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Americans live in larger households to save money
January 17, 2011, Monday
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EDITOR'S note:
This is the second and last part of a Wharton article on the US Census Bureau's American Community Survey involving poverty. It was published in September.
A NATIONWIDE study published in April by the Pew Research Center, a public opinion research organization in Washington, DC, showed a correlation between declining birth rates and increasing economic hardship in the US.
"Strong associations were found between the magnitude of state-level birth rate change from 2007 to 2008 and the magnitude of the previous year of per capita income change and housing price change," the study's report stated.
Kristen Harknett, a sociology professor at University of Pennsylvania, cited a study in Europe she worked on that shows a link between low fertility rates, economic uncertainty and unemployment. She suggests this is equally applicable to the American context.
Like marriage during an economic downturn, "people put off having kids, and when there is greater economic uncertainty, they may put it off so long that they end up having fewer children than originally planned," she says.
Not only are fewer couples having children; they are also less likely to get married these days. As Wharton's management professor Peter Cappelli noted, "Marriage choices are influenced by a lot of things, including the economy." Just the cost of a wedding alone might be enough of a deterrent to tie the knot.
The Wedding Report, an Arizona-based research company that tracks the US wedding industry, said the average cost of a wedding is rising, to US$23,867 in the first half of this year, from US$19,581 in 2009 and US$21,814 in 2008.
Samuel Preston, a demography professor at the University of Pennsylvania, said it's not just about when to get married - but also to whom - that is often determined by economic stability. He is not surprised people are putting off this major life change. "Marriage is part an economic union, and it's easier to form a stable relationship when there is a steady source of income," he noted.
More couples in bad times
But as Wharton professor of business and public policy Justin Wolfers pointed out, marriage rates have been falling for the past 30 years, even during economic booms. He argues that marriage is more appealing during bad economic times because it's an "insurance policy," so if one partner is laid off, there is still the other partner's income to live on.
"Looking at the institution of marriage through the eyes of an economist, I am surprised marriage has not risen more during this recession," Wolfers said. Once couples do get married, the economy could play a role in the longevity of their unions.
Harknett pointed to a study she has worked on over the last two decades looking at the dynamics of 5,000 families in urban areas. The study showed that couples experiencing big drops in income during the recession were more likely to get divorced.
In addition, couples living in parts of the country where foreclosures and unemployment were high were more likely to get divorced than those in more stable locations.
Economics of relationships
Other Census Bureau research sheds further light on the economics of relationships. Between January 2009 and July 2010, its Current Population Survey found that the number of unmarried, opposite sex couples living together increased 13 percent.
The Census Bureau was so surprised by this trend that it published a working paper in September after digging deeper into the results to see whether economic situations, such as long-term unemployment, had anything to do with the increase. It seems that it did.
According to the paper, both partners of a couple who have just started living with each other were less likely to be employed (39 percent) than other couples (50 percent).
What's more, the newly established couples were also younger, with 37 percent of men and 45 percent of women between 15 and 29, compared with 23 percent and 32 percent, respectively, for longer established couples. They also were part of larger households - 24 percent lived in households with five or more members, compared with 15 percent of longer-term couples.
The latter finding correlates with other Census Bureau findings showing that both the number of people living in households and the number of non-relatives living in those households have increased.
Irma Elo, a University of Pennsylvania professor of sociology, said that if individuals were not living with friends and family, the poverty rate would likely be much higher. "That's definitely an indicator of how families are coping with the economy."
According to Preston, increasing household size is expected when poverty increases.
He said that 100 years ago, when more than half the country was considered impoverished, people had much larger households because extended families lived together, people took in borders, and multiple families lived under one roof. "It's been shown over and over again that when income grows, people express their preference for small living units," he said.
But will such demographic shifts reverberate to the economy? Wolfers said the current cohabitation trend "... could be a factor hindering the recovery of the housing sector."
