Over the last two posts I have provided my opinions regarding both the decision to have a stay at home parent to raise your children, as well as the reasons why I think we see such a rise in the two income family household. In my third and final post about this topic, I would like to provide a few more statistics about the two income household, and in this case the decision to have a two income household as opposed to a single income household with a stay at home parent. I will also discuss some thoughts on how the return to a prevalence of single income family households can positively impact our economy and improve the solvency and financial security of the family.
Let's take a look at some of the numbers (some of which originate from Elizabeth Warren's book "The Two Income Trap").
1. The current unemployment rate is published at about 9%, or roughly 14 million Americans are out of or searching for work (this does not include those who have "given up" searching for work).
2. Per my prior post, there are 5 million two income households with children under 5.
3. There are, on average, 4 million births per year in the U.S.
4. In 1970, a family of four with a single income dedicated approximately 1.5 % of their disposable income toward short term revolving debt such as credit cards. Alternatively, today, the average two income household with two children has approximately 15% of the household income attributable to short term revolving debt.
5. In 1970, a family of four with a single income earned approximately $32,000 per year on an inflation adjusted basis, the two income household of four earns an average of $75,000 per year today.
6. In the 1970's, the personal savings rate was about 10% to 12%. What this means is that families, on average, we're saving 10% to 12% of their disposable incomes annually. As late as 2010, following a much deeper recession than experienced in the 1970's, the personal savings rate was at roughly 4.2% which was a huge improvement over the preceding decade, where the personal savings rate was less than one percent and more frequently than not, was at zero or even negative.
7. In 1970, approximately 50% of a households income was spent on "the big five"...housing, healthcare, automobiles, taxes and child care. Today, these same five categories are approximately 75% of a household's income.
8. A single income family in the 1970's had more disposable income, on an inflation adjusted basis, than a two income family today.
Numerous references indicate, and the data above show that two income households spend more, consume more, borrow more and save less than their single income household counterparts. One thing to keep in mind is that the increase in spending seen with two income households is not a function of the purchase of food, clothing or other basic necessities. In fact, on an inflation adjusted basis, food and clothing have actually remained relatively flat or in some cases have even decreased since the 1970's (thank you Super Walmart). The biggest hitters regarding the increased spending for two income households (other than housing, which I will address later, and healthcare, which has increased for everyone) are child care, taxes and transportation.
Let's first look at taxes. There is an interesting dynamic within a two income household as it relates to taxes. The dynamic is that first dollar of the second income is taxed after the last dollar of the first income. See, every dollar that we earn is not taxed at the same rate. The first dollar is generally taxed at a lower rate than the last dollar. So, the second income in a two income household is taxed after the last dollar of the first, meaning that, the second income begins being taxed at the tax rate of the last dollar of the first income, effectively "missing out", if you will, on the lower tax brackets for the first portion of the second earners income. The net effect of this, to return to my 1970's comparison to today, is that a two income household today pays about 25% higher taxes than a single earner household in the 1970's. And, just in case you are curious, the tax rates in the 1970's we're much higher than today. The bottom tax bracket in the 1970's was 14% versus 10% today, and the top tax bracket was 70%, versus 35% today.
Now let's look at child care...this is an easy one. With a stay at home parent, the need to shell out thousands annually for child care just goes away. In 2007, on average a family would spend about $7,000 per year for one child to be in day care.
Transportation is an interesting one, particularly for my wife and I given that we just, within the last year, bought a second car. Part of the reason for a second car was that our other vehicle was too small to handle our growing family. However, the other reason was the realization that as our children are getting older, we need to "divide and conquer" and frequently need to have different children in different places at the same time. The reason I mention this is merely to point out that I am not necessarily saying that a family with a stay at home parent can get by with only one car. I recognize and see the value of needing two cars, if one can afford it. However, the statistics about transportation are interesting, and speak very strongly to priorities and choices we, as consumers (and parents), make. Today, on an inflation adjusted basis, two income families spend 50% more annually on automobile expenses than in the 1970's. Some of this increase can be attributed to insurance and maintenance on two cars as opposed to one, but I would submit a larger portion is attributable to fuel consumption and vehicle choice. With both parents working, the "mandatory" fuel expense is arguably double that of a single income family. Additionally, with the decision and tendency to purchase bigger, fancier cars with "all the options", people are choosing to buy more expensive vehicles that translate to higher monthly payment obligations, despite the fact that, on average, the average cost of cars on an inflation adjusted basis has decreased from 1970 to today. Additionally, the move to larger homes (I will touch on this in the next paragraph) is effectively pushing people into suburbs of cities and has increased the average daily miles traveled, further exacerbating automobile expenses.
