ATWT Series one: The Two-Income Trap by Elizabeth Warren and Amelia Warren Tyagi
Puncturing the heart of the book, or Chapter Three
Chapter Three Discussion
This chapter is about as far as most people speaking of the book have gotten, and it is the heart of the Two-Income Trap. That heart is the idea that stay-at-home mothers (SAHMs) are backup income earners and thus allow single income households to avoid the, well, you know. Of course this idea is mostly wrong and is simply an emotional argument based on Elizabeth Warren's own very working-class childhood.
On page 68 Warren admits this idea is made up from whole cloth and entirely her own. But in between the start of the chapter and that page near the end we see the same pattern of conflating working-class and working poor with middle class.
After opening with a two-income family going bankrupt because of mom's unemployment due to caring for a very sick child, Warren rambles about the lack of a safety net in society before on page 58 using a description of stay-at-home mother that is working class, not middle class. In all honesty it could even be construed as poverty-level. Middle class housewives during the 1950s and 1960s had household help. Additionally, bankruptcy from the loss of mom's income is explicitly not middle class.
Warren moves on to the only footnoting in this chapter, which is pretty light on footnotes (thus footnote discussion will be left entirely to that section for this chapter), when discussing SAHMs entering the workforce due to their husbands losing their jobs. By couching it in terms of "more likely to do so when the kids are bigger and won't incur daycare costs", Warren elides that it is still not very common at all for SAHMs to do so. Further a SAHM entering the workforce replaces 25% of the husband's lost wages, which...is the amount that working mothers contribute on average in two-income married families. But how having 25% of one income staves off bankruptcy is left as a confusing exercise for the reader. Warren also presents divorce as a weather event again, which in this context is particularly weird.
Ultimately this chapter reiterates Warren's refrain that spending she thinks is important is essential even though her one-income comparison couple did not require such spending and comparison one-income year 2000 couples did not necessarily require such spending. We're only at chapter three and essential spending requiring two "full" incomes (in quotes because over and over in the example bankrupt couples, one of them is not working full time long before bankruptcy) is up to preschool, college tuition, health insurance, two reliable cars (and she wants them, from chapter two, to have every safety bell and whistle in her definition of reliable) and a safe neighborhood with good schools.
It is notable that most people interpret this book as being entirely about the last item driving people into bankruptcy but the text itself adds a long list of other, very big-ticket spending items besides a mortgage in a low-crime neighborhood with a low student-teacher ratio (people believe test scores is the requirement for a good school from this book, but it's low student-teacher ratios almost entirely).
Warren, after a lengthy justification of all this spending then says nobody could have foreseen the (not quite) Two-Income Trap. She does wisely point out that conservatives relied on emotional arguments which tend to lose to obvious positive economic arguments. But her conclusion is pretty much that all savings being tax exempt would fix it. Ironically, this is a suggestion that is very close to tax policy earlier in the 20th century, even before the 1970s.
Many more forms of spending outside of basic bills were exempt or sheltered from taxable income and savings sometimes fell under that heading. In fact it is still the case in many states that interest from government savings instruments is either not taxed or taxed in a way that is more favorable than passbook savings interest. Mentioning that would have made the end of this chapter much more interesting in terms of discussing the policy implications of not taxing savings and how they related to preventing or reducing bankruptcy. Missed opportunity, though she does mention that the savings rate for year 2000 families was effectively zero, a throwaway comment that also undermines her arguments about two incomes.
Anyway, on to the meagre footnotes, which can be included in this post and thus are below.
Footnotes Discussion for Chapter Three
The footnotes are rather minimal but we do learn that a full-time female worker *regardless of marital status* had a median income of 22k in 2000 dollars. The footnotes fail to provide earnings by marital status and thus fall back on wages of early 20s women as a proxy, which is a bad approach. Notably even in 2000, there were still a lot of part-time "working mothers", so including earnings of working mothers would have left Warren with a smaller income contribution from working mothers, thus the use of a metric heavy on childless unmarried educated women.
Moving on to whether SAHMs actually join the workforce when husbands lose their jobs, the footnote discussing that boils down to "it depends". It turns out there wasn't really evidence of "added worker effect" unless one looked at women strategizing to enter the workforce years before a husband's job loss. This of course means that her whole argument about SAHMs as backup earners rests on the set of SAHMs planning divorce, the main circumstance in which one would be planning to get a job years in advance. Warren relies heavily throughout this book on divorce being an essentially neutral factor in bankruptcy and this assumption is woven all through examples of couples who are not getting divorced but go bankrupt, or examples of never-married single mothers.
Similarly, Warren mentions difficulty with a SAHM getting a job in a high unemployment area in the main text, but the footnote reveals she's literally talking about black women in high unemployment areas. This is especially sneaky because of the already rock-bottom black SAHM rate in the first place. The entire book is debunked in a way by the experiences of black families adopting two "full" incomes earlier than white and Hispanic families, but that is beyond the scope of this footnote discussion.
The remaining footnotes are generic obvious stuff, except for the shoutout to Phyllis Schlafly and the reference for an "effectively zero" savings rate is one of the very few I was unable to track down, so for more enterprising folks it is footnote 17 on page 211.
Wrap-up of Chapter Three
There's not much to say, it's really just some emoting and that this was turned into some kind of "the experts say" bullet point is rather disheartening, but then again we all lived through a recent series of even more egregious cases of that.