(Reproduced with permission from Wharton@China, http://www.knowledgeatwharton.com.cn. All rights reserved. Shanghai Daily condensed the article. )
This is the second and last part of a Wharton article on the US Census Bureau's American Community Survey involving poverty. It was published in September.
A NATIONWIDE study published in April by the Pew Research Center, a public opinion research organization in Washington, DC, showed a correlation between declining birth rates and increasing economic hardship in the US.
"Strong associations were found between the magnitude of state-level birth rate change from 2007 to 2008 and the magnitude of the previous year of per capita income change and housing price change," the study's report stated.
Kristen Harknett, a sociology professor at University of Pennsylvania, cited a study in Europe she worked on that shows a link between low fertility rates, economic uncertainty and unemployment. She suggests this is equally applicable to the American context.
Like marriage during an economic downturn, "people put off having kids, and when there is greater economic uncertainty, they may put it off so long that they end up having fewer children than originally planned," she says.
Not only are fewer couples having children; they are also less likely to get married these days. As Wharton's management professor Peter Cappelli noted, "Marriage choices are influenced by a lot of things, including the economy." Just the cost of a wedding alone might be enough of a deterrent to tie the knot.
The Wedding Report, an Arizona-based research company that tracks the US wedding industry, said the average cost of a wedding is rising, to US$23,867 in the first half of this year, from US$19,581 in 2009 and US$21,814 in 2008.
Samuel Preston, a demography professor at the University of Pennsylvania, said it's not just about when to get married - but also to whom - that is often determined by economic stability. He is not surprised people are putting off this major life change. "Marriage is part an economic union, and it's easier to form a stable relationship when there is a steady source of income," he noted.
More couples in bad times
But as Wharton professor of business and public policy Justin Wolfers pointed out, marriage rates have been falling for the past 30 years, even during economic booms. He argues that marriage is more appealing during bad economic times because it's an "insurance policy," so if one partner is laid off, there is still the other partner's income to live on.
"Looking at the institution of marriage through the eyes of an economist, I am surprised marriage has not risen more during this recession," Wolfers said. Once couples do get married, the economy could play a role in the longevity of their unions.
Harknett pointed to a study she has worked on over the last two decades looking at the dynamics of 5,000 families in urban areas. The study showed that couples experiencing big drops in income during the recession were more likely to get divorced.
In addition, couples living in parts of the country where foreclosures and unemployment were high were more likely to get divorced than those in more stable locations.
Economics of relationships
Other Census Bureau research sheds further light on the economics of relationships. Between January 2009 and July 2010, its Current Population Survey found that the number of unmarried, opposite sex couples living together increased 13 percent.
The Census Bureau was so surprised by this trend that it published a working paper in September after digging deeper into the results to see whether economic situations, such as long-term unemployment, had anything to do with the increase. It seems that it did.
According to the paper, both partners of a couple who have just started living with each other were less likely to be employed (39 percent) than other couples (50 percent).
What's more, the newly established couples were also younger, with 37 percent of men and 45 percent of women between 15 and 29, compared with 23 percent and 32 percent, respectively, for longer established couples. They also were part of larger households - 24 percent lived in households with five or more members, compared with 15 percent of longer-term couples.
The latter finding correlates with other Census Bureau findings showing that both the number of people living in households and the number of non-relatives living in those households have increased.
Irma Elo, a University of Pennsylvania professor of sociology, said that if individuals were not living with friends and family, the poverty rate would likely be much higher. "That's definitely an indicator of how families are coping with the economy."
According to Preston, increasing household size is expected when poverty increases.
He said that 100 years ago, when more than half the country was considered impoverished, people had much larger households because extended families lived together, people took in borders, and multiple families lived under one roof. "It's been shown over and over again that when income grows, people express their preference for small living units," he said.
But will such demographic shifts reverberate to the economy? Wolfers said the current cohabitation trend "... could be a factor hindering the recovery of the housing sector."
(Reproduced with permission from Wharton@China, http://www.knowledgeatwharton.com.cn. All rights reserved. Shanghai Daily condensed the article. )
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