By Arnold Kling
Jeff Madrick discusses the work of Elizabeth Warren and Amelia Warren Tyagi on the plight of middle-class two-income families with children.
what families spend a lot more on, the authors calculate, is a house in a safe neighborhood with a good school — about 70 percent more a year, discounted for inflation, for the typical family of four. The scarcity of good schooling has created a bidding war that drives up house prices in first-rate school districts.
…The other factors driving spending are largely the costs of the two-income family. The authors find that typical payments for day care and preschool for two children can add enormously to the household budget.
…The upshot is that two-income families often have even less income left over today than did an equivalent single-income family 30 years ago, even when they make almost twice as much.
I do not have their data, but my guess is that it is similar to this analysis.
In comparing a hypothetical two-earner family today with a hypothetical one-earner family of the past, I worry about failing to impute any value to the child care and housework provided by the stay-at-home parent. If your hypothetical one-earner family seems better off, that may be because its income was actually higher, once you include the value of noncash income that the non-earning spouse provided.
UPDATE: Stephen Karlson has more thoughts and many more links on the topic of child care and family income.
For Discussion. How does this issue cause the growth rate in average family income to overstate the increase in well-being?