David R. Henderson  

"Get Married and Stay Married"

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I'm glad that co-blogger Bryan Caplan raised the issue of the marriage premium.

When I was writing a review of Dwight Lee's and Richard McKenzie's excellent book, Getting Rich in America: 8 Simple Rules for Building a Fortune and a Satisfying Life, I called Dwight to ask a question and we got talking about Rule #5: Get Married and Stay Married. Dwight pointed out that if you follow the other 7 rules but don't get married or stay married, you have a substantial probability of building a fortune and a satisfying life. But, he said, if you don't get married and stay married, you tend not to follow at least some of the other 7 rules.

My own life is an example. When I left the University of Rochester in 1979 to go the Cato Institute in San Francisco, I had a liquid net worth of about $23,000. That was a substantial amount in 1979 for a 28-year-old who was unmarried. So that seems already to contradict Lee and McKenzie's rule #5. But when I left San Francisco 2.3 years later for Washington, D.C., my net worth was about $1,000.

I think that my saving $23K was an aberration. I had grown up with a strong ability and willingness to save, stronger than that of almost every guy in my cohort. I also had an artificial incentive to save. I went to the U. of R. in August 1975 without my dissertation done and I was on an F-1 student practical training visa. At the time my net worth was approximately -$2,000. I had to get my Ph.D. by December 1976 in order to move to the next step of the immigration process--getting a green card. But I had noticed one little loophole in the law: I could get a green card if I invested $10,000 of my own money in a business. (That has now been raised to $1 million.) So I had a plan B. If I didn't finish my dissertation in time, I would invest $10,000 in a book store, have it open for 4 or 5 hours a day, and spend the rest of my time finishing my dissertation. In my first year at the U. of R., my salary, including summer money, was $20K. So I lived like a graduate student for a year--had a cheap apartment, bought used furniture, took on a roommate for 4 months of that year--and had a liquid net worth of $9,300 at the end of the year. A $700 loan from my father would have been a no-brainer for both of us. Of course, I ended up meeting the deadline for the dissertation and Ph.D. and immigrated. (Although not without a hitch, something I'll talk about sometime in the future.)

Then I wanted to buy a house and in those days, interest rates were so high that there was a strong incentive to assume an existing loan and get a lower rate, but you had to come up with the cash. So my father gave me 2 or 3 grand and I assumed a mortgage on a house of a colleague who was moving. He gave me a deal on the house for a quick sale and my net worth jumped to about $17K. Then the next year I sold and the price of houses had risen, and thus the net worth of $23K.

But once I got to San Francisco, I didn't see any good reason to keep saving. So I spent it. It was only when I decided that I wanted to propose to my wife-to-be that I immediately committed to saving again and did save.

The more I've observed about people in the 14 years since that conversation, the more I've come to agree with Rule #5. I have a friend, Harry, whose father first married when he was in his 50s. He had a high income as CEO of a major Canadian company. Funny thing, though, said Harry. With all those years of high income, he didn't have much saved when he entered his first and only marriage. I pointed out Lee and McKenzie's point and that helped resolve a puzzle for Harry.

HT to Michael Davis.

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COMMENTS (13 to date)
Kevin Driscoll writes:

Has anyone proposed that the increasing divorce rate is partly the cause of a lower savings rate in the US? I don't actually know if people spend less time married, on average, today than they did 40 years ago, despite the increased divorce rate. Maybe they are just married to different people for a roughly equivalent number of years.

Do you know of anyone who has studied the correlation between marriage/divorce rate and personal savings rate, Dr. Henderson?

Finch writes:

Kevin, didn't the divorce rate peak about 35 years ago? Late 70s, if I remember correctly. It's been on a steady downtrend since then.

Pemakin writes:

I know you don't need me to quote Milton Friedman back to you but this is really an illustration of his point abouth the difference between an individualist society and a family society. Anything that penalizes savings or inheritance will penalize the formation of families and undermine an important human incentive, the desire to build safety for the family.

