Introduction:
How do two people benefit from committing to spend their lives together through the institute of marriage? Among other gains from marriage, is there an economic benefit from moving beyond a simple committal to one another into marriage? Linda J. Waite, University of Chicago, argues that yes, marriage does matter. In addition to an economic benefit, Waite finds that marriage, among others, brings a couple health benefits, decreases mortality rates, and increased emotional and physical satisfaction (Waite, 1995).
Many researchers argue that, particularly with men, one can see that marriage is economically beneficial. Historically, cross-sectional data shows that unmarried men have lower wages then married men (Gray, 1997). Studies show that men of different marital states have large statistically significantly different earnings (Schoeni, 1995). Where this difference in wages arises from is debated. Some suggest that it is a result of the productivity-enhancing effects of marriage (Gray, 1997). Others propose that the difference arises as a result of other factors (Cornwell and Rupert, 1997). Regardless of what causes the marriage wage premium, it appears that marriage is indeed beneficial.
Why are Married Males Rewarded in the Labor Market?:
Several hypotheses have been suggested as to why married men have higher wages then unmarried men. The most common of these are the following: 1) productivity differences, 2) selection into marriage, 3) discrimination by employers, and 4) omitted unobservables. The first hypothesis suggests that marriage male workers are more productive then unmarried male workers (Schoeni, 1995). This productivity-enhancing hypothesis is often explained by two mechanisms. First, in a married household there is a division of labor that allows for the male to allocate more time to the market. Secondly, human capital acquisition have a lower cost for married men; this second mechanism is not highly supported in literature, though it is put forth as an explanation for how the productivity-enhancing hypothesis functions (Cornwell and Rupert, 1997).
The second hypothesis, selection into marriage, is an alternative explanation for the marriage premium. It states that marriage acts as a signal for other characteristics that are unobservable, such as loyalty, determination, honesty, and dependability that are valued in the labor market as they are in the marriage market (Cornwell and Rupert, 1997). Financially successful men may be more desired as marriage partners; thus being married may not cause higher wages, but having higher wages may cause a male to be more likely to become married (Schoeni, 1995).
The third hypothesis suggests that employers may have a preference for married men as employees. Thus discrimination by employers may cause married men to have higher wages then unmarried men. The last hypothesis suggests that there are unobservable characteristics that a labor market rewards which correlate with marriage (Schoeni, 1995).
Support for Hypotheses Explaining the Marriage Wage Premium:
Christopher Cornwell and Peter Rupert used panel data from the National Longitudinal Survey of Young Men to determine what causes the wage premium seen when comparing the earnings of married men to those of unmarried men. Past studies by Nakosteen and Zimmer (1987) showed that the marriage premium was not significantly different from zero and therefore concluded that marriage does not enhance the productivity of males. Korenman and Neumark (1991) found opposite results showing a marriage premium of 15% rising with years married. They therefore conclude that marriage may indeed enhance male productivity. Cornwell and Rupert re-examined existing data to determine which of these two studies was more accurate. They find that there is indeed a marriage premium, but it is not as high as that presented by Korenman and Neumark. Rather, the find a marriage premium that is a pure intercept shift of 5% to 7%. In addition, they find no statistically significant effect of time spent in a marriage on wages (Cornwell and Rupert, 1997).
Cornwell and Rupert claim that Nakosteen and Zimmer’s study is not supported empirically. They are skeptical of Korenman and Neumark’s results because they find fault with their methodology. Specifically, the way the later study categorizes males effects variation and consequently statistical results. In addition to looking at a wider variety of “marriage categories,” Cornwell and Rupert attempt to determine if married men with children have higher wages then married men with no children. They find that married men with children, on average, earn 5.3% more married men without children (Cornwell and Rupert, 1997).
When holding individual effects as fixes, Cornwell and Rupert find a sharp decrease in the marriage premium thus concluding that there are individual-specific variables that are omitted but are positively correlated with marriage and wage rates. In contrast to Korenman and Neumark, in this analysis, they find no statistically significant effect of time married on the wage premium. Thus, Cornwell and Rupert hypothesize that marriage premium of 5%, which they determine to be a pure intercept shift, may be due to “settling down:” getting married, they propose, causes a reallocation of market, leisure, and housework that results in wage increases. As a result of these conclusions, they reject the productivity-enhancing hypothesis (Cornwell and Rupert, 1997).
In contrast to Cornwell and Rupert, Jeffery S. Gray argues that the productivity-enhancing hypothesis indeed holds. He notes that there has been a 40% decline in the earnings premium paid to married men over never-married men during the 1980s. He attributes this decline to a decrease of the average degree of specialization across households resulting in less of a productivity-enhancing effect of marriage. This coupled with women’s move to the workforce explains the drop in the marriage wage premium (Gray, 1997).
