Blogs

  Magazine   Government | Health & Sexuality | Magazine | Marriage & Parenting

The Marriage Wage Premium

DOWNLOAD ENTIRE ARTICLE (with images and endnotes)

The Financial and Personal Benefits of Marriage

For decades, young people have been encouraged to continue their education beyond high school and earn at least a four-year college degree. The impetus for this encouragement is data showing that college graduates with four-year degrees earn higher lifetime wages relative to those who never attended college or those who started and never finished. This “college wage premium,” measured as the difference between the median hourly wages earned by those with at least a four-year college degree and those without, is significant and has been growing steadily since the mid-1970s. Estimated to be about 40 percent in 1980, the wage premium has risen to an estimated 70 percent today.

Another opportunity exists for people to benefit from a wage premium nearly as significant as that enjoyed by college graduates. Unfortunately, while there are no socioeconomic and education requirements to participate in this activity, fewer people are doing so today relative to previous generations. As a consequence, many people—especially younger people—are missing out on an opportunity that not only provides a financial return, but also is likely to improve their mental and physical health, as well as enhance their overall life satisfaction. This activity is marriage, which requires little formal training in order to participate, yet participation has been retreating for the past 50 years. This means that a decreasing percentage of the population is enjoying the fruits of one of our most important social institutions.

Marriage Trends

Americans between the ages of 25 and 60 from all socio-economic backgrounds view marriage favorably, with at least three-fourths of adult Americans professing marriage as either “very important” or as “one of the most important things to them.” According to a study by the Pew Research Center, 61 percent of adult Americans reported that they wanted to someday marry. Conversely, 27 percent reported they were “not sure” about marriage, and 40 percent viewed it as “an institution [that] is becoming obsolete.”


FNC_Winter_2014-AgeFirstMarriage


Despite a predominantly favorable attitude toward marriage, fewer Americans are choosing to marry relative to just 30 years ago. According to that same Pew Research study, in 1960, 72 percent of the U.S. population aged 18 and older were married, whereas less than 50 percent are today. For those age 45 and older, the percentage of never married men increased from about six percent in 1990 to just over 10 percent by 2010; and for never married women, it increased from 5.5 percent to eight percent.

This jump in the percentage of the adult population who never married, especially those younger than 40, is not necessarily due to their outright rejection of marriage. Instead, at least some of the decline in the rate at which people have been marrying is due to more people delaying marriage. As Graph 1 shows, the age at first marriage has steadily increased for more than half a century. In 1956, the median age at which both men and women first married reached a 120-year low of 22.5 and 20.1, respectively. By 2011, the median ages increased to 28.7 for men and 26.5 for women. So although the rate at which adults in their late 20s-30s marry has fallen, many will still fulfill their dream of marriage, just later on.

Careers for Women

This trend of delaying marriage or choosing to never marry is not a recent phenomenon, nor is it totally a surprise. Marriage rates started trending downward in the late 1960s, and have continued to do so ever since. For example, in 1960, married couples made up 78 percent of all households, whereas today less than half consist of married couples.

One reason for this downward trend was the transformation in the U.S. (and other developing nations) from an industrial economy to a knowledge and information economy. With labor at one time heavily concentrated in sectors like construction, manufacturing, mining, and other jobs that required physical strength, women found it difficult to participate and establish careers. Beginning in the late 1950s, the information and service sectors expanded, offering more career opportunities for women. The logical response was for women to delay marriage in order to establish careers.

FNC_Winter_2014-UnionsChildrenFewer than 38 percent of the females who graduated from high school in 1960 enrolled in college. Today, that number is 72.2 percent. In fact, females enrolled in institutions of higher education today outnumber males by a ratio of 1.35 to 1. It is no surprise that more and more females continue to delay marrying in order to invest in their human capital and pursue full-time careers.

Even for women without college degrees, the workplace has become far more welcoming over the past 40 years. Many service sector jobs like retail, data entry, transportation, and government typically require no formal education beyond high school. For other careers, a two-year associate’s degree often suffices. This change in the skills required of labor for employment in the U.S. economy, from primarily brawn to primarily brain, provides more women career opportunities.

