Abstract
The number of dual-income households has been steadily increasing over the past few decades. This study supports the hypothesis that given a household’s desire to remain above a minimum threshold standard of living, the rise in the number of dual-earner households is inevitable mostly due to inflationary pressures in product markets including rising housing prices and child care costs coupled with relatively flat wage trends. Mitigating uncertainty and risk associated with shifts in retirement plan offerings—moving away from defined benefit plans such as pensions toward defined contribution options such as 401(k) plans—was also cited as a factor contributing to the rising number of dual earners. This study highlights the costs and benefits of dual-earning decisions and the intertemporal implications for households, labor markets and overall societal welfare.
Introduction
Households with two incomes have become commonplace in contemporary society and are generally considered to be more financially secure than households with one income.1-3 Much of the transition away from predominantly single-income households can be attributed to evolving perspectives regarding the role of each partner in the household accompanied by a significant rise in the number of women engaged in external employment either part-time or full-time.4-6
On the surface, it appears that households securing two steady incomes is a luxury that should necessarily yield higher levels of financial stability than their single-income counterparts. Consistent with traditional consumer economic theory, extra earnings should equate to expanded choices, increased access to leisure and augmented buying power. However, in many cases, dual-income families generally contend with more financial and time management challenges than those where there is a solo income earner—a phenomenon often referred to as the two-income trap.7-9
This brings us to the two pillars in this study. First, given a household’s desire to remain above a minimum threshold standard of living, the rise in dual-earner households is inevitable mostly due to inflationary pressures in product markets including rising housing prices and child care costs and relatively flat wage trends. Second, the upward trend in the number of dual earners is accompanied by substantial unavoidable opportunity costs for the household as well as for labor factor markets now and into the future. This intertemporal approach presents insights that have not yet been adequately explored in the literature.
To provide context for this analysis, we continue by examining the typology of dual-income households and proceed to highlight labor market participation trends that have contributed to the rise in dual-income households. The next section outlines key factors which support the proposition that the decision to become a two-income household is a logical next step for families seeking to maintain a satisfactory standard of living in an economy of ever-increasing costs and relatively flat wages. An analysis of the dual impact of two-income households, presented in the third section, provides insights on the intertemporal effects of dual-income households on labor supply and societal welfare, and some concluding thoughts are presented in the final section.
A Typology of Dual-Income Households
The dual-earner terminology emerged from research on evolving family dynamics in industrialized societies where women were beginning to secure employment in formalized productive sectors outside of the home.10-12 The language was used to contrast with traditional households that were characterized by a single breadwinner (typically the male spouse) and by women assuming domesticated roles within the household, including nurturing families, producing family clothing and working on subsistence family farms. However, the homemaker role is being gradually deemphasized, and the concept of the working woman lauded particularly at a time when dual incomes are viewed as a middle-class necessity. 13
Some researchers have distinguished between the terms “dual-earner” and “dual-income” households. A dual-earner household is necessarily a dual-income one, but the reverse is not necessarily true. Theoretically, there is dual-income earning potential for a single-person household. This may mean that the individual has taken on two jobs or consistently works substantially longer-than-average days at a given job, scenarios that both render the individual time-poor. Furthermore, a dual-earner household may not necessarily comprise two spouses. A scenario where rising living costs place pressure on two independent income earners to pool financial and material resources to mitigate these rising costs while being able to sustainably enjoy a desired standard and style of living is quite common particularly in metropolitan areas. This case is alluded to in Faridani’s 14 study, which indicates that several central cities have experienced recent waves of urban renewal or gentrification, which have resulted in soaring inner-city rents.
The term “dual-income couple” is often used interchangeably with “dual-income family,” where the latter often connotes the presence of children as additional household occupants. However, the slang phrase “DINK,” which is an abbreviation for “dual-income, no kids” has become quite popular in reference to households comprising only two spouses. In the case of DINKs, either both partners are employed or one has two incomes. Commercial establishments are increasingly capitalizing on the presumed higher disposable income capacity of this group, and DINKs often become marketing targets for luxury products, including costly condominium-style housing, vehicles and vacations.
