Wednesday, November 5, 2008

Book Sleuth Review: The Two-Income Trap

From time to time here on DD I like to share with you what I'm reading.  I call these posts "the book sleuth" just for fun.  And because the graphic is cute.

Earlier this fall I found myself lingering in the social issues section of the bookstore (like I normally do) and my eyes fell on The Two-Income Trap.  Though it was published in 2004, I had never seen it before, and was instantly curious.

Once I started skimming through the pages, I couldn't put it down.  Why?  Because authors (mother and daughter) Elizabeth Warren and Amelia Warren Tyagi, had a fascinating thesis.  It was that the two-income lifestyle we've grown accustomed to as Americans is hurting--rather than helping--us financially.

Now I know--first impressions might make you think that they were encouraging women to get back home and leave the working to men.  But I assure you that they argue nothing of the sort.  Here's the book in a nutshell:

*  since women went in to the workforce en masse, a funny thing has happened to American families: we're filing for bankruptcy more than ever.  In fact, a woman is more likely to file for bankruptcy than to have a heart attack, die of cancer, or get divorced.
*  contrary to popular opinion, families are not financially bankrupt because they spend too much, or are lazy, or like to take advantage of the system.  Instead, it is because they want to give their children safety and quality education.
*  unfortunately, the price of safe and educated neighborhoods has skyrocketed since the '50's, and most families today commit two incomes (rather than one) to pay for them.
*  this commitment (for mortgages, cars, insurance, childcare, etc.) eliminates one of the most important social safety nets for families: the "back up earner."  The back up earner--someone who can step into the workforce in the event of illness or unemployment--can save a family from bankruptcy by buying valuable time and bringing in extra income.

Reading these numbers on bankruptcy, and learning that average American families are the most likely to struggle financially, was an eye-opener for me.  It was also an eye-opener to consider that having two incomes makes us more vulnerable to bankruptcy, rather than protected from it.

The authors recommended several strategies.  Of course they wanted to see families adjust down to one income, but they confessed that doing so was simply too difficult for most today.  Education and housing reform was what they promoted, then.  And they made some good arguments that fell outside of the traditional liberal vs. conservative boxes.  

I highly recommend the read to those who are trying to understand the current financial pickle we find ourselves in as a nation.  Perhaps you may not agree with the conclusions the authors came to, but I think that they provide some arguments that are provocative and generally ignored by today's economists, pundits, and media.  And they are arguments that make a lot of sense to me.

Tell me what you think of The Two-Income Trap by emailing me at or commenting here!

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