Hazel Meade writes:

I have a suspicion that the tax benefits to marriage are going to start coming under attack from a surprising direction: feminists.

We're in an economy where many more women than men are getting college degrees, including advanced degrees. Which means that in the future there will be a lot of women bread-winners. In the past, the tax benefits induced men to marry women and help support children, but female-breadwinner heads of houshold may not feel any particular need to marry and may resent being cajoled into doing so by the tax benefits.

Kevin Driscoll writes:

@Finch It seems that you're right. Clearly, I've been misled by people talking about destruction of family values, etc etc etc. The number of divorces per capita, per year has been decreasing over the past few decades. So has the number of marriages per capita per year. The net effect seems to be that the divorce rate is falling faster than the marriage rate. However, it was harder for me to find corroboration of the percentage statistics than the per capita numbers.

I imagine fluctuations in the rate of cohabitation without marriage are a significant confounding factor.

Foobarista writes:

What is the savings rate among people who are married, especially if they've been married for a few years?

Joe Cushing writes:

I would think a man would me more likely to save without a wife. Wives spend money on quickly depreciating assets while the man is working. Marriage increases income because wives push men and because wives work and share expenses.

You mentioned that getting married and staying married is important. Since the staying married part is completely out of the hands of the man, as women often just lose interest and leave men, getting married and having children is a huge huge huge risk for a man. Women often leave men because they are genetically programmed to seek genetic diversity for their offspring. That's why they lose interest after a while of a marriage that has no real problems. So a man has a 50% chance she will live him or be so intolerable that he has to leave her. Then a portion of marriages that last are not happy marriages.

If the wife leaves him, he because as alone as he would have been had he not married in the first place but he has to pay for her lawyer, she takes half his money, the house, the car, and gets a 20 year payment plan of about half of his net income.

This sounds like the definition of gambling to me. Take a risk to achieve economic success and relationship happiness when odds are in favor of a marriage bringing economic ruin and depression. This is why men also commit suicide many times more frequently than women.

Tracy W writes:

Wives spend money on quickly depreciating assets while the man is working.

Such as food and cleaning products. While single men are notorious for buying long-life assets: it's well known that you never encounter them at pubs, or football games, or casinos, or driving flash sports cars. Occupations dominated by single men, such as remote Australian mines, are known for their sobriety and high rate of asset accumulation.

If the wife leaves him, he because as alone as he would have been had he not married in the first place but he has to pay for her lawyer, she takes half his money, the house, the car, and gets a 20 year payment plan of about half of his net income.

Funny how you think it's *his* money, not theirs. You also fail to mention how the woman often has main custody of the children, so her expenses are the higher of the couple (we may want to distinguish between wealth and utility here of course).

Women often leave men because they are genetically programmed to seek genetic diversity for their offspring.

I can think of reasons why genetic diversity in offspring would be something our genes would favour, but I can't think of any reason why women's genes would be more likely to benefit from genetic diversity amongst offspring than men's genes. Noticeably, each act of conception produces a new shuffle of the genetic dice (I am not a biologist but I understand that identical twins coming from the egg splitting after conception), and a woman can't have that many children in a life-time anyway.
Also, it seems odd to say that people are genetically programmed for a reasonably conscious activity like who to have sex for and whether to stay married, unless you go in for determinism all the way.

Joe Cushing writes:


It's fine that you and other women can see it this way but the truth is the court system GROSSLY favors women in divorce and it is women who initiate most of the divorces, often because they just lost interest and can't put their finger on why. It's his money if he earned it. If he hadn't gotten married in the first place he would not have to give it to you. Sure the child has expenses but why does he have to pay for her expenses and not just 50% of the child's for the time the child is with her? Why are her expenses higher if he makes more money? Why is it that she is suing him but he has to pay for her lawyer? Why does she get custody when studies show that the best interests of the child are equal custody? If she can't afford to give the child a good home, why not let him have custody?

In any case, it doesn't matter if you can see the truth in this situation. Men are seeing it and more and more, men are refusing to get married. This has women upset and men are being called childmen by them and there are whole documentaries about how men refuse to grow up and hand over half of their income to women. Men don't fear commitment, men fear the guns of the state are going to come and rob them when the women decide to leave them.