Furthermore, a more formalized categorization of dual-earner households was presented in a 2007 study where the authors considered the varied nature of dual-income families in the current millennium. 15 They essentially formulated four different labels for dual-income earners based on the interaction of gender and the occupational status of the male and female partner. The authors distinguish between career employment and other generic functional jobs. Dual-career couples comprised partners engaged in professional or managerial employment, whereas dual-earner couples source their incomes from “jobs” rather than careers. The other two groupings—the status-reversal couple and the new-traditional couple—entail one spouse engaged in managerial or professional work and the other spouse securing a noncareer job.
Although the various characterizations of households with dual-earning potential are interesting and import to distinguish, for the purposes of this study, we use the terms interchangeably as the focus here is the impact of the rise in dual-earner households as it pertains to members of the household being time-poor. In each of these classifications, less discretionary time is available to the household, which has clear implications that we continue to explore.
Labor Market Participation Trends and Dual-Income Households
Examining fundamental labor market dynamics, increased levels of labor market participation imply increased labor supply, but demand for labor among firms may not have experienced similarly sized positive shocks, so the result is depressed wages. Despite the gender-related pay gap where women still make about $0.70 on the dollar of the earnings of their male counterparts, increased pay has incentivized women to work outside the home. According to a March 2018 YouGov survey, 16 affluent women contribute a significant amount of earned income propelling their families from their middle-class roots into the top 10% of U.S. households—and for some, the top 2%. 17
Family dynamics are evolving and so has legislation related to women’s compensation. From as early as the late 1970s, researchers referred to the “Pregnancy Pay: Boost for Working Wives,” where disability and health insurance plans now covered pregnant workers. This included temporary disability plans that covered pregnancy and childbirth, making it easier for women to work outside the home and have children.
Although the dual-income household earns more than a single-earner family, a 2003 study 18 revealed that dual-income families have less discretionary income and minimal opportunity for a rainy-day fund due to the increased cost of living stemming from inflationary pressures. The study concludes that increased participation of once-upon-a-time homemakers in the external working market “has had a paradoxical effect of making families less secure, less flexible and poorer.” 19 This was referred to as the two-income trap.
The Inevitable Rise in Dual-Income Households
If inflation is steadily gnawing at households’ purchasing power, an increase in nominal wages or an additional income stream does not necessarily equate to increased financial flexibility and access to more goods. This study posits that households each have a minimum threshold standard of living they seek to maintain. As a result, they are left with little choice but to pursue dual earnings because increases in cost of living have outpaced the rise in wages. The discussion on the direction of causality can also be had much like the “chicken and the egg” conundrum. Do dual-income families necessarily incur higher living costs, or do ever-increasing living costs compel households to become dual earners?
Managing a dual-earner household typically entails additional expenditure on items such as commuting costs to separate places of work. This could take the form of public transportation passes, or if private modes of transportation are required, these families are shelling out substantial earnings on fuel, insurance and vehicle maintenance. Other major costs include housing, food, child care, transportation, telecommunication and energy bills. If product prices experience moderate increases over time, then dual-income streams should make families better off. However, this is not the reality. The additional paycheck dissipates, not solely due to new expenses associated with being dual earners, but primarily due to rising prices of commodities. In an August 2018 Bureau of Labor Statistics monthly Employment Situation report, a 2.9% increase in average hourly wages was applauded. However, a Forbes contributor, Jeffery Pavlik, noted that consumer price index had also reached 2.9%, which he recognized as a 10-year high. Therefore, in real terms, the increase in wage rates quickly dwindled to a mere 1%. 20
Higher spending by workers can create conditions for demand pull inflation. In some labor markets, typically career-oriented ones, the spiral effects of wage push inflation can also be observed where increases in wages incentivize businesses to charge more for their products in order to cover the additional wage expenditure. In either case, the impact on dual-income earners is reduced purchasing power. Essentially, the dual earners feel relatively poor particularly when it comes to accessing big ticket items like housing and child care.
