Economy & Business

Momonomics

Claudia (R) and her dauther Katharina cook lunch at their home. June 20, 2012. (Michaela Rehle/Reuters)
Why it costs so much to have a stay-at-home mother

The fact that it is so economically difficult for most families to have one stay-at-home parent sometimes is presented as evidence that the economy isn’t working the way it should. Looked at another way, that’s exactly backward: Families find it much more difficult today to have a stay-at-home parent mostly because the labor market now values women’s labor much more highly than it once did.

Economic justice is here, ladies. Enjoy it!

In the Eisenhower-era economy, a working woman could expect to earn something on the order of 59 cents for every $1 earned by a male counterpart, according to census data. The wage gap was actually a bit larger in the early 1970s. But in 2020, that has changed: Women’s real wages have risen about 60 percent since 1980, whereas men’s wages have risen about 6 percent. Among married couples, two out of five wives outearn their husbands. Women in their early 20s earn more than men in the same age cohort. All of this points to a labor market that no longer discounts work done by women.

Naturally, a lot of women are unhappy about that. A lot of men, too.

Think of it this way: If you want to have a stay-at-home mother (stay-at-home fathers are a thing, too, but let’s not pretend that this is a sexually neutral question), then dear old Dad has to earn enough to do two things: 1. Provide the desired standard of living for the family, and 2. Buy Mom out of the labor force on behalf of the firm of Family, Inc.

As women’s relative value in the labor market has climbed, that has become a more expensive proposition. In a situation in which a wife’s potential earnings are half her husband’s, taking her off the labor market represents a hit of 33 percent to the couple’s potential joint earnings. If they have roughly equal earnings potentials, then her staying at home reduces their income by half. If she’s a recent graduate earning $60,000 to her husband’s $40,000, then taking her off the market reduces household income by 60 percent — a big hit.

One of the things that may have contemporary couples feeling this even more sharply than they would have in a stereotypical 1950s family is increasingly fierce socioeconomic sorting, i.e. the fact that we now tend to marry spouses who have similar earnings potentials. An Eisenhower-era lawyer was less likely to be married to another lawyer than a contemporary lawyer is. In situations in which the wife’s potential earnings were only a small fraction of her husband’s, having her stay at home imposed only a very modest opportunity cost.

I can hear some of my populist friends already demanding, “Why should my family have to compete with the Fortune 500 for my wife’s time?” That’s just another way of saying, “Why should I have to live in a world with scarcity in it?” And scarcity is real — it is not optional, it is not something invented by economists, nor something that has been foisted on the world by conniving capitalists.

If you want a world in which women’s work is highly valued in the labor market, the opportunity cost of taking women out of the labor market is going to be high.

Another way of looking at the issue is this: Women’s labor is valuable, and it is going to be consumed in any case, whether the woman in question does paid work outside the home or does not. Families with a stay-at-home mother pay a price for consuming her labor, just like they pay a price for tuna and Netflix.

That’s why Elizabeth Warren and Amelia Warren Tyagi get it slightly wrong in The Two-Income Trap. In an interesting interview with Mother Jones (well worth reading in its entirety), Tyagi argues that “a big part of the two-income trap is that families have basically bid up the cost of living.”

A generation ago, an average family could buy an average home on one income. Today you can’t do that in three-quarters of American cities. . . . A lot of that has to do with public schools. As confidence in the public schools has dwindled, people are bidding up the prices on homes in those school districts with good reputations; so for a typical family, the only way to afford one of those homes is to send mom to work. . . . Of course that’s where you see the trap. If families were simply sending Mom into the workforce and using that money to build their savings, or to have more fun, or to go on more vacations, you wouldn’t see the same kind of financial trap.

There are a lot of unspoken assumptions in that, of course. For example, our houses are bigger (both in absolute terms and in per-resident terms) and better appointed than they were a generation or two ago, and shopping the elite school districts is something characteristic of relatively affluent families rather than struggling ones — another example of the fact that our policymaking discussion is dominated by and reflects the interests of elites who are well-off but not as well-off as they would like to be. That’s why middle-class tribunes such as Senator Warren spend more time talking about college loans than high-school dropout rates. But where Tyagi and Warren get it wrong is this: That labor already was valuable, irrespective of whether women entered the formal work force or did not. There isn’t any way it wasn’t going to be priced.

(The story of women’s entry into the labor force in the modern era is sometimes exaggerated: In the 1950s, a third of U.S. women already were in the labor force, with the number rising to about 60 percent by the turn of the century.)

Even in the relatively narrow world of oil, with an industry dominated by state-run firms, OPEC can’t manage to run an effective cartel — how much less likely is it that American families would be able to cartelize women’s labor? Or that American families are going strategically shift their consumption patterns away from bigger and nicer houses toward more expensive vacations . . . because Amelia Warren Tyagi thinks they should?

There are many women who would prefer to stay at home rather than enter the formal work force — affluent and educated people may fret about their careers, but most people just have jobs that they would not do if they did not need the money. Senator Warren et al. think that government should make it easier for them to do so. So do many on the right.

But there are also Republicans and Democrats who want to make it easier to be a working mother, for instance by subsidizing child care and parental leave. Though everybody’s hearts may be in the right place on these issues, as a purely economic question, the two sides’ policy goals probably would end up working at cross purposes: Subsidized child care would operate in effect as a wage subsidy for mothers, raising the cost of buying them out of the labor force by making the opportunity cost of being a stay-at-home mom higher. Tyagi acknowledges as much in her Mother Jones interview, arguing that subsidies for working mothers should be offset with subsidies for stay-at-home mothers, “in the hopes that that would offset the competition between families. Otherwise, you’re providing even more financial pressure on one-income families, and forcing those remaining stay-at-home mothers to enter the workplace in order to keep up with everyone else.”

The last six words there — “to keep up with everyone else” — really tell the story. Tyagi insists that the underlying problem is not irresponsible consumption, and it isn’t: It’s just consumption. We compete as producers, but we also compete as consumers. There isn’t any clever way around that. Money, properly understood, is only a record-keeping system, a way of simplifying the fact that all the goods and services available in the marketplace are in reality priced in terms of all the other goods and services in the marketplace. Giving somebody $100 doesn’t change the supply of houses, avocados, or Honda Civics in the world, which is why having the government write every American a check for $1 billion wouldn’t give everybody a billionaire’s standard of living. Subsidizing consumption for one group of people is generally going to leave the unsubsidized group relatively worse off, because we compete as consumers in a world of scarcity.

That doesn’t mean that we shouldn’t subsidize some kinds of consumption, e.g. through programs for very poor people, for children, for people with disabilities, etc., or through such consumption-smoothing programs as old-age benefits. But we should be mindful of political incentives, which tend to convert good intentions into bad programs. Very clever-seeming policies (for example, the grievously misnamed Affordable Care Act) end up being a lot less clever in practice. That’s one excellent reason to prefer less clever-seeming but much more straightforward social-welfare policies such as sending poor people money.

There’s no getting around economic reality, and whatever programs we may design to help families live the way they want to live, we should start by recognizing that. Making it easier to be a stay-at-home mom is not a matter of labor-market regulation or housing policy — it’s a consumption subsidy.

We know what Mom’s labor is worth to the Fortune 500. What’s it worth to you?

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