Huge numbers of mothers entered the labor force over the last few decades. And the inflation-adjusted price of food, clothing, appliances, electronics etc. dropped sharply. So how come we don`t feel like we`ve got a lot more discretionary income than our single-income parents had?
A wise and readable new public policy book called The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke provides a simple answer:
We don`t have more discretionary income than our single-income parents had.
The mother and daughter team of Harvard Law professor Elizabeth Warren and former McKinsey consultant Amelia Warren Tyagi explain:
"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—and less money to put away for a rainy day—than the single-income family of a generation ago."
The two authors note:
"The brunt of the price increases has fallen on families with children. Data from the Federal Reserve show that the median home value for the average childless individual increased by 23 percent between 1983 and 1998 … (adjusted for inflation). For married couples with children, however, housing prices shot up 79 percent—more than three times faster."
For example, in August, the median price of a single-family home in pleasant, suburban Ventura County west of Los Angeles was $480,000.
Many economists shrug that this vast rise in prices increases Americans` net worth. "But that net worth isn`t worth anything," the two women point out, "unless a family plans to sell its home and live in a cave, because the next house the family buys would carry a similarly outrageous price tag."
Further, this housing cost rise transfers hundreds of billions of dollars of wealth from young families to aged empty-nesters—which probably isn`t the most sensible way to run a society if the welfare of the next generation is a high priority.
Warren and Tyagi made an impressive survey of 2200 families that declared bankruptcy. "Our study showed that married couples with children are more than twice as likely to file for bankruptcy as their childless counterparts," they write. This will come as no surprise to married couples with children. Even more striking: "This year more people will declare themselves bankrupt than will suffer a heart attack."
The biggest single cause of this growing financial stress on middle-income parents: the breakdown of much of the public education system. As Warren and Tyagi note,
"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… "
Warren and Tyagi report: "A study conducted in Fresno … found that, for similar homes, school quality was the single most important determinant of neighborhood prices …"
They go on to say:
"Bad schools impose indirect—but huge—costs on millions of middle-class families. In their desperate rush to save their children from failing schools, families are literally spending themselves into bankruptcy."
But what causes "bad schools"?
Here the authors play it coy. I can hardly blame them. Almost everybody uses "bad schools" as a euphemism. Who wants to become a pariah for telling the truth?
And for a book about the economics and law of personal bankruptcy, The Two-Income Trap is full of well-crafted zingers. I came away just plain liking these two ladies and their down-to-earth approach based on both formal data and the realities of daily life.
Still, euphemisms get in the way of solutions. So I`m going to rush in where W&T fear to tread. I`m going to explain exactly what Americans mean by the term "bad schools"—and the one crucial thing that can done be to slow their decline.
I`m a reductionist. I believe in simple explanations and simple solutions. The more conceptual moving parts an idea requires, the more likely it is to fail. This insight has been the basis of Western science going back to the English monk William of Ockham in the 14th Century.
If you want to read a highbrow vindication of reductionism, check out Edward O. Wilson`s Consilience: The Unity of Knowledge. Or just remember "KISS—Keep It Simple, Stupid."
What do homebuyers mean when they say "bad schools?" Occasionally, they do have highly specific criticisms: the principal might be disorganized, the teachers unmotivated, the textbooks incomprehensible. Overwhelmingly, though, Americans use the term "bad schools" to mean—"bad students."
That`s the single most important key to the "two-income trap." Parents spend huge amounts of money to keep their children away from dim and dangerous fellow students.
Maybe Americans are wrong, on factual or moral grounds, to do this. But it`s how they behave.
What, then, should we do?
W&T propose a statewide voucher system. You won`t have to live in an expensive municipality to send your kids to school there. You could live in South Central LA and send your kids to school in Beverly Hills!
The problem with this idea, of course, is that Beverly Hills schools would no longer be Beverly Hills schools if they were full of students from South Central.
If we eliminated the legal right of suburbs like Beverly Hills to protect their residents` children from bad, big city students, parents who could afford it would just flee to remote exurbs—to defend their children through sheer distance.
No, the fundamental problem with America`s schools today is the sheer number of bad students.
So let me propose one crass but extremely simple way to at least lessen the harm done in the future:
Let`s stop importing bad students from the rest of the world.
America has all the bad students it needs right now.
Let`s use the total Hispanic student population as a rough proxy for immigration to show how the government is worsening the two-income trap. Hispanic 12th graders averaged 3.8 grade levels behind whites in reading on the 2002 National Assessment of Educational Progress test. (Blacks were about another grade back.) And that`s even though the Hispanic figure is skewed upward by the higher Latino dropout rate—12th graders who aren`t in school don`t get tested.
The new SAT results paint a very similar picture. Over the last decade, white students` scores are up 26 points (that would be about 0.12 standard deviations) to 1063. Asians—who are, in effect, more carefully selected immigrants—are up an impressive 41 points to 1083. (These aren`t huge improvements, and most of the gains are in Math rather than Verbal, but they`re better than a sharp stick in the eye.)
Some Hispanics are improving too. The small Puerto Rican group, which did most of its immigrating to America one or two generations ago, is up 26 to 909. But that`s still only 85% of the white average.
And the trend among the two recent immigrant Hispanic groups is in the wrong direction. Mexican-Americans are down 5 to 905. "Other Hispanics" are down 2 to 921. (See page 11 of this 820k PDF. All these scores, whether from 1993 or 2003, use the easier scoring system introduced in 1995.)
The government is importing uneducated foreigners into America—and the middle class is driving itself to the brink of bankruptcy to keep its children away from them.
To the tally for America`s post-1965 Immigration Disaster, we can add the Bad School Squeeze—and the Great Middle Class Massacre.