Rising Cost of Housing
Dual-earner households, as with any other household structure, seek utility from two desirable assets: money and time. However, dual-earner households typically have fewer hours of nonwork time in contrast to single-earner households. As a result, dual-earner households will be willing to forfeit more money in order to safeguard their limited time. Given separate work locations, for instance, dual-earner households are induced to incur higher living costs to avert excessive commuting times. 21 Dual-earner households also have to make decisions regarding housing tenure—that is, securing financial arrangements regarding tenancy or owner occupancy. According to Carter, homeownership rates have declined to generational lows particularly among younger dual-earner families. 22 The author also states that given increases in housing prices, the ability to afford home ownership can only come if a nonworking member of the household enters the work force. Researchers attribute this inability to afford housing to inflated home prices stemming from unfriendly banking policies and to some degree, poor investment practices.
Skyrocketing Child Care Costs
In dual-earner households comprising children, parents are faced with the decision of sourcing child care. Typically, in dual-career cases, neither parent wants to forgo professional employment, and they resort to outsourcing child care, which comes at a high cost.23,24 Even for households where parents would prefer to have one parent provide child care, research has shown that the overall cost of child care, whether internally or externally sourced, has increased exponentially over time and as a result, households necessarily choose to become dual earning. 25
A study examining child care costs was performed by the Children’s Defense Fund where data were collected from local child care resource and referral agencies. 26 Major results of the study revealed that child care costs for a 4-year-old averages between $4,000 and $6,000 per year in cities and states nationwide, but can reach as high as $10,000 per year, and the costs trend further upward when considering families with multiple children. The researchers compared the child care costs in urban areas with annual tuition rates for public colleges and found that in many instances, child care costs were greater. The study also acknowledged that child care costs are expensive regardless of the source: child care centers or family.
The author also lamented that low-income households are typically unable to afford average costs of child care and are left with no choice but to seek lower cost alternatives, which often mean lower quality care. Within this low-income group, the majority are single-parent or single-earner households. Parents tend to prioritize child care and value its high quality; as such, single parents either secure a second job or work longer hours or single-earner households may transition to dual-earner status. The study also indicates that parents can anticipate no break in these rising costs as most child care agencies were reported to be already operating at low profit margins where individual staff costs alone averaged $15,000 per year.
Increased Time-Saving Discretionary Spending
Given the rising costs of big-ticket items such as housing and child care pushing households toward dual incomes, another category of expenditure is on the rise: time-saving discretionary expenditure.27,28 This includes items such as frozen foods, pre-packaged meals, restaurant meals and mobile phone communication expenses. As members of dual-earner households spend significantly less time in the home, they resort to these options to efficiently manage the household. 29
Retirement Planning Under Increased Uncertainty
Over the past few decades, employees have experienced a change in the type of retirement plans offered to them by their places of work. 30 There are notably fewer defined benefit options (e.g., Pensions) and a trend toward more defined contribution plans (e.g., 401k). Career employees had traditionally depended on the U.S. economy to provide stable jobs, increasing pay and defined benefit pensions, which they could rely on as a steady source of income clear into their retirement years.31-33
The evolution of retirement plan options in the U.S. economy is fascinating. The 1980s and 1990s witnessed a significant shift in pension arrangements when several firms endorsed and adopted 401(k) plans as highlighted in a study 34 by Ghilarducci et al. 35 The analysis revealed that during this period, firms were combining 401(k) plans with pensions and that it was difficult to ascertain whether their intention was to supplement pensions or phase them out. The authors also noted that based on legislation in the late 1970s, a growing number of firms adopted individual 401(k) plans, which made pension contributions optional. Furthermore, during the same period, defined benefit plans faced increased regulation and became more costly to administer. The results from the study indicated a steady shift toward defined contribution plans and a concomitant decline in contributions to pension plans.