As far as housing is concerned, prior to the real estate bubble we experienced in the most recent recession, housing costs had grown exponentially since the 1970's on an inflation adjusted basis...in many cases well over 100%. Today, with housing prices having fallen substantially (put aside the fact that real estate prices are highly localized), on an inflation adjusted basis, housing is actually comparably priced to that of the late 1970's. However, prior to the recession, and despite the materially higher housing prices, what the price inflation does not take into account is the increase in square footage and amenities of the average house over the last 40 years. In 1970, the average size of a home was 1,400 square feet, compared to roughly 2,700 square feet in 2009. Thus, when comparing costs of housing on a per square foot basis, the cost of housing has actually remained quite flat. The main difference is that we are buying bigger homes, regardless of the need for the space, which are more expensive to insure, heat, cool, maintain etc...
So, where am I going with all of the above? What am I getting at? That can be boiled down to the following three conclusions...
1. The dual income household with children is an unsuccessful model to achieving financial security. Dual income households with children (and again, my focus here is specifically households with children under the age of 5), despite making significantly more money than single family households compared to a generation ago, spend more, consume more, borrow more and save far less (on average) than their single income household brethren. These same households also have a far higher likelihood of filing for bankruptcy than their single income household counterparts. The primary drivers for the increase in spending, and subsequently the reduction of financial stability, are a combination of the paradigm of consumption, which I addressed in an earlier blog post, as well as a function of increases in taxes, transportation and child care, all of which are a direct result of the decision to have a dual income household. Additionally, I would also submit that the two income household is less able to respond to the loss of the primary earner's income, since a single income family essentially keeps half it's earning potential "in reserve" for a "rainy day". A dual income family does not tend to have this option.
2. Dual income households with children are contributing negatively to unemployment. As previously discussed, there are 5 million dual income households with children under 5. That is 5 million people in the workforce, that were they to be stay at home parents, would free up, theoretically, 5 million jobs immediately, potentially reducing the current unemployment numbers from 14 million to as low as 9 million (this would put the effective unemployment rate at 6%). However, on an ongoing basis, there are 4 million births per year. If we assume that 50% of these births are to households with a stay at home parent, with at least one child under the age of 5 already, and 50% are to dual income households with older or no children, there would be an additional 2 million jobs per year that would be immediately available (and 2 million fewer people in the labor force) on a sustained basis, if that later 50% chose to have a stay at home parent. This would further reduce unemployment, all things being equal, to a sustained rate of 5%.
3. A return to the single income family household with children would have a net effect of raising the financial discipline of families with children, increasing, as opposed to decreasing the number of households actually achieving the financial security that dual income households are trying to achieve in vain.
Showing posts with label Stay at Home Parent. Show all posts
Showing posts with label Stay at Home Parent. Show all posts
Thursday, November 17, 2011
Thursday, October 27, 2011
The Decline of Stay At Home Parents...Part 2
Depending on your source of information, one can argue if we are seeing a decline or an increase in families choosing to have a stay at home parent. Certainly the recession has resulted in, most likely unintentionally, an increase in the number of stay at home parents. However, regardless of the direction the trends show, there are, in my estimation, at least 3 key reasons why we see so many families choosing to be two income households (at the expense of their kids, in my humble opinion), and to avoid the suspense, it is NOT because two incomes are needed to raise a family.
