The Inevitable Rise in Dual-Income Households and the Intertemporal Effects on Labor Markets

Abstract

The number of dual-income households has been steadily increasing over the past few decades. This study supports the hypothesis that given a household’s desire to remain above a minimum threshold standard of living, the rise in the number of dual-earner households is inevitable mostly due to inflationary pressures in product markets including rising housing prices and child care costs coupled with relatively flat wage trends. Mitigating uncertainty and risk associated with shifts in retirement plan offerings—moving away from defined benefit plans such as pensions toward defined contribution options such as 401(k) plans—was also cited as a factor contributing to the rising number of dual earners. This study highlights the costs and benefits of dual-earning decisions and the intertemporal implications for households, labor markets and overall societal welfare.