With the trend toward defined contribution plans, firms are able to hedge against financial risk given volatile financial markets. Not only have firms moved away from defined benefit plans, but they have taken further steps to reduce financial risk. Firms have moved toward contingent work arrangements, which essentially transfers the economic risks to the workers by way of reduced pay and work hours, increased work instability and reduced nonpecuniary benefits. This has caused increased anxiety among households not only with respect to current earnings but also with respect to retirement earnings in the future. As a result, households attempt to mitigate this risk and associated uncertainty by securing dual incomes.
A controlled econometric analysis was performed using microeconomic household data, and the results showed that heightened concern regarding financial stability during retirement years occurred mainly within the middle-aged group and compelled them to secure dual incomes. 36 According to the survey responses, for households within the 40s to 50s age group who indicated they were “a little/very worried about their financial situation in old age,” the probability of being a dual-income household was found to be significantly higher.
Dual Impact of Dual Incomes on Households and Labor Markets
Despite rising living costs faced by dual-income households, research shows that today’s dual-income households are still able to afford a lifestyle that the majority of single-earner households are not able to access. This observation was documented in a seminal 1979 report, which references a group of dual-earner households the author labeled “America’s New Economic Elite.” Much of the casual spending for this group was on recreational items such as travel and entertainment. Even during this historical period, the dual-earner couples admitted that rising inflation impeded their ability to feel wealthy. 37
In a 2015 Pew Research Center study, 38 it was determined that households that comprised dual earners working full-time were financially better-off than other families. A comparison of median incomes was made across households with two full-time working parents ($102,400), one full-time and one part-time earner ($84,000) and one full-time earner with the other partner unemployed ($55,000). Two-income families constitute an increasingly powerful economic group, and they can access several desirable goods that single-income earners typically cannot, including high-end homes, cars and vacations, private school tuition, expensive department store products and meals at exclusive restaurants. However, dual-income households often pay a high price for their decision to secure two streams of income. This typically entails balancing the needs of family with the work-related demands of both partners. We proceed to examine four key life aspects wherein dual incomes create promising economic opportunities, but simultaneously pose serious threats to household welfare, thereby creating dual impact on labor supply and societal welfare.
Health Benefits Versus Moral Hazard
As discussed earlier, dual earnings facilitate access to services that a single-earner household may have difficulty securing. One such benefit is in the area of comprehensive health care. Households spend substantial amounts on health care costs ranging from high insurance premiums, high copays and deductibles, as well as other health-related expenses that require out-of-pocket payments. Health spending in the United States increased by 3.9% in 2017 to $3.5 trillion at the macro level or an average of $10,739 per capita. 39 Dual-income households are better able to spread these costs across the earnings of both working partners. The scale of privilege can be extended even further when considering the fact that members of the dual-income household may be covered by two health insurance plans. For instance, children younger than the age of 26 years can receive coverage through their parents and employer, or a couple can receive health insurance through their respective employers, or in a different scenario, the child of dual earners can be a dependent under both parents’ plans. 40 In other cases, an individual may have dual health coverage from social services offered by the public sector as well as a private sector health insurance plan.41,42 Although this does not mean that the insured gets reimbursed twice, but rather involves coordination of coverage, dual-earner households can end up saving money overall. For instance, if one such plan is a Health Savings Account, the dual-earner family may end up spending less on out-of-pocket expenses. These options provide some insight into the additional health expenditures dual-income households choose to incur because they can afford to do so. However, this prompts a discussion on moral hazard as it relates to health care.
