The Two-Income Trap (6 page)

Ultimately, however, it did not matter whether there was a meaningful gap between the schools in the center cities and those in the surrounding suburbs, or whether the streets really were safer far away from the big city. It didn’t even matter whether there really was a crisis in public education, as the politicians and the local news might insist. What mattered was that parents
believed
that there was an important difference—and that the difference was growing.
⁴⁸
The only answer for millions of loving parents was to buy their way into a decent school district in a safe neighborhood—whatever the cost.

And so it was that middle-class families across America have been quietly drawn into an all-out war. Not the war on drugs, the war about creationism, or the war over sex education. Their war has received little coverage in the press and no attention from politicians, but it has profoundly altered the lives of parents everywhere, shaping every economic decision they make. Their war is a bidding war. The opening shots in this war were fired in the most ordinary circumstances. Individual parents sought out homes they thought were good places to bring up kids, just as their parents had done before them. But as families saw urban centers as increasingly unattractive places to live, the range of desirable housing options began to shrink and parents’ desire to escape from failing schools began to take on new urgency. Millions of parents joined in the search for a house on a safe street with a good school nearby. Over time, demand heated up for an increasingly narrow slice of the housing stock.

This in itself would have been enough to trigger a bidding war for suburban homes in good school districts. But a growing number of families brought new artillery to the war: a second income. In an era
when the overwhelming majority of mothers are bringing home a paycheck and covering a big part of the family’s bills, it is easy to forget that just one generation ago most middle-class mothers—including those in the workforce—made only modest contributions to the family’s regular expenses. A generation ago, the average working wife contributed just one-quarter of the family’s total income.
⁴⁹
In many families, Mom’s earnings were treated as “pin money” to cover treats and extras, not mortgages and car payments. Unenlightened husbands weren’t the only ones to foster this attitude. Banks and loan companies routinely ignored women’s earnings in calculating whether to approve a mortgage, on the theory that a wife might leave the workforce at any moment to pursue full-time homemaking.
⁵⁰

In 1975 Congress passed an important law with far-reaching consequences for families’ housing choices. The Equal Credit Opportunity Act stipulated, among other things, that lenders could no longer ignore a wife’s income when judging whether a family earned enough to qualify for a mortgage.
⁵¹
By the early 1980s, women’s participation in the labor force had become a significant factor in whether a married couple could buy a home.
⁵²
Both families and banks had started down the path of counting Mom’s income as an essential part of the monthly budget.

This change may not sound revolutionary today, but it represents a seismic shift in family economics. No longer were families constrained by Dad’s earning capacity. When Mom wanted a bigger yard or Dad wanted a better school for the kids, families had a new answer: Send Mom to work and use her paycheck to buy that nice house in the suburbs.

The women’s movement contributed to this trend, opening up new employment possibilities and calling on mothers to reconsider their lifetime goals. For some women, the decision to head into the workplace meant personal fulfillment and expanded opportunities to engage in interesting, challenging occupations. For many more, the sense of independence that accompanied a job and a paycheck provided a powerful incentive. But for most middle-class women, the decision to get up early, drop the children off at day care, and head to
the office or factory was driven, at least in part, by more prosaic reasons. Millions of women went to work in a calculated attempt to give their families an economic edge.
⁵³

The transformation happened gradually, as hundreds of thousands of mothers marched into the workforce year after year. But over the course of a few decades, the change has been nothing short of revolutionary. As recently as 1976 a married mother was more than twice as likely to stay home with her children as to work full-time. By 2000, those figures had almost reversed: The modern married mother is now nearly twice as likely to have a full-time job as to stay home.
⁵⁴
The transformation can be felt in other ways. In 1965 only 21 percent of working women were back at their jobs within 6 months of giving birth to their first child. Today, that figure is higher than 70 percent. Similarly, a modern mother with a three-month-old infant is more likely to be working outside the home than was a 1960s woman with a five-year-old child.
⁵⁵
As a claims adjuster with two children told us, “It never even occurred to me not to work, even after Zachary was born. All the women I know have a job.”

Even these statistics understate the magnitude of change among middle-class mothers. Before the 1970s, large numbers of older women, lower-income women, and childless women were in the workforce.
⁵⁶
But middle-class mothers were far more likely to stay behind, holding on to the more traditional role of full-time homemaker long after many of their sisters had given it up. Over the past generation, middle-class mothers flooded into offices, shops, and factories, undergoing a greater increase in workforce participation than either their poor or their well-to-do sisters.
⁵⁷
Attitudes changed as well. In 1970, when the women’s revolution was well under way, 78 percent of younger married women thought that it was “better for wives to be homemakers and husbands to do the breadwinning.”
⁵⁸
Today, only 38 percent of women believe that it is “ideal” for one parent to be home full-time, and nearly 70 percent of Americans believe it doesn’t matter whether it is the husband or the wife who stays home with the children.
⁵⁹

It is also the middle-class family whose finances have been most profoundly affected by women’s entry into the workforce. Poorer, less educated women have seen small gains in real wages over the past generation. Wealthy women have enjoyed considerable increases, but those gains were complemented by similar increases in their husbands’ rapidly rising incomes.
⁶⁰
For the middle class, however, women’s growing paychecks have made all the difference, compensating for the painful fact that their husbands’ earnings have stagnated over the past generation.
⁶¹

For millions of middle-class families hoping to hold on to a more traditional mother-at-home lifestyle, the bidding wars crushed those dreams. A group of solidly middle-class Americans—our nation’s police officers—illustrate the point. A recent study showed that the average police officer could not afford a median priced home in
two-thirds
of the nation’s metropolitan areas on the officer’s income alone.
⁶²
The same is true for elementary school teachers. Nor is this phenomenon limited to high-cost cities such as New York and San Francisco. Without a working spouse, the family of a police officer or teacher is forced to rent an apartment or buy in a marginal neighborhood even in more modestly priced cities such as Nashville, Kansas City, and Charlotte. These families have found that in order to hold on to all the benefits of a stay-at-home mom (which we will discuss in chapter 3), they will be shoved to the bottom rungs of the middle class.

