They present an observation of the financial condition of middle-class families in the USA where both parents are employed outside of the home that many may find counterintuitive. The TWO-INCOME TRAP, as the term is coined by the authors, is the condition in which _Mothers now work two jobs, at home and at the office. And yet they have less cash on hand. Mom's paycheck has been pumped directly into the basic costs off keeping the children in the middle class_ . (p8) Now, these hard working, thrifty families find that they must forfeit decent public schools and preschools, health insurance, and college degrees [for their children] if Mom stays at home.
How can this be? Wasn't Mom's new job supposed to bring in more money? Provide a safety net in times of trouble? Put the family in a better neighbourhood? Send the children to safer schools and better institutions of higher learning? This may have been the well-intentioned objective, however, the authors provide bountiful statitistics that tell a different story. _After an average two-income family [in 2000] makes its house payments, car payments, insurance payments and child care payments, they have less money left over, even though they have a second, full-time earner in the workplace_ compared with the average middle-class, single-income family of 1973 (p50).
The Warrens are both professionals in presumably two-income families who add their own experiences to the data that identify the sources of this surprising situation. First, they argue strongly against the _Over-Consumption Myth_. Then, they enumerate more likely culprits, including, deteriorating public schools, a limited supply of homes in _good_ neighbourhoods that encourages a bidding war, and universities that have very little incentive to control their costs. Surprisingly, one of the culprits identified by the Warrens, even though they are both recipients of its benefits, is the Feminist Movement that encouraged equal employment opportunities for women.
Despite the statement that _this book is dedicated to all parents_, there is precious little offered that a parent could use to improve their current situation. The TWO-INCOME TRAP has been sprung and only government policies can release it according to the Warrens. To each problem, a long-range policy change is recommended: Deteriorating Public School systems are solved through a voucher program that allows parents to choose from all the public schools in their area irregardless of postal code. Shortages of pre-school programs are solved by publicly funded, universal preschool, if and only if, the authors demand, the package includes improvements to public education from kindergarten that continue through high school. Otherwise, _day-care subsidies offer no help for families with a stay-at-home mother..because they would create yet another comparative disadvantage for single-income families trrying to compete in the marketplace_. Finally, the rising cost of a college education can be solved by simply mandating that all state colleges will not be allowed to raise tuitions.
There are many who quite rightly bemoan the short-sighted interests of business and politics in our society. To their credit, the Warrens are presenting a long-term view and presenting far-reaching policy changes. The authors are suggesting that policy makers accept this opportunity to look beyond the next opinion poll.
Regretably, the solutions offered are not supported with the same level of research as the problems to which they are addressed. The merits of the solutions appear to be enough for the Warrens to insist that federal and state governments should risk the status quo to implement. Naively, the role of campaign financiers is completely ignored. Absent are examples of communities that have succeeded with school vouchers, for example. With models of successful programs, politicians and business leaders have a plan to follow rather than simply empty promises to do the right thing.
On the positive side, reading about the policies proposed in this book did influence me to contact my elected officials. Who knows? It might make a difference.
PEACE
There is no trap here. It's people buying into some idea that they HAVE TO live near a good school district, or have all that entertainment, or buy name brands - yes, I said it. People get buffaloed into thinking if it costs more, it must be better. Frankly, if something costs too much, I'm afraid if could break (and they all do folks), it can't be replaced so easily so I won't use it or enjoy it. Everything is made cheaply so nothing lasts like it used to. I still own things from the 80's that work better than the new ones.
As for school vouchers....from my experience, all public schooling stinks, so what's the rush to buy into a mortgage you can't live with in a neighborhood for the schools? Vouchers? Let's watch more government regulation with that one. Hey, there's always homeschooling. And the best part is that you don't have to buy name brand clothes for your kids, no lunches at a higher cost, no rushing in traffic, less gas and wear and tear on your car, and free help with the chores, AND they kids get a private education. What we need are tax breaks for those people.
Do we have to go to preschool and end up at an Ivy league school to become educated? What happened to FREE library access? Or clepping out of college courses, or going to the local Junior college for the first 2 years.
Why are the authors blaming the problem on credit companies, interest rates, and regulations? Know your income and what you can afford, say NO and hang up the phone. Do the numbers for yourself. Watch how the market goes up and down. Grab that mortgage when the rates are down and don't get in over your head....simply common sense.