We have all seen men be ruined by women. I have a cousin that is being ruined right now. I think his wife left him because she was homesick. She tried to steal the baby and went to another state where her mom lives. After they threatened her with jail, she came back and robbed with, using the guns of the state. She completely broke him financially. This story happens millions of times a year. In his case, he has to pay her 46% of his income and $3000 for her lawyer. They were newlyweds.

Tracy W writes:

Firstly, marriage is a partnership. Very often, where there's a substantial earning difference, what's going on is that one person is earning the money and the other is providing home services, such as childcare.

As for biases, I've seen plenty of claims by ridiculously biased courts, regardless of gender, or relationship (eg grandparents versus parents), and not just of family court rulings, but of all other court cases, including corporate cases where you'd think the parties would be less emotionally involved. Consequently such claims, unless based on good statistics, don't impress me much.

I also doubt your statistic about this happening millions of times a year, a quick google indicates that divorces are something like 1.2 million a year in the USA (though statistics seem dodgy), which is less than 2 million total, and somehow I suspect you haven't done a careful study of international financial splits after divorce.

Joe Cushing writes:

So if somebody marries Warren Buffet, why is their child care worth so much more than the average person? Many other countries are just as bad or worse than the United states. For example, if you sign a pre-nuptual agreement, then move to England and man earn 40 million pounds while the wife earns nothing--the judge does not consider the prenup and she takes a huge chunk of that 40 million. Which again makes me ask the question, why is her child care worth so much more than the average persons's child care? Why does the woman get a percentage of what the man earns? Child care is a pretty standard job. Shouldn't it be worth same amount of money from one household to the next? What if there was no child and the woman worked but earned a lot less than the man? Why does she get to take what he earned when she decides to dump him? Fine what's his is hers as long as she is faithful to him but if she is going to leave him then she can take what she earned.

Why would somebody sign a contract that entitles somebody else for half of everything they earned for the life of their relationship, then have a child with them which entitles that person to about half of that somebody's net pay for 20 years--simply for the pleasure of living with them for as long as the other person decides they want to? All this knowing full well that half the time, the other person leaves and and exercises the contract or they are so miserable that the somebody has to leave.

You can feel as entitled as you want to but why would I sign that contract? Just to get your company?

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Thomas writes:

It has always seemed to me that "get married and stay married" is advice akin to "buy stocks that will go up; if they're not going to go up, don't buy them".

Unfortunately, "get married and find yourself divorced" is a lifetime guarantee of poverty for breadwinners (like, you know, people who went to college and maybe even have debts to pay off). Outside of disability, it's hard to think of anything else as destructive of a breadwinner's welfare, as divorce.

Basic economics: economic welfare is not about how much you earn, it's about what you keep and/or consume. I've met too many upper-middle-income men just getting by in their 50s (and even 60s), while their still-at-home-after-all-these-years wives live in the houses they're paying for. One of them, in his 70s, was still working, still paying support to a woman who had left him 30-something years before. These men have high incomes, but dreadful lifestyles. Marriage is not a form of investment: it's a form of consumption, and it's more expensive than it looks.

I'm dubious about the marriage premium. I work my butt off, and I save like crazy. In my experience, being in a long-term relationship now is nice, but it is really limiting my ability to shine at work by putting in the hours (white collar career, no such thing as 9-to-5 or real weekends), and is really limiting my geographic flexibility as well. I love her, but having her in my life is detrimental to my income. Now, David Henderson may point out, here, that anecdote is not data, to which I can only respond, "exactly". :-)

Tracy W, I understand your legalistic point that marriage is structured as a financial 50/50 partnership with all the financial risk on the breadwinner, if there is one (something few men really understand, in my experience). My point is only that, as a prescription for building wealth, it is good if you are a low-income person marrying a higher-income one, but not the other way around (including if your formerly-equal-income spouse decides to drop the intensity a few years after the wedding).

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