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October 29, 2014

Is marriage a solution to income inequality?

October 29, 2014

A new report sponsored by the American Enterprise Institute and the Institute for Family Studies provides evidence that marriage may be a solution to income inequality.

As the figure below (taken from the report) shows, married and unmarried households have had growing inequality in incomes. Median family income grew substantially between 1979 and 2012 for married households. During the same period, median incomes were essentially stagnant for unmarried household heads. Overall (married and unmarried together) household incomes also remained mostly stagnant, because the share of families with children in which the parents were married declined from 78 percent to 66 percent. AEI

What’s more, not only do married men have higher incomes than their unmarried counterparts, but kids growing up in two-parent households have better economic success, according to the report.

The authors—Urban Institute fellow Robert I. Lerman and AEI visiting scholar W. Bradford Wilcox—demonstrate a strong correlation between increasing family income inequality and decline in marriage. They find that, had 1979 rates of marriage persisted, family income inequality would have grown by only about two-thirds as much as it did.

So what’s the right conclusion to draw from these numbers? Does marriage improve economic outcomes and reduce inequality? Or does the arrow of causality point the other way?

Causation is complicated

There are several ways marriage might cause better economic outcomes. From an obvious standpoint, households with two adults are likelier to have two incomes, improving well-being. Two-parent households will also have more person power to divide among parenting, household responsibilities, and paid work—this will likely improve kids’ development and school performance. There is also evidence to suggest that children who grow up in stable environments do better—and having congenial parents who live together with steady income suggests stability.

On the other hand, what if married people have more income for reasons other than marriage? For example, married parents tend also to be more educated parents, so maybe parental education provides the key advantage for children. Or maybe married people have higher incomes because their bigger salaries make them more desirable marriage prospects.

Statisticians call such effects selection bias: marriage seems to cause higher incomes because higher income people are more likely to marry. Selection bias can get really tricky when one considers that some of the things that predict both marriage and high incomes can be hard to measure, like motivation, interpersonal skills, and confidence.

In this alternate scenario, marriage alone would not alleviate inequality. So how do you tell which scenario is the right one?

Follow the same people over time

Because the authors use data that follow the same individuals over many years, they employed a technique called fixed effects. That method looks at how people’s own incomes change after marriage, compared with comparable people who don’t marry. That is, it “controls” for people’s innate qualities that are unmeasurable but also unlikely to change over time.

Using fixed effects, the authors find significant evidence that men greatly boost their income after marriage—a “marriage premium”—while women’s incomes go neither up nor down. At the same time, marriage is associated with much better social and economic outcomes for kids.

But fixed effects, while powerful, can’t untangle all elements of cause and effect. For example, what if the promise of future income makes some people a more desirable marriage prospect? What if there were outside influences that changed people’s perspectives both toward harder work and marriage simultaneously? That is, what if people decide to “settle down” both for their economic futures and into marriage?

Policy implications

Lerman and Wilcox have uncovered a strong relationship between marriage and positive economic outcomes, and ultimately it’s likely that all of these scenarios are at play simultaneously. As people marry they probably tend to buckle down, make smart decisions, and invest in themselves and their families.

But people who are already economically and socially successful are probably likelier to find a desirable marriage partner and tie the knot. At the same time, outside influences like recessions, increasing acceptance of women working, and cultural trends toward later marriage likely affect individuals’ perspectives during their lives.

So, can public policy work both to facilitate marriage for those who wish to marry, while improving low-income workers’ economic positions both to help them now and make them better marriage prospects later? Lerman and Wilcox propose:

  • Scouring the tax code to eliminate any “marriage” penalties
  • Expand tax credits to low-income workers to stabilize income and improve marriageability
  • Expand opportunities for apprenticeships and other lucrative employment, with the understanding that not all people will complete college
  • Encourage young people to invest in their economic stability before marriage and parenting

Whether or not marriage is the magic mechanism, all of those policies would help improve life chances and lower economic inequality.

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As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.

Comments

I for one can say, marriage and child rearing have cost me roughly $300,000 over the last 8 years.
I believe selection bias plays a huge role. While it is true, that marriage improved the lives of 5-8 people in my household. It also has made my quality of life and productivity much worse.

My choice of marriage partners was poor. I married someone who did not speak English, was not college educated, and was unable or unwilling to work in the US while employers took advantage of the US economy to freeze salaries for 8 years.

I married because I believed I had the income to support a family. I was so very wrong.....

Thom,
Relevant to our earlier discussion-

It is difficult untangling variable that cause reduction/elimination of income inequality, but marriage is a key condition associated with positive economic and child well-being outcomes. JL