For those working: why so much?

Original Reporting | By Greg Marx |

January 18, 2011 — The American economy has undergone a radical transformation over the last 40 years: reduced barriers to competition, a weakening of organized labor, and a retreat from attempts at broad-based regulation. Over the same period, another great change has occurred: the prevailing middle-class model, in which a family could be supported by one full-time income, has given way to one in which both parents work, even as they try to devote more time to their children.

The entry of mothers to the paid workforce stems from a welcome shift away from the gender norms of the postwar years. But for many families, maintaining a middle-class lifestyle means both parents have to work. In 2003, Elizabeth Warren, then a law professor at Harvard, and her daughter and co-author Amelia Warren Tyagi, gave a name to the situation faced by these families: “the two-income trap.”

“A rigidly free-market perspective is badly needed,” Reihan Salam said, “and I don’t think we have enough of it.”

As women have entered the workforce, they argued, family earnings have risen, even as men’s incomes have largely stagnated. And while the bounty of consumer goods has grown, a more open marketplace means that its cost has fallen. But dramatic increases in other expenses — from housing to health care to education to child care — have eaten up that second income. The result, Warren told a Senate committee in 2007, is that “after they pay their basic expenses, today’s two-income family has less cash left over than their one-income parents had a generation ago” — even though they have sacrificed the safety net of a stay-at-home parent.

Survey data support the idea that parents are working more than they would prefer. In 2007, the Pew Research Center found, 60 percent of working mothers said they would prefer to work part-time; only 24 percent actually did. The same year, 48 percent of working mothers told a Wall Street Journal/NBC poll they would prefer to be at home raising their children, but their families needed the income; in the same poll, 43 percent of working women who were not primary wage earners said their income was needed not to buy nicer things for their family, but to “make ends meet.” And it’s not only moms: a 2000 survey of married dads found that barely half wanted to work full-time, but 9 in 10 were doing so. The greater competitive pressures of the modern economy, it seems, are not only being felt by businesses.

The changes in the rules governing the economy that accompanied this transition occurred under both political parties, and their relationship to the shifting circumstances of American families is disputed. But the driving force behind those changes is a belief in the power of the free market to deliver better outcomes — a belief that traditionally is professed most fervently by conservatives. So Remapping Debate recently spoke with a range of right-leaning policy thinkers — a group that included economic libertarians, social conservatives, journalists, and social scientists — to ask about the economic pressures facing families. Did they agree that the two-income trap was real? If so, what had caused it? And what, if anything, could be done about it? Here’s what they had to say.


“You just have to be somewhat entrepreneurial”

Call up one of the leading free-market outfits to ask about the shifting landscape for families, and you’re likely to learn that no one on staff studies that topic. But if someone can be found to field questions on the subject, he or she might say that yes, things have changed — but really, they’re not so bad.

Nita Ghei, the manager of editorial services at the libertarian think tank the Cato Institute, agreed that families are in some ways more strapped today. In affluent coastal areas, professional couples face rising education costs on many fronts, including paying off their own student loans and saving for their children’s college. And in heartland towns, there had been some loss of security: after all, there was no longer a factory job waiting after high school to provide solid earnings through middle age.

But she rejected the idea that there is any tension between a business’s interests in seeking profit in a more competitive marketplace, and a working parent’s interest in earnings security, or in flexibility to allow them to balance work and home.

“Competition runs both ways,” Ghei said. “Workers can walk away — it’s a much more mobile society.” She added, “The power distribution is actually is a lot more even now than it used to be…You just have to be somewhat entrepreneurial.”

“After they pay their basic expenses, today’s two-income family has less cash left over than their one-income parents had a generation ago,” said Elizabeth Warren in 2007 Senate committee testimony, even though that family has sacrificed the safety net of a stay-at-home parent.

That sounded like a strategy that Ghei might have developed or adopted while contemplating the circumstances of the upper-middle-class, degree-holding parents whom she had begun the conversation by discussing. Whether the strategy would work or not for those families, what about service-sector employees, who often face not just lower wages but less flexibility — for example, the Wal-Mart workers who complained in 2006 that innovations in the company’s labor practices required them to be available around the clock, which was especially hard for parents? Those practices sounded unfair, Ghei said, especially if they weren’t initially disclosed to employees — but it wasn’t the government’s place to intervene in the private sector.

Nor was it the government’s role to do much of anything else. While Ghei pointed to higher education costs as a source of economic stress, with the federal deficit increasing and state budgets strapped, “providing more aid just can’t be an option,” she said. “The gravy train has to stop somewhere.” (Her Cato colleagues have argued that student aid has done more to drive up tuition and attract unprepared students than make college more accessible to students with the skills to succeed.) And while she said an array of policies may be inducing mothers to return to the workforce who otherwise wouldn’t — and clearing away those “distortions” might provide a truer picture of families’ actual preferences — she was skeptical about the prospect of public support for stay-at-home parents. “I would be really wary of adding more complications to the system,” she said.

Deborah Simpson, another working mom in the free-market advocacy world — she is the managing vice president of the libertarian law firm Institute for Justice — was, if anything, more upbeat. Most families need two incomes today, she agreed — though, she said, for many families having the second parent work part-time is enough. But the marketplace had responded by creating a range of jobs that would allow them also to be engaged parents: everything from telecommuting positions for professionals to at-homes sales or Internet research jobs to “entrepreneurial” opportunities like selling handmade jewelry online.

Gains in technology had made this adjustment possible, Simpson said, but so had shifts in the business environment. “Deregulation is a plus for the employee,” she asserted, because it gave employers more freedom and flexibility, and “generally speaking, the employer wants to make the employee happy.”

Simpson acknowledged that she had less knowledge about circumstances farther down the income ladder. But, she said, “I would think that [that analysis] would hold.” And asked whether there was potential, in a more innovation- and competition-oriented business environment, for tension between an employer’s goals and a working parent’s interests in security and stability, she said, “I don’t see that as a problem, and I don’t see a group of people who would be a victim of that.”

As for why a second income is necessary, Simpson had a simple answer: middle-class families are paying more to get more. “People want to have a higher standard of living, and it costs a lot more to have that standard,” she said. “Would it be better if cost of living were less? Yes, but I don’t think you can do that through creating a government system. I think what you do is, you let the market work.”

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