For the average female who delayed marriage in order to pursue a career, this investment appears to have paid off. As Kay Hymowitz et al. note: “Women with a college degree who waited to marry until at least thirty, and highschool- educated women without a degree who also waited until thirty, earn more than those who married at younger ages. In fact, this report finds that they earn $18,152 and $4,052 more per year, compared to their sisters who marry before twenty.”

The financial rewards to females who delayed marriage indeed appear beneficial, but neither the benefits nor the costs have been felt equally across all socioeconomic groups. Other than for women with a college degree, the average woman has seen the costs of delaying marriage greatly exceed the financial rewards. This includes women who started college and later dropped out.

Men’s Marriage Wage Premium

For men, the financial rewards of marriage are unequivocally positive. Data consistently reveal significantly greater lifetime earnings for married men relative to men who never married, and to a lesser degree, men who separated or divorced. Estimates of this wage premium range from a 10 percent to 50 percent increase in lifetime earnings, and are prevalent across all socioeconomic groups. So, for example, after controlling for the effects of age, education, job type, experience, and other demographic characteristics, a married male can expect to earn $44,000 to $60,000 per year, compared to an unmarried male with similar background and characteristics who earns $40,000 per year.

Correlation vs. Causation. Although the rewards are great, some question whether the marriage wage premium is simply a matter of correlation: Do more productive men tend to marry, or does the act of marrying actually cause a male worker’s productivity to increase? If it is the former, what economists call the selection effect, then whether a male marries or not has no influence on his productive capacity, and therefore no influence on his lifetime earnings. On the other hand, if marriage indeed causes males to become more productive, then it is marriage that causes wages for married males to exceed the wages of males who never married.

In one of the most highly regarded studies of the effects of marriage on the earnings of males, economists Sanders Korenman and David Neumark compared the hourly wages earned by married males to the hourly wages earned by males who had never married. They found that after controlling for age, education, years of experience, hours worked per year, and other factors, married males earn more than unmarried males. Furthermore, this wage premium was not from an abrupt increase in the earnings of married males immediately after marrying, which would indicate employer bias in favor of married males. Instead, their wages started to grow at a more rapid rate after marriage compared to the rate of growth before they married. This increase in the rate of growth of wages persisted throughout their marriage to where the hourly wages of married men in their 40s substantially exceeded the wages of their counterparts at age 40 who never married.

Divorced or Separated Men. The authors also compared the wages of married men to the wages of men who were divorced or separated. If marriage indeed causes male labor productivity to increase, then that should reveal itself in the higher wages earned by divorced and separated men as well. After all, given they were once married, their labor productivity should have increased relative to the productivity of males who never married. The additional skills acquired in some prior time period resulting from marriage do not simply vanish once the marriage terminates. They may, however, dissipate over time if the attributes of marriage that made the male worker more productive are no longer present. Korenman and Neumark found that males who married and later separated or divorced earned higher wages than males who never married. So marriage mattered even among divorced and separated males. More importantly, they found that the wages of males who divorced or separated did not immediately plummet right after their divorce or separation, but the rate of growth in their wages slowed shortly after dissolution of the marriage. Divorcing or separating from one’s spouse does not immediately deplete a formerly married male’s added productivity acquired as a result of marriage. But dissolution of the marriage does remove what once was the basis for that added productivity, causing a subsequent decrease in the growth rate of his wages.

Selection Effect. Doubts still remain about the selection effect (whether highly productive males are more attractive marriage partners and therefore more likely to attract a female and marry her relative to less productive males) as a cause of the marriage wage premium, leading Donna Ginther and Madeline Zavodny, economists at the Federal Reserve Bank in Atlanta, to come up with a creative approach to measuring the marriage wage premium. Using data from what were inferred to be shotgun marriages—marriages that were entered into out of obligation following an unplanned pregnancy—they further isolate the effect of marriage on increasing the productivity of married men, and therefore the cause of the marriage wage premium.

Just because couples are delaying marriage does not mean they are by default celibate. Graph 2 shows the transformation between 1995 and 2010 of first unions for women between the ages of 15 and 44. In 1995, 39 percent of women who moved in with a man for the first time did so after marrying him, while 34 percent did so without first marrying. By 2006, just 23 percent of women reported that their first union was by marriage, while 48 percent chose to cohabit.