First and foremost, the United States has become a society fixated on consumption. We have become a society of immediate gratification, one that prioritizes wants often times at the expense of needs. Keeping up with the Jones' has become a way of life. This paradigm of consumption leads to the predisposition that both the Mom and the Dad must work in order to provide for themselves and their children. Case in point, let's look at an extreme case of how fixated, we as a society, are on consumption. Recently, the Heritage Foundation (a think tank focused on conservative public policy) released a series of statistics that profile the typical "poor" American household. In 2010, the poverty line was drawn at $22,314 (pre-tax and not including any governmental "handouts") for a family of four. Now, putting the definition of poor aside (they use the current definition utilized by the Social Security Administration which unfortunately, is a complete joke and is an insult to the truly poor Americans, but that is another story), here are some statistics about the average poor household in the United States:
1. The typical "poor" household in America has a car
2. 78% of "poor" households in America have air conditioning
3. 64% of "poor" households in America have cable or satellite TV .. most have two TVs, along with a DVD player and VCR
4. Most "poor" households in America with children have a gaming system such as an Xbox, PlayStation or Wii
5. 38% of "poor" households in America have a personal computer
6. Most "poor" households in America have a refrigerator, an oven and stove, and a microwave. They also have other household appliances such as a clothes washer, clothes dryer, ceiling fans, a cordless phone, and a coffee maker.
7. The typical "poor" American has more living space than the average European.
8. The typical "poor" American family is able to obtain medical care when needed.
9. The average "poor" household in America claims to have sufficient funds to meet their most basic needs.
Is this the image you have in your mind when thinking about the American poor household? It is certainly not the image I had, hence why I think it does a disservice to the real poor Americans. That aside, according to these statistics, the things that the "poorest" Americans are struggling to pay for are pure luxuries, the game systems, the cable bill, satellite t.v., electronics, etc..., not the necessities such as food, shelter and clothing. My point with all of this is that our desire as Americans to have the "luxuries" in life materially distort our perceptions of what is necessary to live and more importantly, to raise a family.
Second, somewhere along the way the role of stay at home parent has become viewed as less desirable, a "choice of last resort" or even subordinate to, and less rewarding than, a career outside the home. There seems to be a belief that a stay at home parent is not contributing to society to the same degree as a person who works outside the home. I think there are likely several reasons why this has become the case but certainly some of the roots can be traced back to the second wave of the feminist movement during the 1960's to 1980's. This part of the feminist movement was arguably kicked off by a book written by Betty Friedan called "The Feminine Mystique". In this book, writing as a housewife and mother, Friedan talks about the "problem with no name", the dissatisfaction of educated, middle class women in a post war era society that denied women the opportunity to develop their own identities and encouraged women to confine their roles to housewife and mother, forsaking all of their other aspirations. Regardless of the validity of Friedan's research in the book (I am not critiquing her work here and certainly not trying to engage in a discussion about gender and the expectations in society, etc...) it called into question the role of a stay at home parent, inviting the connotation of being a narrowly defined role that was unfulfilling, unrewarding and unsatisfactory.
Third, and tied strongly to my view that the decision to have a family and subsequently raise your own children are not mutually exclusive, we as a people have lost our sense of personal responsibility when it comes to the choices we make, when it comes to our actions. We have become a society with little to no personal accountability. We continually seek to place blame on everything but ourselves for our problems, choices and actions. This is a very disturbing trend given that we were a nation founded on the ideals of rugged individualism. We see this trend demonstrated in all facets of life, from people suing fast food chains for making their coffee too hot or for making their food too fattening. If you end up stealing something, it is a function of socioeconomic forces. Unplanned pregnancies and young mothers blame poor sex education or lack of access to contraceptives. Murders have been blamed on race, easy access to weapons, violent movies and video games, etc... If your child does not make the soccer team, or does poorly on a test, it is the coaches fault or the teachers fault, not that your child is just no earthly good at soccer or did not study hard enough for the test. To bring the issue closer to home, to be more relevant to the purpose of this post, a child must go to daycare because you cannot raise a family on one income due to socioeconomic factors, due to not being able to find a better job, due to the high cost of living where you live, etc... Rather than accepting personal responsibility and accountability for raising your own child, people blame outside forces as the reason for putting their children into daycare. Rather than choosing to move to a lower cost area, doing without certain luxuries, postponing the decision to have a family, etc... we as a society would rather just place blame as opposed to making the hard choices required to take responsibility for our actions and decisions. So, why is this the case? What can it be attributed to? In my opinion, it is tied to the lack of appreciation for our roots, for the origins of our country and for the origins of our ancestors, our grandparents and great grandparents. The younger generations currently living in this country, in the wealth of the post WWII era, have had it pretty easy (relatively speaking), we have had a lot "given" to us rather than having to struggle for it ourselves. Generally, we have not experienced the hardships that our grandparents suffered, and as such when faced with hardship, the tendancy is to blame something or someone else.
