Changes in Couples’ Earnings Following Parenthood and Trends in Family Earnings Inequality

Working paper number: 
2020-42
Paper Abstract: 
The growing economic similarity of spouses has contributed to rising income inequality across households. Explanations have typically centered on assortative mating, but recent work has argued that changes in women’s employment and spouses’ division of paid work have played a more important role. We expand this work to consider the critical turning point of parenthood in shaping couples’ division of employment and earnings. Drawing on three U.S. nationally representative surveys, we examine the role of parenthood in spouses’ earnings correlations between 1968-2015 and ask to what extent changes in spouses’ earnings correlations are due to: (1) changes upon entry into marriage (assortative mating), (2) changes between marriage and parenthood, (3) changes following parenthood, and (4) changes in women’s employment. Our findings show that increases in the correlation between spouses’ earnings prior to 1990 came largely from changes between marriage and first birth, but after 1990 have come almost entirely from changes following parenthood. In both instances, changes in women’ employment are key to increasing earnings correlations. Changes in assortative mating played little role in either time period. An assessment of the aggregate-level implications points to the growing significance of earnings similarity after parenthood for rising income inequality across families.