Graph 3 shows the increase in the percentage of total births to unmarried mothers in the United States between 1985 and 2011. With the increase in the number of couples delaying marriage and choosing to cohabit, there has also been an increase in the number of women having children out of wedlock. For unwed teens however, those between the ages 10 and 19, the birth rate (out of 1,000 women) fell by more than a third between 1990 and 2011. This means that the increase in the percentage of all births occurring out-of-wedlock has been predominantly among women over the age of 20, with the largest increase occurring with women over the age of 24.

The rise in out-of-wedlock births notwithstanding, an unintended benefit of women delaying marriage may be an extended search period for finding a more suitable spouse. By taking longer to search, a prospective wife expects to lessen the probability of the mistake of choosing a less productive male to marry. But if a wedding is unplanned due to an unexpected pregnancy—a shotgun wedding—then maybe we can infer an increased likelihood of error on the wife’s part since she did not give herself a sufficient amount of time to vet the groom for suitability as a spouse.

This is the approach Ginther and Zavodny took in their study of the marriage wage premium. They sorted married men based on the birth date of their first child born after marriage and compared the wages across two groups. If a first child was born within six months of the father’s marriage, then it is presumed that the marriage was unplanned. And if a marriage was unplanned, it is presumed that the marriage occurred out of obligation rather than from careful consideration by the prospective spouses. If, due to an unplanned pregnancy, a woman was pressured to marry the father, there is a higher likelihood of error in her decision since she was unable to sufficiently vet her prospective spouse for his ability to financially support her and her children.

So the assumption is that males who married in shotgun weddings are likely to be less productive than males whose weddings were planned well in advance. If this is the case, then selection bias argues that only the latter would experience a marriage wage premium. What these researchers in fact found was that even for males who married in shotgun weddings, their wages exceeded the wages of males who had never married. Controlling for other factors, the average male who married in a shotgun wedding earned about 24 percent more after seven years of marriage relative to the average male who never married. By comparison, after six years of marriage the average male who married when his bride was not pregnant earned about 21 percent more than the average male who never married.

One final study confirms to an even greater extent the argument that marriage causes male productivity to increase and is therefore the cause of the marriage wage premium. Using a sample of 138 pairs of identical male twins, Kate Antonovics and Robert Town conducted a cross-sectional study, and once again affirmed the prevalence of a marriage wage premium. Consistent with the other studies, they found that the males who married earned 19 percent more than the males who never married.

They then separated out the 31 pairs of the twins consisting of one who had married and the other who had never married. After controlling for other factors, they compared the wages of these two groups and found that the married twin earned on average 26 percent more than his never-married twin brother. This means that the average unmarried twin brother was earning $40,000, while his married twin was earning more than $50,000.

Identical twins have the same genetic makeup and most are raised in the same household by the same parents. Any pair of monozygotic twins consists of two people likely to have similar, if not identical, productive capacities. Consequently, any differences in wages between the two cannot be attributed to differences in productivity, since any difference is likely negligible, if any exists at all. This study further reinforces that marriage is the cause of the marriage wage premium.

Costs of Cohabitation

Although earning a greater lifetime income is certainly preferred to earning less, a higher income is neither the sole benefit nor purpose of marriage. As discussed earlier, one reason for the increase in people delaying marriage is that a greater number of women are choosing to invest in their human capital. In its place, couples are choosing to cohabitate, most with the intent to marry later, and the belief that by living together first they can better evaluate their partner as a future spouse. If cohabiting with a partner does not work, they split up and move on to a new partner, hoping to establish a relationship that survives to marriage. Unfortunately, cohabitation introduces a host of new problems.


FNC_Winter_2014-EducationMarriageChildren


Women and Education. Women who delay marriage can benefit in the form of higher wages, but that assumes that the reason for delaying marriage is to invest in human capital and establish their career. This has been primarily true for women who eventually go on to earn a college degree, but not so for most of the rest. As Graph 4 shows, women with less than a college degree are far more likely to have a child out-of-wedlock than women who earned a college degree.

Eventual Marriage. About 55 percent of cohabiting heterosexual couples do marry within five years of moving in with each other, but again, that is largely concentrated among the college educated. Those without a college degree were far more likely to break up before ever marrying, but not before having at least one child.