It is with these three factors in mind and the resulting decline in the prevalence of stay at home parents that I will discuss (in my next post) my theory regarding how this decline and the increase in two income households has harmed our country's economy and exacerbated our most recent recession.
First and foremost, the United States has become a society fixated on consumption. We have become a society of immediate gratification, one that prioritizes wants often times at the expense of needs. Keeping up with the Jones' has become a way of life. This paradigm of consumption leads to the predisposition that both the Mom and the Dad must work in order to provide for themselves and their children. Case in point, let's look at an extreme case of how fixated, we as a society, are on consumption. Recently, the Heritage Foundation (a think tank focused on conservative public policy) released a series of statistics that profile the typical "poor" American household. In 2010, the poverty line was drawn at $22,314 (pre-tax and not including any governmental "handouts") for a family of four. Now, putting the definition of poor aside (they use the current definition utilized by the Social Security Administration which unfortunately, is a complete joke and is an insult to the truly poor Americans, but that is another story), here are some statistics about the average poor household in the United States:
1. The typical "poor" household in America has a car
2. 78% of "poor" households in America have air conditioning
3. 64% of "poor" households in America have cable or satellite TV .. most have two TVs, along with a DVD player and VCR
4. Most "poor" households in America with children have a gaming system such as an Xbox, PlayStation or Wii
5. 38% of "poor" households in America have a personal computer
6. Most "poor" households in America have a refrigerator, an oven and stove, and a microwave. They also have other household appliances such as a clothes washer, clothes dryer, ceiling fans, a cordless phone, and a coffee maker.
7. The typical "poor" American has more living space than the average European.
8. The typical "poor" American family is able to obtain medical care when needed.
9. The average "poor" household in America claims to have sufficient funds to meet their most basic needs.
Is this the image you have in your mind when thinking about the American poor household? It is certainly not the image I had, hence why I think it does a disservice to the real poor Americans. That aside, according to these statistics, the things that the "poorest" Americans are struggling to pay for are pure luxuries, the game systems, the cable bill, satellite t.v., electronics, etc..., not the necessities such as food, shelter and clothing. My point with all of this is that our desire as Americans to have the "luxuries" in life materially distort our perceptions of what is necessary to live and more importantly, to raise a family.
Second, somewhere along the way the role of stay at home parent has become viewed as less desirable, a "choice of last resort" or even subordinate to, and less rewarding than, a career outside the home. There seems to be a belief that a stay at home parent is not contributing to society to the same degree as a person who works outside the home. I think there are likely several reasons why this has become the case but certainly some of the roots can be traced back to the second wave of the feminist movement during the 1960's to 1980's. This part of the feminist movement was arguably kicked off by a book written by Betty Friedan called "The Feminine Mystique". In this book, writing as a housewife and mother, Friedan talks about the "problem with no name", the dissatisfaction of educated, middle class women in a post war era society that denied women the opportunity to develop their own identities and encouraged women to confine their roles to housewife and mother, forsaking all of their other aspirations. Regardless of the validity of Friedan's research in the book (I am not critiquing her work here and certainly not trying to engage in a discussion about gender and the expectations in society, etc...) it called into question the role of a stay at home parent, inviting the connotation of being a narrowly defined role that was unfulfilling, unrewarding and unsatisfactory.