Gray explores the specialization (productivity-enhancing) and selection hypotheses as explanations for why a marriage premium exists. He suggests that if the specialization hypothesis is correct, the recent decrease of the premium could be explained by the rise in married women’s labor force participation; as wives increase labor supply, husbands would focus more energies away from the labor market. He argues that if the selection hypothesis is correct one would see a fall in the marriage premium as a result of a decrease in the average unobservable ability of married men compared to that of unmarried men (Gray, 1997).
Gray finds, in his empirical analysis, that both the productivity-enhancing and selection hypothesis can explain the marriage premium. He finds that the origin of the premium has shifted from productivity-enhancing, specialization, to selection into and out of marriage. Thus it is a fall in the productivity effects of marriage that explain the recent decline seen in the marriage premium. This fall could be due to either a decrease in the returns to specialization or less specialization occurring in marriages. Gray finds that more than 50% of the reduction in the marriage wage premium can be attributed not to less specialization, but to decreasing returns to specialization (Gray, 1997).
In addition to a study of the economic benefits of marriage, Waite looked at non-economic benefits. She finds that, overall, marriage patterns have diverged for different races; white men and women stand to gain more then black men and women, and couples today are less likely to benefit than couples married a generation ago. In general, Waite concludes that marriage does indeed matter as a couple substantially benefits from marriage over cohabitation or being single (Waite, 1995).
Comparing married, separated, divorced, widowed couples, and those never married, Waite finds that married couples have more assets and wealth. Married couples have higher incomes then others, though this accounts for little of the difference seen between married-couple and single-person households. Waite finds that marriage increases wealth through economies of scale (two can live more cheaply then one), and specialization increasing efficiency (the productivity-enhancing hypothesis) (Waite, 1995).
While Waite determines that married couples have more assets and wealth, but based on work by Daniel (1994) effects of marriage on labor market outcomes are not universally beneficial for married couples. While both black men and women receive a marriage wage premium, only white men receive a premium. White women, on the other hand, pay a marriage penalty. While both black and white men receive some wage benefit when cohabiting, neither black nor white women do. In addition, without taking into account hours of work, both black and white women see a negative effect on wages of having children (Waite, 1995). Overall, however, Waite finds that marriage is economically beneficial.
Non-Economic Benefits of Marriage:
Waite, in her study, explores several non-economic benefits of marriage. She finds that married men have lower rates of drinking problems then men who are either widowed or divorced. Married women also have lower rates of drinking problems then unmarried women, though extremely low rates of drinking problems are see for all women. Waite also finds lower rates of unhealthy behaviors for married men and women then for divorced men and women. Thus marriage is beneficial in that it increases healthy behavior (Waite, 1995).
Because marriage appears to reduce risky and unhealthy behaviors, marriage also appears to reduce mortality of married men and women. This decrease in mortality for married persons is also attributed to marriage increasing material well-being and to an individuals increased network of health and support through marriage (Waite, 1995).
Waite also explores the effects of marriage on sexual satisfaction physically and emotionally. She finds that married men and women are more likely to be extremely satisfied physically with sex with primary partners then cohabitation couples or single men and women. She also reports more emotional satisfaction with sex lives in married couples then those who are cohabitating or single (Waite, 1995).
The last factor Waite explores is whether or not marriage is beneficial with respects to children’s well-being. She reports, from studies done by McLanahan and Bumpass (1988) and McLanahan and Sandefur (1994), that children from one-parent families represent twice as many high school dropouts then children from two-parent families. In addition, children from one-parent families are more likely to become teenage parents and live in poverty as children. Thus, marriage, in addition to providing benefits to adults is beneficial to their children (Waite, 1995).
Conclusions:
Is marriage economically beneficial? It seems that, yes, marriage does incur economic benefits. Particularly, males see a marriage wage premium having higher wages when married then when unmarried. It is debated, however, as to what causes this wage premium to exist. While several hypotheses are commonly put forth as explanations for the marriage premium, different studies have supported different hypotheses. Regardless of which hypothesis is correct, marriage is economically beneficial, though less so then it was in previous decades. In addition to economic benefits, marriage appears to provide benefits in the form of better health, longer life, more sex and more satisfaction with sex, and better well being for one’s children.
Despite the apparent benefits to individuals from the institution of marriage, marriage has declined in recent years. Among many other factors, Waite cites the following as contributing to the decline: increases in women’s employment decreasing specialization by spouses (McLanahan and Casper, 1995); high divorce rates decreasing people’s confidence in marriage (Lillard and Waite, 1993); changes in divorce laws (Regan, 1993); decreases in women’s dependence on men’s financial support (Oppenheimer, 1994); and public policies supporting single mothers along with changing attitudes to sex outside of marriage, childbearing outside of marriage, and divorce (McLanahan and Casper, 1995). Regardless of what has caused the decline, it is important to realize that not only is marriage economically beneficially, but it is beneficial in many, and possibly more important, realms as well.
Reference:
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