Given access to better insurance and health care compensation, dual earners tend to engage in more unhealthy behaviors, including sleep deprivation, eating late due to long/erratic work hours, where they develop more work-related health issues such as mental illness, carpel tunnel syndrome and dependence on sleep aids and opioids. Furthermore, the insured dual earners may spend an extra day in the hospital or acquire a health care procedure that they would not likely have purchased if they had to incur the full cost.43,44 This study recognizes the likelihood that dual earners may make these poor choices merely due to them being time-poor. However, the argument being made is that insured dual earners are more likely than their uninsured counterparts to disregard the consequences of these poor health choices and continue to engage in these behaviors given their access to comprehensive health coverage. This creates a moral hazard leading to societal welfare allocative inefficiencies.45,46 With dual earners accounting for an increasingly larger proportion of the labor supply, all of these behaviors have severe repercussions for productivity and efficiency within labor markets. 47
Social Integration at Work Versus Isolation at Home
Dual earners derive several benefits from the social integration experience that external employment affords. Seasoned business leaders and human resource professionals recognize the benefits of effective internal and external working relationships on the organizational culture and bottom line.48-50 Researchers have studied the benefits of increased social interaction and integration among employees at all levels of the organization. More interaction among work colleagues; increased external communication with suppliers, clients and other stakeholders; active commitment to corporate social responsibility projects; and civic engagement all lead to improved morale and an increased sense of well-being, where one is working toward something greater than oneself. Anecdotal evidence supported by several research studies has shown that when people are happy in the workplace, customer service improves. 51 More important, from an economic standpoint, workers are more likely to perform at higher levels, and errors on the job are reduced. Furthermore, facilitating more collaborative opportunities capitalizes on potential synergies particularly during seasonal periods of high stress. In another study, employees engaged in coworker interaction were more likely to receive better performance evaluations and to be chosen to be part of future projects. 52 This nurtures a culture of coworker altruism at the workplace. 53 But not all interactions in the workplace are viewed with rose-colored lenses.
Negative interactions at work can contribute to bouts of confusion, tension, anxiety and uncertainty, which adversely affect the efficiency of workers and overall productivity of the organization. 54 There is also the potential for these undesired work experiences to create negative spillover effects in the household and can loop back to the workplace creating a vicious cycle of lethargy and unproductive behavior in the workplace and isolation in the household.
This increased isolation means that little to no real quality time is shared during nonwork hours. The term “role overload” is now commonplace in professional literature on the subject of dual-income households. Studies have documented that dual earners report high levels of stress associated with juggling the ever-increasing demands of career, household and personal lives.
Researchers also surveyed DINK households, where it was reported that the dual earners have little downtime to connect with each other after a taxing work week—expending 40 to 50 hours of personal energy at the workplace. The issue is exacerbated when dual-income households with live-in children younger than the age of 20 years were assessed. 55 Dual-earner parents indicated that they felt pressed for time. Forty percent of full-time working mothers reported that they “always feel rushed” and 50% of full-time working dads admitted that they don’t get enough time with their kids. 56 This leads to feelings of isolation by the dual earners as well as their children, which often result in poorly adjusted members of the workforce and productive inefficiencies in labor markets.57,58
Recreational Wealth Versus Emotional Capital Bankruptcy
We consider the case of affluent households here. In a survey conducted as part of a March 8, 2018, YouGov study on affluent household choices, 55% of the affluent households surveyed were dual-income households. 59 The researchers defined affluent households as those with incomes of at least $150,000. Perspectives were collected from affluent households around the world about what they consider to be “the good life” given their financial freedom. Among the French respondents, 30% indicated a passion for live theater, 41% of affluent Germans valued the great outdoors, 62% of Saudis identified shopping as an area for splurging and 50% of Chinese reported a strong passion for music. The number one recreational pursuit of all affluent households, including those in the United States, was travel. The mostly dual-income affluent households indicated that they take an average of four leisure trips per year, which allows them to define themselves, learn from new experiences, nurture relationships with loved ones and disconnect from life’s distractions.
But a compelling question follows. To what degree and at what rate do stressors associated with being dual earners deplete the stock of emotional capital or overall well-being of the dual-income household even as that stock is augmented by all the recreational luxuries afforded by dual earning power. Emotional capital is defined as “the set of resources (emotional competencies) inherent to an individual that is useful for personal, professional and organizational development, that contributes to social cohesion and can bring about personal, economic and social returns (p.28).” 60 Results from the 2015 Pew Research Center survey revealed that 56% of parents indicated that the task of juggling work and family responsibilities is challenging. 61 In the case of dual-earner households with children, some household responsibilities still fall squarely on the shoulders of one parent. In households where the dual earners work full-time, 54% indicated that the mom oversees children’s schedules and provides care to sick children. In other areas such as household chores, child discipline and engaging in recreational activities with kids, the tasks were shared fairly equally across parents.