Third, and tied strongly to my view that the decision to have a family and subsequently raise your own children are not mutually exclusive, we as a people have lost our sense of personal responsibility when it comes to the choices we make, when it comes to our actions. We have become a society with little to no personal accountability. We continually seek to place blame on everything but ourselves for our problems, choices and actions. This is a very disturbing trend given that we were a nation founded on the ideals of rugged individualism. We see this trend demonstrated in all facets of life, from people suing fast food chains for making their coffee too hot or for making their food too fattening. If you end up stealing something, it is a function of socioeconomic forces. Unplanned pregnancies and young mothers blame poor sex education or lack of access to contraceptives. Murders have been blamed on race, easy access to weapons, violent movies and video games, etc... If your child does not make the soccer team, or does poorly on a test, it is the coaches fault or the teachers fault, not that your child is just no earthly good at soccer or did not study hard enough for the test. To bring the issue closer to home, to be more relevant to the purpose of this post, a child must go to daycare because you cannot raise a family on one income due to socioeconomic factors, due to not being able to find a better job, due to the high cost of living where you live, etc... Rather than accepting personal responsibility and accountability for raising your own child, people blame outside forces as the reason for putting their children into daycare. Rather than choosing to move to a lower cost area, doing without certain luxuries, postponing the decision to have a family, etc... we as a society would rather just place blame as opposed to making the hard choices required to take responsibility for our actions and decisions. So, why is this the case? What can it be attributed to? In my opinion, it is tied to the lack of appreciation for our roots, for the origins of our country and for the origins of our ancestors, our grandparents and great grandparents. The younger generations currently living in this country, in the wealth of the post WWII era, have had it pretty easy (relatively speaking), we have had a lot "given" to us rather than having to struggle for it ourselves. Generally, we have not experienced the hardships that our grandparents suffered, and as such when faced with hardship, the tendancy is to blame something or someone else.
It is with these three factors in mind and the resulting decline in the prevalence of stay at home parents that I will discuss (in my next post) my theory regarding how this decline and the increase in two income households has harmed our country's economy and exacerbated our most recent recession.
Friday, October 21, 2011
Stay at Home Parents...Grim Statistics & Additional Context on my Views...Part 1
A few posts ago I shared a high level view about our decision to have my wife be a stay at home mommy while our children are young and not in school. I also indicated that my beliefs regarding the importance of a stay at home parent run pretty deep, and that I would expand on them in a future post. This will be one of several posts that attempts to provide my point of view and opinions on how the decision of how a stay at home parent is ultimately the best possible outcome, not only for the parents and children, but also how stay at home parents contribute to the economic stability of our nation.
First and foremost, I want to clarify some things about my position on this topic. I am an advocate for there being a stay at home PARENT. While in the case of my family it happens to be the mommy, I am in no way against or not advocating for all those stay at home dads out there. My hat goes off to them, it is the toughest job you will ever love. Dad or mom, the important thing is that the parents of the child are making a decision to have one of them (whom it ends up being is a personal decision) stay at home with their children.
Second, I do not equate a stay a home parent and permanent homemaker as one in the same. What I mean here is that once the children are in school full time, I think that it then becomes optional regarding whether or not the stay at home parent continues to choose to stay at home during the day. The one caveat here is that if the parent does choose to return to work, there needs to be an appropriate accommodation made such that one of the parents has the flexibility to be home when the kids leave for school and when they return home from school. In fact, it probably becomes even more crucial (for a variety of reasons), as the children get older, for there to be a parent home when they return from school. So, given this, the timeframe to be a "full time" stay at home parent is about 5 years (the time between the birth of a child and when that same child goes to school full time). Thus, a five year commitment (obviously longer if you have successive children) for couples to plan for one or the other to be home with their child.
Finally, as I discussed during my prior post, the decision to have children and the decision of whether or not to have a parent stay home with those children is not, and should never be considered mutually exclusive. I am pretty black and white about this one. If there is a decision to start a family, one of the parents stays home with the children...end of story. If the belief is that you cannot afford to, or are unwilling to make the sacrifices necessary to allow for one parent to stay home, then you should not start a family at that point in time...period. A bit harsh, perhaps...but part of the responsibility of having a family is to raise your own children, and make a plan, prior to having children, to allow this to happen. This does not mean you pay someone to watch / raise your children so you can go to work. It means that you make the required sacrifices so one parent stays home to care for the children. Mother nature is even kind enough to give you about 9 months to prepare (or in the case of adoption, couples can often have longer) or from another viewpoint, time to adjust to living on one income prior to that bundle of joy coming home.