What about those families with middle-class aspirations who earned a little less than average or those who lived in a particularly expensive city? Even with both parents in the workforce, they have fallen behind. Rather than drop out of the bidding war and resign themselves to sending their kids to weaker schools, many middle-class couples have seized on another way to fund their dream home: take on a bigger mortgage. In 1980, the mortgage lending industry was effectively deregulated (see chapter 6). As a result, average families could find plenty of banks willing to issue them larger mortgages relative to their incomes. As the bidding war heated up, families took
on larger and larger mortgages just to keep up, committing themselves to debt loads that were unimaginable just a generation earlier.

With extra income from Mom’s paycheck and extra mortgage money from the bank, the usual supply and demand in the market for homes in desirable areas exploded into an all-out bidding war. As millions of families sent a second earner into the workforce, one might expect that they would spend
less
on housing as a proportion of total income. Instead, just the opposite occurred. A growing number of middle-class families now spend
more
on housing relative to family income.
⁶³
As demand for the limited stock of desirable family housing continued to grow, prices did not reach the natural limit that would have been imposed by the purchasing power of the single-income family confined to a conventional 80 percent mortgage. Instead, monthly mortgage expenses took a leap of
69 percent
at a time that other family expenditures—food, clothing, home furnishings, and the like—remained steady or fell.
⁶⁴

Parents were caught. It may have been their collective demand for housing in family neighborhoods that drove prices up, but each individual family that wanted one of those houses had no choice but to join in the bidding war. If one family refused to pay, some other family would snatch up the property. No single family could overcome the effects of millions of other families wanting what it wanted.

Each year, a growing number of stay-at-home mothers made the move into the workforce, hoping to put their families into solidly middle-class neighborhoods. But the rules quietly changed. Today’s mothers are no longer working to get ahead; now they must work just to keep up. Somewhere along the way, they fell into a terrible trap.

Can families extract themselves from the two-income housing trap? We could make all the obvious suggestions here. Families should “downshift,” taking on no more mortgage debt than they can afford. If that means renting for another ten years or living in a neighborhood
with lousy schools, well, that’s just too bad. This advice would certainly be sensible from a financial point of view. The problem is that families don’t find it particularly compelling. The experts have been dispensing these words of wisdom for at least a decade with no discernible effect, and we’re pretty sure that adding our own voices to the chorus would be useless.

Alternatively, we could take the usual liberal approach, calling for more government regulation of the housing market such as price caps. But we don’t think the solution lies with such complex regulations. Indeed, any effort to eliminate the fundamental forces of supply and demand with such artificial constraints might actually worsen the situation by diminishing the incentive to build new houses or improve older ones. Nor would we argue for outright government subsidies. Such programs may be appropriate to help a small number of low-income families get a decent place to live, but America simply cannot afford mass subsidies for its middle class to buy housing. Besides, direct subsidies are likely to add more ammunition to the already ruinous bidding wars, ultimately driving home prices even higher.

In order to free families from the trap, it is necessary to go to the heart of the problem: public education. Bad schools impose indirect—but huge—costs on millions of middle-class families. In their desperate rush to save their children from failing schools, families are literally spending themselves into bankruptcy. The only way to take the pressure off these families is to change the schools.

The concept of public schools is deeply American. It is perhaps the most tangible symbol of opportunity for social and economic mobility for all children, embodying the notion that merit rather than money determines a child’s future. But who are we kidding? As parents increasingly believe that the differences among schools will translate into differences in lifetime chances, they are doing everything they can to buy their way into the best public schools. Schools in middle-class neighborhoods may be labeled “public,” but parents have paid for tuition by purchasing a $175,000 home within a carefully selected school district.

It is time to sound the alarm that the crisis in education is not only a crisis of reading and arithmetic; it is also a crisis in middle-class family economics. At the core of the problem is the time-honored rule that where you live dictates where you go to school. Any policy that loosens the ironclad relationship between location-location-location and school-school-school would eliminate the need for parents to pay an inflated price for a home just because it happens to lie within the boundaries of a desirable school district.

A well-designed voucher program would fit the bill neatly. A taxpayer-funded voucher that paid the entire cost of educating a child (not just a partial subsidy) would open a range of opportunities to all children. With fully funded vouchers, parents of all income levels could send their children—and the accompanying financial support—to the schools of their choice. Middle-class parents who used state funds to send their kids to school would be able to live in the neighborhood of their choice—or the neighborhood of their pocketbook. Fully funded vouchers would relieve parents from the terrible choice of leaving their kids in lousy schools or bankrupting themselves to escape those schools.

We recognize that the term “voucher” has become a dirty word in many educational circles. The reason is straightforward: The current debate over vouchers is framed as a public-versus-private rift, with vouchers denounced for draining off much-needed funds from public schools. The fear is that partial-subsidy vouchers provide a boost so that better-off parents can opt out of a failing public school system, while the other children are left behind.