With the dual earners seeking to strike a work–home balance, it often results in either one or both partners experiencing emotional distress as each partner looks to the other for solace where emotional capital is anemic at best.62,63 Therefore, recreational escapes afforded by dual incomes typically serve to mitigate these negative effects on emotional capital rather than augment it.
“Keeping Up With the Joneses”: Highways Versus Cliffs
It is reasonable to assume that most households, including dual-income ones, are on a quest to achieve the “American Dream.” An August 2018 YouGov survey solicited perceptions from respondents on what the “American Dream” entailed. Freedom, financial stability, a solid education, home ownership and “starting from nothing and becoming a success” were the most popular responses. 64 Many dual-income earners have attained tertiary-level education (46% have earned graduate degrees) and are accomplished professionally with 25% being business owners, increasing their earning potential even further. With additional streams of income comes additional responsibility regarding wealth management.
Dual-earner households tend to be less frugal than their single-earner counterparts and hardly subscribe to the concept of delayed gratification in order to secure financial independence in retirement. Much of this increased spending and consumption is fueled by intense pressure to “keep up with the Joneses,” where everyone’s next big purchase is strategically featured in neighborhood chatter and on social media platforms. Driving alongside the Joneses on the highway of financial freedom is not necessarily harmful in and of itself. On the contrary, it can be quite exhilarating as long as wise spending decisions are part of the experience. However, within dual-income households, “rainy-day” savings funds are not prioritized due to the complacency and overreliance on contingency income secured by a second earner. Dual-income households are gripped into a spending culture, going into stores without shopping lists and engaging in risky financial behavior such as gambling, or pursuing lifetime investment commitments such as time-share property ownership, which could send them over the proverbial cliff. Therefore, it is important to recognize that financial freedom should be constrained by financially responsible conduct in order to enjoy sustained financial benefits.
Intertemporal Implications of Dual Incomes on Labor Supply and Societal Well-Being
The matter of dual-income couples being time-poor due to work commitments by each partner outside the household has been discussed at length up to this point. This has a domino effect over time as it relates to household well-being, labor supply and societal welfare. The structure of the traditional family has experienced a striking shift over the past three decades. Notable trends include older parents, delayed marriages, postponed childbearing, single-parent families and stepfamilies. 65 Furthermore, declining fertility rates among younger and unmarried individuals were attributed to delayed marriages to pursue college degrees and to dual-income families acknowledging increasing costs of raising children. 66 Keshner noted that estimated births in 2018 were down 2% at more than 3.7 million, or an average of 1.8 children per family, the lowest level since the 1980s, and half of what it was 20 years ago as reported by the Centers for Disease Control and Prevention’s National Center for Health Statistics.
The increased participation of women in the workforce has also been linked to the drop in fertility rates as women are particularly incentivized by rising pay. As many couples are focused on attaining clearly set goals, the current culture is one where dual earners prioritize pursuing their individual financial and personal goals. This choice typically comes at a cost: time forgone with each other, with children or even forfeiting parenthood altogether. It is notable that over four decades ago, Charles Westoff, head of the Princeton University Office of Population Research at the time stated, “The decision not to have children is often one that is not made consciously. Many times, it is the result of a tacit decision not to decide.” Westoff expounded on the subject indicating that “couples involved in their careers can gradually back into childlessness.” 67 Dual earners have also moved away from having large families as they are fearful of the repercussions of what sociologists refer to as “latchkey children”—children unsupervised for portions of the day, typically during after school hours before working parents return home. 68 The combined effect of declining birthrates and populations living longer is an aging population in the long run leading to depressed labor supply and associated tax revenues. Several countries including Japan, Singapore, Sweden and Australia are reporting such effects. 69
Robust birthrates are also vital for the sustainability of Social Security funds. The 2019 Social Security Trustees Report stated that 80% of scheduled benefits will be payable by 2035. In 2018, 63 million people received approximately $994 billion in Social Security benefits. A real concern exists regarding the impending depletion of these funds. Among other factors, the report indicated that the future of the Social Security pool depends on the size of the workforce.
