ATWT Series one: The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi
In which Warren spends Chapter Five discussing how single earners are in a two income trap, bafflingly.
Chapter Five
This chapter is a defense of divorce and unwed motherhood. The chapter opens with a married couple where the wife outearns the husband by a lot and this ultimately leads to divorce and the ex-husband moving in with his girlfriend. Husbands are not the primary earners in any couple mentioned in this text. Notably, after laying out all the benefits of feminism in the form of child support collection improvement (particularly for never-married mothers), higher educational attainment than men, and massive wage increases since 1970, Warren laments that somehow single mothers are worse than ever at paying bills reliably and avoiding foreclosure and bankruptcy.
After making up a number for how many single mothers went bankrupt in 1981, she uses her made-up number to argue that by 2010 1/6 single mothers will go bankrupt, from 1 in 38 in 2000. Warren is fond of the "if trends persist" argument, especially for made-up numbers, several of which are anchors for her bankruptcy predictions and explanations.
On page 106 Warren provides a chart showing the divergence of single mothers from all others in bankruptcy rate increases, but the footnotes reveal a subtler story. On the same page Warren claims that college educated single mothers are even more likely to end up bankrupt than non-college single mothers.
Warren then moves on to discuss the high earning single mother only to reveal that a $46,000 income is not sufficient to service the mortgage on a $105,000 house. We also find that the divorced single mother was married to a guy who was previously divorced, which is historically a major sign of instability and substantially higher divorce risk. Regardless of whether all this is middle class or not, the example woman ("Gayle") is not representative of a median married couple who then divorce.
Warren pretends that her completely made up SAHM as backup earner would have produced a more functional outcome in the wake of a divorce. But she omits that SAHMs who divorced prior to mass entry of married mothers into the workforce received alimony and child support dollars prior to the very short-lived early 1970s period of middle and upper-middle class men skipping out on housewives who had never worked in multidecade marriages.
Middle class married SAHMs had a much lower divorce rate and still continued to receive dollars from their ex-husbands when they did divorce. This is part of why the backup-earning SAHM argument is so absurd; it does not reflect the middle-class financial picture that still held even during the 1970s and 1980s for the most part.
Warren then makes some weird claims that divorce leaves double-income working mothers with essentially no discretionary income, while leaving stay at home mothers from the 1970s with a modest (~20%) amount of discretionary income. There is a chart on page 111 showing this. Again, the footnotes reveal a different story entirely. Warren then describes another divorced mother whose husband earned an extremely low wage pre and post-divorce (less than half of $50000 in 2000 dollars) and how this mother did not bother to get herself removed from her ex-husband's debts during the divorce proceedings.
Warren goes on for a few more pages about the travails of a single mother earnings-wise, including a pit stop to lament the plight of the formerly cohabiting never-married single mother. In a very real sense, this chapter is the least necessary and could and perhaps should have been omitted entirely. It leads her to go on a rambling detour about how child support, being excluded from bankruptcy, has been legally adjusted as well as it could be and that divorced and never-married fathers owing support are filing for bankruptcy strictly to make sure they can pay their child support.
Ultimately this chapter is about non-middle class single mothers with questionable decision-making tendencies running into financial problems, and not a larger symptom of middle-class difficulty at all. Notably, the paywalled source Warren relies on heavily in this chapter from the SMR corporation ends up exposing that her reference pool is explicitly not middle class at all. This will be discussed briefly in the footnotes section, as I was able to find a summary online of the report Warren used for this chapter and the previous one in particular.
And with that we go on to the footnotes for this chapter.
Footnotes discussion for Chapter 5
Warren does reference the classic Lenore Weitzman divorce statistic that incomes plummet for divorced mothers and its debunking in the main text of the chapter, and the footnotes for this reflect the ambivalence of academia about its falsity, with Warren simply declaring in the footnotes that somewhere in academia where you didn't look Weitzman's basic premise is "generally well established".
Another footnote shows that women outearning their husbands went from 11% in 1980 to 21% in 1996 but it does not break out marital status by parenthood, as the aging of the population led to increasing numbers of women earning more than retired husbands among older married couples. So we don't really know if married mothers are outearning their husbands while the children are in the home when daycare and preschool expenses are involved.
