June 27, 2011

Living Together: The Economics of Cohabitation

IV. The Households and demographics of 30- to 44-Year-olds

The economic well-being of adults ages 30 to 44 is influenced not just by their own labor market characteristics and those of any partners, but also by the nature of their households.

The measure of economic well-being used in this analysis already takes account of differences in the size of the household, but the makeup of the household matters as well.  The presence of children and other family members has important consequences for the amount of effort adults devote to the labor market and the number of earners in the household.

Married adults of all education levels are the most likely to have one or more children in the household.  In 2009 married adults were about equally likely to have one or more children in the household, whether the adults were college-educated (81%) or not (85%).

There are sharp differences by educational attainment, however, in the share of cohabiting couples with children in the household. Only a third of college-educated cohabiters live with at least one child, compared with two-thirds of less-educated cohabiting adults.

Cohabiters without college degrees are more likely to live with one or more children for at least two reasons.  First, they are more likely than college-educated cohabiters to have been married in the past. Among cohabiters without college degrees, 43% had been married in the past; among those with college degrees, 32% had been.

Second, there are notable differences in the child-bearing patterns of college-educated and less educated women. Less-educated women tend to bear children at younger ages, are more likely to have children while unmarried and are less likely to end their child-bearing years without having had children.

For example, among 30- to 44-year-old women who gave birth in the past year, fewer than one-in-ten of college-educated women was unmarried, according to data from the 2008 American Community Survey. The shares were notably higher—ranging from 21% to 34%—for women with some college education, a high school diploma or no high school diploma. Births to unmarried women include births to women who are cohabiting; they accounted for 2.2% of births to college-educated women ages 30 to 44 and 6% to 7% of births to women in that age group without college degrees (Dye, 2010).

The presence of children in a household tends to have large economic ramifications.  The table below reports the median adjusted household income of adults not residing with a child in the household versus residing in a household in which the adult is either a parent or the partner of a parent.  Regardless of education or partnership status, adults living with children are much less well-off than comparably educated adults who are not living with children.  For example, consider college-educated cohabiting adults.  Those with no children in the household have a  median adjusted household income of $120,637.  If one or both of the partners is a parent of a child in the household, their median adjusted household income is $78,808, about 35% lower than for a similar adult who is neither a parent nor the partner of a parent in the household.

The presence of children detracts from economic well-being because children require time and care; they likely lead to a reduction in hours devoted to paid work on the part of the parent or the partner of the parent. They also increase household size, but the measure of median adjusted household income accounts for differences in household size.

Thus, a basic reason that cohabitation seems to economically benefit college-educated adults but yields much lower economic dividends for less-educated adults is due to household composition. Among the college-educated, cohabitation is much less likely to involve living with children, and, perhaps as a result, these cohabiters are likely to be members of dual-earner couples.  Cohabitation among the less-educated two-thirds of the time involves parenthood on the part of at least one of the cohabiters, and children tend to reduce measured economic well-being.

Another important household composition difference involves the household members of adults not living with a spouse or partner.  Again, the nature of the household varies along educational lines.  Among college-educated adults without a spouse or partner, 44% live alone.  The typical college-educated adult without a spouse or partner earns most of the household income—88% in the typical household, as shown in the table on page 11.

By contrast, only 20% of less-educated adults lacking a spouse or partner live alone.   Less-educated adults lacking a spouse or partner tend to live in bigger families (2.7 family members versus 1.9 family members), a difference only partly explained by their larger average number of children (0.7 children versus 0.3 children).  Less-educated adults without a spouse or partner are more likely to live with at least one of their parents. In part because they often live with other adult family members, less-educated adults without a spouse or partner are not the only source of household income.   The typical less-educated adult with no spouse or partner earns only 43% of the household income, half the share earned by the typical college-educated adult with no spouse or partner.

Given that less-educated adults without a spouse or partner often reside with other adult family members, cohabitation offers less of a potential economic windfall to them. By moving in with a partner, they may have the benefit of that partner’s income. But by moving out of a household with other family members, they lose the economic resources those other family members contribute. Cohabitation does not necessarily produce net additional earners for the households of less educated adults as it does for college-educated adults without a spouse or partner.


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