The Marriage Premium

Some people grow up with the notion that taxes penalize married couples, while some have the notion that married people can earn more money. Who has it right?

The short answer: Married couples, of course.

Richard Morin, of the Washington Post wrote in June 2004:

“The notion that marriage gives a financial boost to men goes back three decades. It became so well-established that economists and social scientists even gave it a name: "the marriage premium." Married men, the researchers hypothesized, could spend more time working, preparing for work or simply resting up for the job and therefore earned more money than their single counterparts. Why? Because many of them could concentrate on their jobs while their dutiful wives took primary responsibility for the home front. This specialization was good for both spouses, according to this theory. Husbands went further in their careers and earned more, and their wives shared the benefits.”

The Church of Jesus Christ of Latter Day Saints was able to quantify this phenomenon:

“On average, marriage increases income by about $1,800 for every year of marriage…[and] because married couples have an obligation to others, they tend to be more financially responsible are more likely to save money. They also have the opportunity to combine their strengths. For example, a husband who is skilled at fixing things can save a family a great deal of money, as can a wife who is skilled at managing money. When marriage partners pool their resources, both people benefit.”

There you go: Linear and non-linear payoffs of marriage. There are also a slew of other financial benefits. A few are:

· The ability to file joint tax returns

· The ability to set up a family partnership whereas all profits are shared amongst family members

· Estate taxation benefits

· Receiving government benefits on behalf of your spouse

· Receiving family rates for insurance

There are a few downsides, however. According to research reported by Mr. Morin, in regards to women, any “extra income was often offset by a drop in their wives' earnings…The paychecks of many married women declined—or stopped altogether—after they became brides or mothers.” At any rate, a 21-year study concluded that while “’single men have the same total family income [per family member], regardless of whether they are single, cohabiting or married,’ she wrote, adding that ‘marriage and cohabitation confer sizable -- and identical -- financial benefits on women while men break even upon entering either type of union.’"

An up-and-coming social trend, also, is the civil union trend. Whereas it remains a staunch political fight whether homosexuals can formally wed, some legislators in state governments across the United States have introduced the concept of the “civil union” such that partners, such as those of the same sex, can enjoy the benefits of married life without the necessary religious vows. While the politics of this matter, and several others, are outside the scope of this blog, I will leave the matter be as to say this: Expect the civil union debate to continue for some time and affect everyone for whom marriage is—or is not—an option.