WHY do many middle-class families now struggle to get by on two paychecks, whereas most got by on just one back in the 1950s and ’60s?Frank cites other factors, too (housing bubble, credit bubble). It would be interesting to see an estimate of how much the bidding war for suburban schools has contributed to the increase in Frank's toil index.
The answer, according to “The Two-Income Trap,” by Elizabeth Warren and Amelia Warren Tyagi, is that many second paychecks today go toward financing a largely fruitless bidding war for homes in good school districts.
Parents naturally want to send their kids to good schools. But quality is relative. Because the best schools tend to be those serving expensive neighborhoods, parents must outbid 50 percent of other parents with the same goal just to send their children to a school of average quality.
How hard is that? I constructed a measure I call the toil index. It tracks the number of hours a median earner must work each month to earn the implicit rent for the median-priced house.
From 1950 to 1970, when incomes were growing at about the same rate for families up and down the income ladder, the toil index actually declined slightly. But since 1970 — a period during which income inequality has grown — the toil index has risen sharply.
From a postwar low of 41 hours a month in 1970, it rose to more than 100 hours in 2005.
December 31, 2011
I remember, a few years ago, reading an estimate of what would happen to home prices in Westchester County if the state adopted a voucher system. A large drop, as I recall. Very large.
When I was a child, my dad, a farmer in central Illinois, was able to support a wife and four children. He didn't buy health insurance because he figured he'd come out ahead paying doctors out of pocket, and he was right. He put four children through college without loans.
Why are things different today?
Why has the cost of houses, health care, and public schools risen at above-inflation rates for decades?
That's what I'd like to know.