Thursday, January 19, 2006

Marriage Builds Wealth

The study of the month is Jay Zagorsky’s “Marriage and divorce’s impact on wealth” in the Australian publication the Journal of Sociology. Zagorsky, an Ohio State sociologist, followed young Baby Boomers from youth to their 40s through the National Longitudinal Survey of Youth. Zagorsky found that on average, a couple’s net wealth increases 16% for each year they stay married. By their mid-40s, marrieds will have 77% more wealth per person than singles will. The divorced are even worse off, losing 3/4ths of their net worth. And that is only the size of the gap at 50, the limit of the NLSY79 data. Since the great majority of those couples will stay married and keep working, the gap at retirement should be even greater.

Zagorsky focuses on simple economies of scale – one household is cheaper than two. But sociologist David Popenoe, director of the National Marriage Project, points to a more powerful factor: married people work more and work harder because they are working for something greater than themselves. Zagorsky found that divorced people started losing wealth four years before the divorce. He speculates that they were already separated and keeping two households. I think, though, that Popenoe is pointing to the greater factor: people who are committed to a marriage work harder and longer because they are building up something greater. It is reasonable to think that people who eventually divorce start hedging their bets about investing in the marriage years before the final breakup.

Zagorsky’s reported results do not take into account what I think will prove to be the greatest factor in why married couples need to produce more wealth and produce it faster: they have kids to support. That is the next study we need: married parents vs. unmarried parents, looking at how much they make, and how much net wealth they end up with.


Anonymous said...

But don't forget that married couples without children have the most wealth of all.

I would also add two more reasons that married couples have more wealth, drawing from my own experience:

1. Marriage creates a natural check on unneccessary personal spending. For instance, when I spend money on clothes, I'm spending "our money", yet my husband gets no benefit out of me wearing new clothes. Thus, I'm naturally discouraged from spending on things that only I desire. And likewise, he limits his spending when it's for an item that I have no interest in. Before I married, when I was only financially accountable to myself, I spent much more on "luxuries". Now I have to justify non-necessary spending to my husband (just as he does to me). Once we combined our money, our spending went way down. (On a related note, I know that one of the classic warning signs of a marriage in trouble is when spouses "hide" their spending from one another).

2. When you're no longer actively trying to attract a mate, you tend to spend less on disposable items and more on items that increase your wealth. Once you're out of the dating game, you don't need to spend as much on having nice clothes, going out to dinner, or generally being out and about in public. Instead, married couples often spend on things that increase their net worth, like by working on their yard or improving their home.

In my own experience, even though my husband I both make LESS per-person than we did when we met, our assets have easily quadrupled in the past 5 years. I think this is pretty common.

Gruntled said...

Excellent examples.
There is some evidence that parents still end up with more, because fathers work harder and earn more for each dependent.

Anonymous said...

Good stuff. Thanks. If I was to make one correction,
I am an economist, not a sociologist.

I agree the impact of children is a key idea. I have started
but not yet finished that work.

SPorcupine said...

What would happen if a strong argument for marriage was built explicitly around "building?" That is, around the idea that the couple is creating things. The things are on many scales: house, garden, children, potluck dinners, college tuitions, charitable contributions in all sizes, and so on.

That's a way of saying that more is happening than the romance alone. It's a description where the marriage clearly matters to others, rather than just the couple. It's also a way of calling marriage an adventure, an accomplishment, an exciting aspect of an achieving life.

Net assets would be a meaningful piece of that understanding, not as important as some others, but easier to count and easier to explain to some audiences, and especially young men just beginning to think about marriage.