Are Two Incomes Needed to Prosper Today? Evidence from the 1960s to the 1990s

Consumer Expenditure Survey data from 1960 to 1996 are used to examine trends in real consumption, real after-tax income, market work time, and real after-tax wages for single-earner and dual-earner households. Over the entire time period, most households experienced substantial improvements in measures of their prosperity. However, economic progress was considerably reduced when the comparison was from 1972 to 1996. Also, wage changes dominated changes in market work time over all time periods. One of the features of the American economy has been the rise of the dual worker household. Dual worker households increased from 43 percent of all married couple households in 1967 to over 53 percent in 1998 (Rubin and Riney 1995, 18-19; U.S. Bureau of the Census 1998a). The jump in dual worker households has been fueled by the increase in married women who work. Working married women rose from 32 percent of all married women in 1960 to 62 percent in 1997 (U.S. Bureau of the Census 1998b). Several reasons have been cited to explain the increase in working married women and the dual worker household. Included are the rise in feminism and women's rights, the changing nature of jobs that has made them more appealing to women, and the perceived need for two incomes to provide the same level of real consumption in today's economy that one income did decades ago. [1] The last reason is the focus of this paper. Indeed, a popular notion in American society is that dual worker households are necessary to achieve a level of prosperity today comparable to what was achieved by single worker households in earlier decades. This viewpoint implies that single worker households' real consumption is lower today than in previous decades. Higher taxes are often mentioned as one reason for this situation. Often it is said of dual worker households, that one worker is needed today to pay the taxes while the other worker pays to feed, clothe, and house the family (Wessel and Davis 1995). The reduction of real wages for some households during the past forty years is offered as another reason (Mishel 1997). However, Juhn and Murphy (1997) dispute the last contention. Their work shows that the market work hours of wives of low wage workers increased more in the 1960s when their husbands' earnings increased the most. The question of why more households today have two workers goes beyond the issue of finances. Dual worker households spend less time with children than do married single worker households (Bryant and Zick 1996). Some analysts have asked whether reduced parental time with children can be linked to various youth problems, such as juvenile crime and low educational performance (Rector and Hirni 1996). These are weighty questions that are at the core of much of the change in American households over the past half century. This paper addresses a part of these issues by focusing on two questions: (1) Has the real consumption and real after-tax income of married single worker households fallen in recent decades, while the real consumption and real after-tax income of married dual worker households stabilized or risen? (2) How have changes in real wages and market work time contributed to changes in real after-tax incomes of both married single worker and married dual worker households? RELATED WORK There is a large, diverse literature examining trends in the post World War II prosperity of American households. From the political perspective, Phillips (1990), Bluestone and Harrison (1988), and Buchanan (1998) argue that the real income of the average American household has dropped since the early 1970s. Reasons cited include the decline in worker unions, increased competition from foreign workers, and a focus by business on short-run profits to the exclusion of long-run investments in human capital. McKenzie (1997) has criticized these conclusions on a technical point. McKenzie claims the inflation adjustor used in these studies, the Consumer Price Index (CPI), has overstated the rise in prices and, thus, understated real income gains during the past three decades. …