Tuesday, January 15, 2013

The "high" price of being single

It will probably come as no surprise to anyone that I get really nervous when people attach a definitive number to something a little abstract.  I get even more nervous when they start explaining their methodology and have to list over a dozen presumptions they made to get there.  Each one of these is a potential source of error, and if I realize they haven't thought that through and barreled ahead anyway, I start to really cringe.

Want an example?  Here's a good one.

In an article on the Atlantic website called "The High Price of Being Single" Lisa Arnold and Christina Campbell attempt to quantify the cost of being single.  They made up 4 fictional women and compared their costs for income taxes, social security, IRAs, health spending and housing and came to this conclusion:

When we calculated how much money our characters gained or lost altogether, our single women did indeed fare worse—much worse—than the married women. Their lifetime cost of being single?
 Our lower-earning woman paid $484,368 for being single. Our higher-earning woman paid $1,022,096: more than a million dollars just for being single.
We anticipate that critics will point out that the numbers could be manipulated in any number of ways. At every stage in the process we, too, thought "these sums are just too crazy; surely we must have miscalculated or reasoned wrong." We have, however, made only the most conservative of estimates and still reached the conclusion that, no matter which way you read the numbers, the final assessment remains the same: Singles get screwed.
To be clear, the focus of this article was policy based issues that cost singles money. I am not here to comment on particular policy, or to rate singleness as good bad or neutral. I am merely curious about their figures, and their claim that these "are the most conservative of estimates".  But are they really?  I mean, according to them a woman earning $40,000 works for 12 years just to pay for being single (out of the 40 years of working life they estimated for their model).  That seems excessive, so I wanted to break it down further.

Income Taxes: To be clear, I'm not a tax professional, so I have no idea if the assessment that a married woman pays dramatically less in taxes is accurate.  However, presuming that it is*, I thought it was rather deceitful to calculate out only income taxes when this does not accurately represent tax burden for most people.  Looking at my own tax burden, my property taxes have risen dramatically since I got married.  I would imagine this is the case for most people....married people represent 64% of home buyers, and anecdote would suggest they likely buy bigger homes than single people.  Thus, property tax burden would be larger.  Depending on your state, this burden isn't negligible, and would likely cancel out at least part of the income tax difference.  Taxes for Social Security and Medicare tend to also be quite burdensome for people, and those are applied equally and without deductions.

Social Security: I'll just take their word for it on this one, social security rules baffle me....and I'm pretty sure the whole system's going to be gone by the time I get there anyway.

IRAs: This one was a little strange to me.  Again, these rules get tricky, but I was curious how many people actually are using their IRAs enough to feel either the advantage or disadvantage of this every year.  It turns out, not many.  Only 15% of Americans make yearly contributions to their IRAs.  Some of the other moves complained about (a spouse being able to contribute while the other is disabled) also seemed like something most people wouldn't use.

Health Spending:  This was the one that really got me.  It starts with this:
According to the BLS, couples spent 6.9 percent of their annual income on health on average; single men spent only 3.9 percent (the data doesn't explain why this number is so low); and single women spent 7.9 percent. It's not clear how the BLS broke down these numbers into component parts (ie., did they include insurance premiums?).
First, in defense of the BLS, they are incredibly open about their methodology for their Consumer Expenditure Survey.  It's right here (and yes, that included insurance premiums). Upon looking at it, two things jump out at me.  The first is that the BLS uses the designation married/single woman/single man to refer to the head of household.  Second, their expenditures survey asks about total expenses for the entire household.  So it's entirely likely that women pay more not because of the "discriminatory policies by companies and the U.S. government" that the authors blame, but because they have children.  82% of custodial parents are women, and of course the same medical costs for children will add up to a smaller percent of income in two parent home (which is likely to have a higher income than a single earner home).  Single men likely have a lower cost because they are likely not caring for kids.

I actually couldn't find the survey they authors were talking about, but I did find this one that stated that married couples in their 20s pay a higher percentage  in health care costs than their single counterparts (both without kids), and this one that said the per capita outlay for health care is higher for married parents.

This section actually got really weird because the authors got mad that disability favors married people because they can just add their disability payment to their spouses income whereas single people have to live on it alone.  That just struck me as an odd complaint, as it's really more about who you have in your life to take care of you than about a government policy.  If half of an unmarried couple went on disability the same thing is true.  Same goes if your parents/siblings/children can step in.  To argue that it's discriminatory is just bizarre.

Housing: This part started to touch on the obvious issue, but quickly veered in to a strange place.  They touched on logistics, but then decided most of the gap was probably because landlords, realtors and developers discriminate against single people.  That's fine, if you buy that's a bigger factor than the "married people have a built in roommate to split costs" thing, but again, there's no mention of children.

My next door neighbor is a single woman with 3 kids.  She bought her house for almost exactly what we bought ours for.  I have no idea if she's widowed/divorced/never married, but I do know she'd have to make quite a bit of money (or have had a fantastic down payment) in order to pay the same percentage of her salary on housing as I am.  Again, "single women" are heads of household, and if they have children their cost will be much higher than married people ,with no one to split it with.

My last point would be that a higher housing cost should not necessarily be counted as lost money.  Homeowners certainly pay a lot in interest, but at some point they also acquire an asset.  Single women buy homes at twice the rate of single men, and thus we can presume that many of them are ultimately recouping their increased payments in a solid asset.

The conclusion: I have no doubt being single effects people and their spending habits in a myriad of ways, but my guess is having kids affects it even more.  To lump all single women together and extrapolate costs is ridiculous.  To make this article convincing, the women in question would have had to clearly find numbers for single women without kids vs married women without kids and then compare it to those with kids for both categories.   Most people have kids.  Families form because they are the most efficient way of raising kids physically, emotionally and economically.  Efficiency cuts costs.  You're never going to have a scenario in which being a single mother or father costs less per person than being a couple raising children, and at no point in this article were childless singles and marrieds compared.

*Then what's this marriage penalty we're always hearing about?


  1. Wall Street Journal picked up on this too