The Two-Income Trap

The authors present quantitative data to demonstrate how American middle-class families have been left in a precarious financial position by increases in fixed living expenses, increased medical expenses, escalating real estate prices, lower employment security, and the relaxation of credit regulation.[2][6] The result has been a reshaping of the American labor force, such that many families now rely on having two incomes in order to meet their expenses.[2] This situation represents a greater level of financial risk than that faced by single-income households: the inability of either adult to work, even temporarily, may result in loss of employment, and concomitant loss of medical coverage and the ability to pay bills.[6][4] This may lead to bankruptcy or being forced to move somewhere less expensive, with associated decreases in educational quality and economic opportunity.[2]

Among the expenses driving the two-income trap are child care, housing in areas with good schools, and college tuition. Warren and Tyagi conclude that having children is the "single best predictor" that a woman will go bankrupt.[7]

Warren and Tyagi call stay-at-home mothers of past generations "the most important part of the safety net", as the non-working mother could step in to earn extra income or care for sick family members when needed.[3] However, Warren and Tyagi dismiss the idea of return to stay-at-home parents, and instead propose policies to offset the loss of this form of insurance.[6]

Warren and Tyagi attempt to overturn the "overconsumption myth" that Americans' financial instabilities are the result of frivolous spending[4] – they note, for instance, that families are spending less on clothing, food (including meals out), and large appliances, when adjusted for inflation, than a generation prior.[8] They also note that dual-income households have less discretionary money than single-income households a generation prior.[6]

The authors propose several solutions to the "two-income trap". In order to decouple educational opportunity from real estate location, they propose allowing families to choose among public schools in their district, with a voucher system.[6] They recommend tuition freezes for public universities, which have seen tuitions rise three times faster than inflation.[6] They endorse universal preschool as a means of reducing fixed costs for families with children.[6] Warren and Tyagi take care to consider possible perverse consequences of various social programs aimed at middle-class economic relief.[4]

Warren and Tyagi also call for the restoration of "usury laws" limiting credit interest rates, and increased disclosure requirements for creditors.[6] They suggest revisiting policies that have encouraged home ownership by making mortgages available with little or no down payment.[6] Then-Senator Joe Biden comes under heavy criticism for promoting legislation friendly to the banking industry.[4] Biden and Warren would later compete for the Democratic nomination for president in 2020, which Biden would win before going on to win the 2020 United States presidential election.[4]