Friday, July 1, 2011

Labor Force Characteristics and the Economics of Cohabitation

In general terms, cohabitation provides an economic benefit to the parties involved, due to economies of scale: paying one rent or mortgage instead of two, one electrical bill, buying only one set of egg beaters, and so on. We're neither advocating for nor against the practice, but a study released this week on the economics of cohabitation provides some insightful information. The Pew Research report finds that some adults do not seem to gain an economic benefit from combining households.

Who and why not?
Pew researchers analyzed American Community Survey Census data for adults ages 30 to 44 in the U.S. They conclude that less-educated adults are less likely to experience economic benefits from cohabiting. The study measures economic well-being using median adjusted household income. Findings show that among non-college graduates, the adjusted median household income for cohabiters sat 3 percent above those living without a partner in 2009. Among college graduates, the cohabiters had a median household income 18 percent above those living without a partner. Actually, college-educated cohabiting couples' median household incomes exceeded the level for married, college-graduate couples.

The report cites differences in employment rates, labor market participation, and household arrangements of cohabiters with and without college degrees as reasons for the economic benefit (or lack thereof). Here are a few of the report's key points:
  • Among the college-educated, two-earner couples were more prevalent among cohabiters (78%) than married adults (67%) in 2009. By working more, cohabiters offset married adults' higher median earnings.
  • Among those without college degrees, two-earner couples were slightly less prevalent among cohabiters (55%) than among married adults (59%) in 2009. In addition to being more likely to work, these married adults have the advantage of higher median earnings.
  • Among adults without college degrees, the majority of both married adults (85%) and cohabiters (67%) have children in the household. The relatively large presence and number of children in the households of cohabiters without college degrees may reduce the extent to which both partners in such relationships can earn income.

Find more highlights, an executive summary, and the full report at the Pew Research Center
publications page.

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