Kay Hymowitz and her colleagues at The National Marriage Project at the University of Virginia refer to this trend of women delaying marriage, yet having babies before they marry, as “The Great Crossover.” Historically, women who postponed marriage also postponed having children. But that trend changed, leading to the crossover in 1989, when for the first time the average age of first marriage for females exceeded the average age they gave birth to their first child.

Costs to Children. The costs to children born to parents out-of-wedlock, including to cohabiting parents, are significant. These children are far more likely to live in poverty, abuse drugs and alcohol, experience more emotional and physical health related issues, perform less well in school, including dropping out, and are three times more likely to observe their parents break up than are children born to married couples. As a consequence, when these children reach adulthood they lack the skills needed for employment in the information economy, and they are likely to experience at least one divorce and have at least one child out-of-wedlock. This has been especially true for males raised in single-parent households and who grow up lacking the skills required to compete in today’s economy compared to their peers raised by continuously married couples.

The Cart Before the Horse

Not only is having children out-of-wedlock a cost of delaying marriage, other factors also make it a less attractive option. Marriage is a means of emotional, physical, and spiritual support for both husband and wife, allowing both to mature. Surveys show that people who marry by their mid-20s reported being happier with their lives compared to those who delayed marriage or were never married. Hymowitz et al. note that “Thirty-five percent of single men and cohabiting men report they are ‘highly satisfied’ with their life, compared to 52 percent of married men,” and “Likewise, 33 percent of single women and 29 percent of cohabiting women are ‘highly satisfied,’ compared to 47 percent of married women.”

In addition, married people tend to live longer and experience longer survival rates from health setbacks. For example, a recent study by the National Cancer Institute found that people diagnosed with cancer who were married at the time of diagnosis lived “markedly longer compared to unmarried patients.” Doctors attribute this difference in outcomes to the emotional support and care a spouse provides.

For people younger than 30 today, marriage has become something to which one aspires after achieving other objectives, such as an established career and financial stability, not something that helps them achieve these objectives with someone they love, support, and from whom they receive emotional, physical and financial support. By putting the cart before the horse, they are more likely to impede the very happiness they aspire to achieve.

Social Trends

The social trends causing this decline in marriage include technical transformations in the workplace, availability of cheap contraceptives, easy access to abortion, reduced social ostracism for cohabiting and for having children out-of-wedlock, and the change to no-fault divorce laws. As the cost of engaging in premarital sex fell, the number and frequency of couples engaging in premarital sexual relations increased. Furthermore, no-fault divorce laws produced a surge in the number of terminated marriages for parents, creating a generation of younger people who now view marriage not as a foundation of support and comfort, but as something unreliable and oftentimes painful. And although career opportunities for females have expanded, for males they have contracted, especially for those raised by a single mother.

Fifty years ago, males likely married a female with just a high school education regardless of whether they went on to college or not. We see more assortive mating today where a male doctor or lawyer or accountant now marries another doctor or lawyer or accountant. This leaves females who lack a college degree dwindling opportunities to find a potentially suitable spouse with the means to financially support her and a family.

The consequence of all of this is that cultural attitudes toward marriage and having children outof- wedlock have shifted; behavior that was once proscribed is now considered normal. Fortunately, there has been an increase in the number of groups from all political and socioeconomic spectra speaking out against this trend and seeking ways to reverse it. Efforts to abate teen pregnancy have proven effective at reducing the rate of births to unwed teens over the past decade, so there is optimism that this trend of delaying marriage and having children out-of-wedlock, too, can be reversed. The obstacles are substantial and include improving the education system so that both males and females are better prepared for more information and knowledge based careers. In addition, we need to better educate younger people about the deleterious outcomes of cohabiting and having children out-of-wedlock. But as in the case of teen pregnancy, information spreading from both private and public sources is the key to turning back behavior that has proven to be both personally and socially destructive.

DOWNLOAD ENTIRE ARTICLE (with images and endnotes)


Mark Steckbeck, Ph.D., is an Assistant Professor of Economics at Campbell University.

* The views expressed in this article are the author’s and do not represent official positions of Campbell University.


SHARE THIS ON FACEBOOKSHARE THIS ON TWITTER

Receive Our Legislative Alerts