The perils of the double income

This is from an article by Bettina Arndt in Australia's The Age: "Beware the two-income trap."

Having mum and dad both in the workforce makes a family more economically secure. Right? Well, no. Not according to a recent book by Harvard law professor and bankruptcy expert Elizabeth Warren. Her startling proposal is that two-income families may be more vulnerable to financial disaster because they lack the safety net provided by a non-working mum in a single-earner family.

In the traditional family, if dad lost his job or fell sick, mum was available to enter the workforce and do her bit to tide things over, argue Warren and co-author Amelia Tyagi in The Two Income Trap - Why Middle-Class Mothers and Fathers Are Going Broke (Basic Books). Plus the wife played a critical economic role as back-up carer, to look after a sick child or elderly relative.

But the two-income family has no such safety net. "With two adults in the workforce, the dual-income family has double the odds that someone could get laid off, downsized or otherwise left without a pay check," write Warren and Tyagi, producing evidence that the two-income family in the US is more likely to file for bankruptcy than the traditional family.

Today's American two-income family earns 75 per cent more money than its single-income counterpart of a generation ago but actually has less discretionary income once fixed monthly bills are paid, say Warren and Tyagi. One reason is the rise in the housing market, with the two-income family driving up the price of houses by competing for property in areas with good schools. "When millions of mothers entered the workforce, they ratcheted up the price of a middle-class life for everyone, including families who wanted to keep Mom at home."

This would seem to place virtually everyone in bad straits. Single-income families have a tough time making it in a housing market where double-income families have pushed up the cost of living. (Toronto comes to mind here, but even in Hamilton it's not easy.) Yet double-income families are apparently at greater risk for bankruptcy. So where do we go from here?