I had a real problem with some of the numbers these authors came up with. For instance she said that the middle class wasn't getting name brand items, yet the sales are up, malls are crowded and thriving, and I see kids walking around in name brand items - a lot! Friends I know are buying new furniture on credit when waiting for the savings will do them better, or when buying at 0% interest for one year and plan it out will do better? Or how the people I know who took out a 3rd mortgage on their home for the equity to "consolidate" credit cards? They would have been better off not shopping for clothes they can't fit in any closets anymore, or buying the 4 TVs, 5 VCR's, 2 PS2's, gameboys and a host of other "high quality" high dollar items, and plunking that money into their debts above the minimum payments. They knew the strategy, but wanted the stuff. I also see too many people in the 2 income bracket buying new cars, when a year old lease for sale could serve just as well for $10K less. People DO spend much more on entertainment today than we used to. Why not? There IS more. The sad part is people feel they won't be happy, or are "deprived" unless they have the toys, when taking walks, playing games, inviting over friends, etc. would do just as well.
The authors' stance on how 2 income families aren't spending much on groceries compared to the 70's is weak. Of course not! They aren't cooking and opting to spend it at fast food or restaurants. Why would they NEED to buy more at the grocery store? The food cost alone could be cut in half with less "treats" and more quick home cooking (and less incident of food poisoning or doctor visits).
The authors also make a statement to the effect that home entertainment for the average family with cable is a mere $170 a year. Have they looked into cable for entertainment lately? Most people I know who get cable buy the minimum package at $50-$70 a month! (not including taxes) That's at least $600/yr. Don't forget the DVD's they have to buy. I doubt that most people are using just basic cable to get channels and forgoing all entertainment to keep their costs under $200 a year. (Get me the name of that cable company. I want to see this for myself!)
Of course people are filing for bankruptcy. They don't have the money. It's called a wake-up call to reality and basic math. But I do agree not everyone falls into this category, SOME have had truly unfortunate experiences. Likewise, I would think people would go to a consumer credit counseling service before hitting the costly bankruptcy courts, which offers similar benefits as bankruptcy and yet keeps your credit intact (at a fraction of the cost).
Additionally, we all know that divorce causes financial disaster for most of us, not just the mom, but many times the dad as well. If people could get past the "no fault" divorce of "he said/she said" and work it out, they could fare better financially. But everyone's a victim and it's someone else's fault. They want a government to change the rules so they can play better because they don't know how to dive inside and make the best of it, or come up with a different idea...for anything.
The authors do point out the thinking of 2 income families. 2 incomes means more money, a house, more stuff, etc. (and less time building relationships to avert the stress factor - my input). No one made them do it. It was a free choice. Creditors are simply opportunists for those that don't want to think for themselves. I agree with the authors on this: The cost of things has certainly gone up, and income hasn't kept up with inflation. If creditors can find a loop-hole for keeping up rates and prices, they will. But likewise, I can move around them and find my own loopholes to keep them out of my pocketbook. It's not a privalege to qualify for a loan. It's a privaledge to have my freedom and my responsibility from someone else's regulations and obligations.
This book looked more like propaganda for more government regulations and less responsibility for those who make the choices. I think I'll go read "Affluenza".
I have two criticisms, but buy the book anyway. Just (mostly) ignore chapter 5 because longer-term policy recommendations are irrelevant to most of our immediate financial pictures.
First, their public policy recommendations are narrowly focused around a few changes that would affect abusive practices. But it is sheer hipocrisy to criticize the credit industry for being greedy by lobbying against an exception to the bankruptcy laws for divorced parents, which the authors support. Apparently the authors think some creditors (divorced mothers) are more equal than others also.
It also falls short on holding individuals responsible, asserting that the market drove people to make decisions that were financially bad. Well, we all make choices, and we can choose not to engage in a bad deal. The market doesn't force anyone to do anything. People make choices based on their expected outcomes. They seem to be excusing many of those decisions basically by saying that people can't recognize bad deals. Fixing the problem requires addressing the cause, not the secondary effects. But reading this book is a solid primer for anyone to spot the raw deals and avoid them.