Now, there is likely great debate about the factors that contribute to the lack of stay at home parents in today's society. But, before I tackle those factors (I will do so in my next post), let's review some of the statistics...
There are, per the most recent 2010 census data:
120 million households in the U.S.
34 million households with children
23 million married couple households with children
18 million married households with both parents working
10 million married households with children under the age of 5
11 million households with children, single parents
5 million married couple households with a stay a home parent
Regarding the children under the age of 5:
20 million children under the age of 5
10 million children in the care of either their mother or father
10 million children in non parental or organized daycare.
Out of all the households in America with children, less than 15% have a stay at home parent. If we look at just the married households with children, that jumps up to about 22%. Looking purely at the data, and assuming that all the married households with a stay at home parent have children under 5 (likely a gross over estimation), about 50% of the married households with children under 5 have a stay at home parent. That translates to roughly 5 million married households with children under 5 where both parents are working. Framed up another way, 50% of all children under the age of 5, or 10 million children, are in some form of organized daycare or non parental care.
That is 10 million too many in my view...
First and foremost, I want to clarify some things about my position on this topic. I am an advocate for there being a stay at home PARENT. While in the case of my family it happens to be the mommy, I am in no way against or not advocating for all those stay at home dads out there. My hat goes off to them, it is the toughest job you will ever love. Dad or mom, the important thing is that the parents of the child are making a decision to have one of them (whom it ends up being is a personal decision) stay at home with their children.
Second, I do not equate a stay a home parent and permanent homemaker as one in the same. What I mean here is that once the children are in school full time, I think that it then becomes optional regarding whether or not the stay at home parent continues to choose to stay at home during the day. The one caveat here is that if the parent does choose to return to work, there needs to be an appropriate accommodation made such that one of the parents has the flexibility to be home when the kids leave for school and when they return home from school. In fact, it probably becomes even more crucial (for a variety of reasons), as the children get older, for there to be a parent home when they return from school. So, given this, the timeframe to be a "full time" stay at home parent is about 5 years (the time between the birth of a child and when that same child goes to school full time). Thus, a five year commitment (obviously longer if you have successive children) for couples to plan for one or the other to be home with their child.
Finally, as I discussed during my prior post, the decision to have children and the decision of whether or not to have a parent stay home with those children is not, and should never be considered mutually exclusive. I am pretty black and white about this one. If there is a decision to start a family, one of the parents stays home with the children...end of story. If the belief is that you cannot afford to, or are unwilling to make the sacrifices necessary to allow for one parent to stay home, then you should not start a family at that point in time...period. A bit harsh, perhaps...but part of the responsibility of having a family is to raise your own children, and make a plan, prior to having children, to allow this to happen. This does not mean you pay someone to watch / raise your children so you can go to work. It means that you make the required sacrifices so one parent stays home to care for the children. Mother nature is even kind enough to give you about 9 months to prepare (or in the case of adoption, couples can often have longer) or from another viewpoint, time to adjust to living on one income prior to that bundle of joy coming home.
Now, there is likely great debate about the factors that contribute to the lack of stay at home parents in today's society. But, before I tackle those factors (I will do so in my next post), let's review some of the statistics...
There are, per the most recent 2010 census data:
120 million households in the U.S.
34 million households with children
23 million married couple households with children
18 million married households with both parents working
10 million married households with children under the age of 5
11 million households with children, single parents
5 million married couple households with a stay a home parent
Regarding the children under the age of 5:
20 million children under the age of 5
10 million children in the care of either their mother or father
10 million children in non parental or organized daycare.
Out of all the households in America with children, less than 15% have a stay at home parent. If we look at just the married households with children, that jumps up to about 22%. Looking purely at the data, and assuming that all the married households with a stay at home parent have children under 5 (likely a gross over estimation), about 50% of the married households with children under 5 have a stay at home parent. That translates to roughly 5 million married households with children under 5 where both parents are working. Framed up another way, 50% of all children under the age of 5, or 10 million children, are in some form of organized daycare or non parental care.
That is 10 million too many in my view...
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