The average two-income family earns far more today than did the single-breadwinner family of a generation ago. And yet, once they have paid the mortgage, the car payments, the taxes, the health insurance, and the day-care bills, today’s dual-income families have less discretionary income—and less money to put away for a rainy day—than the single-income family of a generation ago.
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We offer two examples. We begin with Tom and Susan, representatives of the average middle-class family of a generation ago. ([T]o make the comparisons easy, all figures are adjusted for inflation [and] reported in 2000 dollars throughout this discussion.) Tom works full-time, earning $38,700, the median income for a fully employed man in 1973, while Susan stays at home to care for the house and children. Tom and Susan have the typical two children, one in grade school and a three-year old who stays home with Susan. The family buys health insurance through Tom’s job, to which they contribute $1,030 a year—the average amount spent by an insured family that made at least some contribution to the cost of a private insurance policy. They own an average home in an average family neighborhood—costing them $5,310 a year in mortgage payments. Shopping is within walking distance, so the family owns just one car, on which it spends $5,140 a year for car payments, maintenance, gas, and repairs. And, like all good citizens, they pay their taxes, which claim about 24 percent of Tom’s income. Once all the taxes, mortgage payments, and other fixed expenses are paid, Tom and Susan are left with $17,834 in discretionary income (inflation adjusted), or about 45 percent of Tom’s pretax paycheck. They aren’t rich, but they have nearly $1,500 a month to cover food, clothing, utilities, and anything else they might need.
So how does our 1973 couple compare with Justin and Kimberly, the modern-day version of the traditional family? Like Tom, Justin is an average earner, bringing home $39,000 in 2000—not even one percent more than his counterpart of a generation ago. But there is one big difference: Thanks to Kimberly’s full-time salary, the family’s combined income is $67,800—a whopping 75 percent higher than the household income for Tom and Susan. A quick look at their income statement shows how the modern dual-income couple has sailed past their single-income counterpart of a generation ago.
So where did all the money go? Like Tom and Susan, Justin and Kimberly bought an average home, but today that three-bedroom-two-bath ranch costs a lot more. Their annual mortgage payments are nearly $9,000. The older child still goes to the public elementary school, but after school and during summer vacations he goes to day care, at an average yearly cost of $4,350. The younger child attends a full-time preschool/day care program, which costs the family $5,320 a year. With Kimberly at work, the second car is a must, so the family spends more than $8,000 a year on its two vehicles. Health insurance is another must,... insurance takes $1,650 from the couple’s paychecks. Taxes also take their toll. ...the family has been bumped into a higher bracket, and the government takes 33 percent of the family’s money. So where does that leave Justin and Kimberly ...? With $17,045—about $800 less than Tom and Susan, who were getting by on just one income.
