Thursday, 18 January 2018

Why men earn more when they marry

Alexandra Killewald (Harvard) and Ian Lundberg (Princeton) wrote in the IUSSP online magazine in June last year about their paper published in the journal Demography:
On average, in the United States, men earn more per hour when married than when single, even after adjusting for differences such as age and education. However, despite the suggestive evidence that marriage may exert a causal effect on men’s wages, we argue that closer inspection reveals little evidence of such a link.
There are a number of theories as to why marriage might cause an increase in wages for married men, compared with unmarried men. The Nobel prize-winner Gary Becker suggested that it was because of specialisation - wives contributing to unpaid labour at home freed up men to concentrate more on paid labour. Alternatively, it might be because marriage leads to a change of motivation - men who have become primary breadwinners for a family are more motivated to work harder and earn more to provide for their family. A third explanation is discrimination - employers may see marriage as a signal of stability for a male worker, and be willing to offer more work to men who are married.

However, it is also possible that the causation works in the other direction - that men who earn more are more marriage-worthy suitors and therefore more likely to be able to convince a woman to marry them. Alternatively, maybe there is actually no causal relationship between marriage and wages at all, but there is some third variable that causes both increases in marriage and increases in wages. One example is simply maturity - more mature men are more likely to marry, and as men mature they earn more (due to increased work experience).

In their paper, Killewald and Lundberg aren't able to directly test which direction causality runs, but they do gather some reasonably convincing evidence that marriage doesn't cause increases in earnings for men, using data on 4,218 men from the National Longitudinal Study of Youth 79 (NLSY79). First, they show that there is an apparent marriage wage premium of 3.8%, similar to other studies.

Second, they show that the increase in earnings happens before marriage, which seems to rule out specialisation as an explanation, since specialisation cannot easily occur before marriage [*]. However, that result might strengthen the case for motivation as an explanation, since some men will anticipate future marriage and being to work harder before marriage. It also suggests that reverse-causation might be at play. That is, men who are earning more are more marriage-worthy.

Third, they show that shotgun marriages (those that were followed by a birth within seven months) are no different than other marriages in terms of effects. That would rule out the increase in earnings arising from anticipation of future marriage, since shotgun weddings are less anticipated [**].

Fourth, they compare the results for men who marry at different ages. They find that men who marry after age 26 have no marriage premium, so the marriage premium is entirely among younger men. This seems to rule out both motivation and discrimination as explanations, as well as reverse causality.

What does that leave? Killewald and Lundberg suggest that maturation is the most likely explanation, and that the observed relationship between marriage and earnings for men is therefore spurious. They conclude in their paper that:
These results are consistent with the claim that marriage is associated with wage gains simply because the timing of marriage is correlated with the transition to adulthood. It may also be consistent with delay of marriage until financial thresholds are met, which may especially affect younger men, who have lower average wages.
I guess sometimes even Gary Becker can be wrong.


[*] When I was reading the paper, I thought they had missed the obvious point that cohabitation can precede marriage, but they include a separate control for cohabitation in their models. They also tested models in their robustness checks that "...described wage patterns relative to the start of a first coresidential partnership (either marriage or cohabitation)...", and "...we found results very similar to those in the main models...".

[**] It is worth noting though, that shotgun weddings only occur for those men who are willing to marry. They will generally be more responsible, and hence more similar to those who plan ahead, then the less responsible men who knock up their girlfriend and then don't marry them. I'm unsure that it biases their results, but it is certainly one explanation for why there are no differences between those two groups.

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