Similarly, Warren makes a big deal in the main text about the high rate of single mother bankruptcy in 2000 compared to other groups, but Warren only provides unsourced filing rates (with even the year left out) showing that single mothers are 21.3 per 1000, married parents are 14.7, and single childless men and women are 6.1 and 7.2 respectively. This footnote, being unsourced, nevertheless shows that parents diverge from the childless more than anything else.
This footnote is circular-ish, in that it's connected in the main text to a footnote later on showing bankruptcy filing rates of 2.1 for women filing alone, 4.3 for men filing alone and 2.7 for couples filing jointly in 1981. Both footnotes combined paint a picture that female credit access appears to have driven these increases, as male filing rates did not increase nearly as much in absolute or proportionate terms.
As for the claim in the chapter that college graduate mothers are more likely to be bankrupt than non-college mothers, the footnotes simply aren't there. The references merely go to general family statistics and appear to have disappeared in the process of compilation. We have only Warren's assertion that this is so, but no reference or data.
In a related and more repeated footnotes error, Warren in the footnotes brings in linear regression extrapolation regarding single mother bankruptcy projections and future estimates. Warren also doesn't really, even in the footnotes give a convincing description of how a $105,000 home is consuming so much of a 36-45k per year annual income from "Gayle".
All the numbers add up (although Warren uses post tax income for the 75% of income tally and pretax income for the raise to 46k), but the larger question is how someone with a DTI (debt to income ratio) so high was granted the mortgage in the first place. Even without back payments, the DTI was a mess, and the mortgage should have been rejected without a much higher down payment than the 3.5% that got the couple into the home. All couples and single mothers in this text, to repeat from an earlier post, have FHA mortgages and put almost nothing down. Ironically, this side issue makes up a large part of Chapter 6. Back to the footnotes for this one though.
The comparisons of constructed families "Justin and Kimberly" and "Tom and Susan" involve Warren just tacking more expenses on to divorced Susan. This may or may not be accurate, but it distorts the comparison and makes the entire, very lengthy footnotes about both families questionable in terms of inclusion. Warren also uses 18% of income for nonresident fathers in her calculations, a reasonable assumption explained in the footnotes, but also incompatible with the basic thesis that two incomes are the "trap" middle-class families fall into.
Relatedly, one must go into the footnotes to discover that families went from about 40% having a credit card in the late 1970s to nearly 70% having one in the late 1990s. Over and over again Warren shows that it's not income but credit access that appears to be the real trap.
In closing out the footnotes section, one must note a reference Warren relies on for much of her bankruptcy and debt statistics, a report from SMR corporation titled: "The New Bankruptcy Epidemic:
Forecasts, Causes, & Risk Control". This is a very expensive paid report ($2000 per copy when first published) with a lot of statistical analysis. However, the key thing to understand about this paywalled report are some details that remain on an old, archived description of the full report, copied below.
"42% of households recently had $1,000 or less in all combined checking and savings accounts, CDs, mutual funds, stocks, and bonds.
More than half of all adults have incomes that vary, significantly, from month to month – a dangerous fact in a recession. Leading this parade: workers dependent on overtime, tips, commissions, or self-employment.
More than 10% of households have monthly debts greater than their incomes. How they're getting by at all is hard to fathom.
Adults not working due to unemployment are dwarfed in number by those not working due to chronic or temporary illness or injury.
Medical debts are incredibly dangerous, due to uneven distribution. Nine of 10 households don't have any. Others often owe massive amounts.
Only 25% of low-income households have credit card debt. But 48% of zero-net-worth households do, and they owe nearly twice the average amount."
Much of the data used to construct Warren's narrative base about middle-class families relies on these statistics, which are actually used to denote subpopulations at very high risk of bankruptcy due to having low incomes and zero net worth.
Wrap-up for Chapter 5
Chapter 5 is really extraneous fodder, and could have been cut, but keeping it in the book just makes Warren's overall arguments weaker, although writing about multiple households with bad credit management is a good setup for the discussion of subprime lending that is big chunk of Chapter 6.