Do you feel like you are working yourself to the ground and in turn you and your family are still standing still financially? You may be on to something. In reading the ‘Changes in Median Household Income from 1969 to 1996’ published by the US Census Bureau, three striking facts stood out and have practical implications to the current recession.
1. Significant increase in workforce participation by American wives.
For 1969 to 1996 for householders less than 40 years old, the proportion of wives working year-round, full time rose from 17% to 39% (with children) and 42% to 60% (households without children). For householders between the ages of 40-64 years, the proportion of wives working year-round rose from 31% to 41% .
2. Median household incomes showed only a small gain when the earnings of wives were excluded in the US Census Bureau calculations. The median incomes of households showed a modest 2% increase. When the earnings of the wives were included, a 25% increase in household incomes was realized during the 1969-1996 time period.
3. From 1969-1996, the median income of married-couple households rose 25%. However, when segmenting the almost 30 year time period into business cycles, there were income variations: from the economic growth cycles of 1969 to 1979 and 1983 to 1989, incomes rose. This contrasts with the general income declines during the recessionary cycles of1979 to 1983 and 1989 to 1993.
What does this mean?
Elizabeth Warren, the Leo Gottlieb Professor of Law, 2003 conducted a study of 2,000 U.S. families and found that while today’s middle class families earn much more than their 1969 counterparts, ‘after shelling out for four fixed expenses- mortgage, health insurance, child care or education and car payments- today’s median income family has less left over (for discretionary spending) in inflation-adjusted dollars’ than the single income family of the 1960s.
Paradigm Shifts
To balance household budgets, now, more than ever before, our families need our participation in the workforce. However, a careful analysis of the spending required to support the participation of two full-time wage earners in a slowing economy is required. At a time of stagnant wages, high fuel, vehicle maintenance, child care costs, and the cost of higher education—an expected 30 to 50% increase in household income may be realized at the expense of 40 to 60% forecast of increased costs to support such an effort.
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