Divorce • no-fault divorce • since 1970 • requires no finding of fault • 46 states • unilateral divorce • does not require explicit consent of both parties

28. with 1% annual divorce rate • 25% of marriages end w/in 30 years • with 2% annual divorce rate • 45% of marriages end w/in 30 years

29. Why? • gains to marriage fall • to point where better off single • when will this happen? • total benefits of marriage < total benefits of two as singles

30. for divorce to occur, • gain to marriage were once positive, but turn negative • happening more often than in the past

31. specialization • gain decline as men and women are more alike in productivity • marriage more vulnerable

32. rising wages for women • singlehood more attractive for women • increase % never married • increase divorce

33. probability of divorce • spouses reluctant to specialize • could be penalized if divorce occurs • married women stay in labor force

34. Economic consequence of divorce • women’s economic status falls by 20-25% • men’s economic status rises by 10% • no-fault, unilateral divorce • led to lower divorce settlements for women • property, alimony