Typically, as a last resort, austerity measures are implemented to mitigate the risk of increased public debt given declining tax revenues. These contractionary fiscal measures may include extending the eligibility age for retirement benefits, limiting the terms of unemployment benefits, reducing public sector wages and benefits and raising taxes particularly on the welfare and increasing value-added taxes, all of which results in reduced social welfare. 70 The domino effect of the rise in dual-incomes households on labor markets and societal well-being is summarized in Figure 1, where t refers to a given time period, t = t0 is the current time period, k > 0 is an arbitrary number of years into the future (referring to the short term) and T represents the end time under consideration.
Intertemporal impact of rising dual-income households.
Figure 1 reiterates the pillars of this study—the rise in the number of dual-income households leads to a series of negative implications that take effect now (t = t0), in the short term (t = k) and extend well into the future (t = T).
Conclusion
The number of dual-income households has been steadily increasing over the past few decades. Using key data trends, this study revealed that the rise in the number of dual-earner households is inevitable given the desire to maintain a minimum threshold standard of living in a climate of rising costs and flat wage trends. Not only have traditional homemakers been incentivized to participate in labor markets due to more favorable legislation around the needs of expectant mothers and childbirth, but this study also underscores the point that inflationary pressures on the cost of living leave most families with little choice but to seek additional income streams to elevate or even merely maintain their original level of purchasing power—referred to as the “two-income trap.”
Several empirical studies were cited throughout this article providing evidence of a positive correlation between key variables and the increasing number dual-income households. Some of these factors include the rising cost of housing and child care and increases in time-saving discretionary spending. Another factor highlighted was the decision by firms to move away from defined benefit retirement plan offerings such as pensions toward defined contribution options such as 401(k) plans, which essentially transfers much of the financial risk to the employee particularly in volatile financial markets.
In addition to providing support from the literature regarding factors contributing to the inevitable rise of dual-income households, the major contribution of this study was to examine the two-pronged intertemporal impact of the rise in the number of dual earners on households, labor markets and overall societal welfare. Four major areas of impact were analyzed. First, it was noted that dual earners were able to secure generous health benefits sponsored by their employer; however, moral hazard behaviors were prevalent in dual-income households.
Second, increased labor participation rates in formalized labor markets fostered enhanced social integration opportunities via collaborative work projects, corporate social responsibility and civic engagement. The downside, however, were the tendencies of dual earners to bring work stress over to the home. This coupled with the fact that dual earners have few residual nonwork hours created conditions for emotional withdrawal and feelings of isolation at home.
Third, although dual-earning households afforded members more opportunities for recreation and stress relief, it was noted that dual earners are often so burnt out from work-related stress, that these leisurely activities simply serve to restore dual earners’ emotional capital to a stable equilibrium, which appears to be declining over time.
The fourth point highlighted was that although dual earnings provided quicker access to achieving the “American Dream,” additional streams of income often lead to an irresponsible culture of overspending usually aligned with the tacit objective of “keeping up with the Joneses.” This exposes dual-income households to tremendous financial risk now and into the future.
Finally, this study provided an overview of the intertemporal domino effect of the decision to be dual earners on households, labor markets and societal welfare as shown in Figure 1. Essentially, dual earners are deciding to have smaller families, and this has long-term effects for the labor markets where a shrinking labor supply and aging population create unwanted pressure on labor productivity and social security funding. In some cases, countries are already considering the implementation of austerity measures to mitigate these effects. This study not only acknowledges the benefits and opportunities dual incomes present but also provides keen insight on the potential negative implications for stakeholders now and into the future.
Footnotes
Acknowledgements
The author wishes to thank Ivan Regalado, Sung Lee and Dawn Charles for their valuable contributions to the preliminary discussions for this study.
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
