Family matters

Decisions about family structure and circumstances—whether to marry, whom to marry, whether to have kids, where to live—are among the biggest and most meaningful decisions people make in their lives. They are also decisions with wide-ranging consequences for everything from wages and taxes to health and happiness. For these reasons, family structure has long been of interest to economists, who recognize that deeply personal decisions still oftentimes involve bargaining, respond to incentives, and require costly reflection.

It’s a topic of study made all the more compelling because of just how much family structure in the United States has changed over the last 60 years: Marriage rates fell, divorce rates climbed, and the share of family income earned by mothers doubled (see Figure 1).

Studying decisions at a time of change is a particularly useful way to dig into the factors that are shaping those decisions: What else was changing, and did it impact the information, incentives, or costs people faced?

Two recent articles by Opportunity & Inclusive Growth Institute economists show how policies intended to address a range of different issues—meeting the needs of our Armed Services and combatting poverty, for example—can have far-reaching effects on families. The research shows that changes in one part of life, such as financial stability or geographic location, can trigger changes in other parts of life, including family structure. Understanding these connections is crucial for policymakers who may not realize they are making “family policy.”

Intrigued by the large-scale changes to family structure that took place between 1960 and 1980, Institute Senior Economist Andrew Goodman-Bacon and visiting scholar Jamein Cunningham look at the introduction of the Legal Services Program beginning in 1965, which expanded access to legal assistance to lower-income Americans. By making divorce attainable and helping to expand access to welfare benefits for single mothers, this program changed the financial calculation for women considering whether to marry or stay married to the father of their children. This finding is consistent with economic models of marriage that find that as the choices available to women have expanded over time, marriage has become less common, Goodman-Bacon said.

While those models help explain long-run trends, they don’t say much about why a particular couple chooses to get married at a particular time. By studying decisions of Army soldiers when they are reassigned to a new base, Institute Director Abigail Wozniak and co-author Susan Payne Carter find that marriage rates rise by 14 percent in the months just before and after a move. This pattern holds regardless of whether a soldier is moving to a location with more or fewer amenities or higher or lower wages. This suggests that the relocation prompts couples to start thinking about their long-term plans—something they could have done at any time. But this sort of reflection is hard (“costly” in economics parlance), and so many couples don’t start this reflection until an external nudge prompts them to.

The peer review process that Wozniak’s article has undergone helps demonstrate the rigor and credibility of Federal Reserve research. Peer review improves and refines the research itself while also sharpening the analytical skills of the researchers, who use these skills to advise the Federal Reserve in its analysis and conduct of monetary policy.

Together, the papers illustrate the diversity of factors that affect decision-making around family structure. They also offer implications about the potential consequences of policymaking to address adverse economic or environmental conditions.

Making legal services and benefits accessible

Poverty advocates in the 1960s believed that legal action was needed to help establish and protect the rights of the poor. This was the goal of the Legal Services Program (LSP), initiated under the 1964 Economic Opportunity Act, whose aim was to “reach into all the pockets of poverty and help our people find their footing for a long climb toward a better way of life,” as President Lyndon B. Johnson said at the bill’s signing.

As quickly as it could, the Office of Economic Opportunity began handing out grants to set up LSP offices. The LSPs immediately created a new corps of attorneys, Goodman-Bacon and Cunningham report, who were eager help poor people deal with local bureaucrats, courts, police, landlords, and more. Nearly forty percent of LSPs’ caseloads involved family disputes such as divorce and child support. These services would have been unaffordable in the absence of legal aid.

In addition, LSP attorneys were willing to challenge welfare bureaucracies by appealing denials or terminations of benefits. In the 1960s, the main program supporting needy families was Aid to Families with Dependent Children (AFDC), which provided cash benefits to families with only one parent present. Like many federal benefits programs, each state defined “need” and set benefit levels. Decisions regarding benefits were made by local caseworkers, who exercised “wide and often arbitrary discretion over case acceptances, benefit amounts, and case terminations,” Goodman-Bacon and Cunningham write.

While welfare benefit appeals made up only about 7 percent of the LSP caseload, this work had widespread impact by changing the way that caseworkers handled applications. Dozens of notable cases even made their way to the U.S. Supreme Court, delivering victories that forced states to take more expansive views of AFDC eligibility.¹ This advocacy work increased the probability that all applicants would receive benefits and lowered the cost of applying or appealing.

Changing the marriage equation

Goodman-Bacon and Cunningham analyze whether LSPs did in fact impact AFDC case rates and family structure by comparing counties with an LSP (“treated” counties) to counties without an LSP (“untreated” counties). To make the comparison credible, they choose untreated counties that are as similar as possible to treated counties before the LSP arrives in terms of family income, family structure, and AFDC case rates.

Their finding? LSPs mattered—a lot. Participation in AFDC went up by 13 cases per 1,000 women, an increase of approximately 21 to 23 percent compared to a counterfactual estimate of AFDC case rates in the absence of LSPs. This changing financial situation for single mothers led marriage rates to fall in counties with LSPs and, as a result, births outside of marriage rose.

These results make sense given the landscape of the 1960s. Single parenthood became more economically feasible as LSP assistance led to more acceptances and fewer terminations of AFDC benefits for their clients. Furthermore, by challenging—and winning—court cases against the welfare bureaucracy, LSPs increased the number of single mothers receiving benefits under AFDC, even those who were not LSP clients.

That changed the financial equation for some mothers: They did not have to enter unwanted marriages to avoid a desperate economic situation.² Ethnographic studies support this view. Some low-income women interviewed in the 1960s believed the earnings of the men they could potentially marry were often less reliable than cash benefits from the government. That the economics findings resonate across disciplines makes them more compelling, in Goodman-Bacon’s eyes.

Goodman-Bacon and Cunningham’s analysis also finds that divorce rates increased by at least 9 percent in counties with LSPs. Previously unaffordable, inaccessible legal assistance for divorce cases meant there was a pent-up demand when LSPs arrived—couples whose marriage had ended years before in practice and now could end legally as well. This demand tapered after about eight years, and divorce rates returned to their pre-LSP levels.

Moves and marriages

Goodman-Bacon and Cunningham’s analysis uses aggregate data on large groups of women to show how behavior patterns change as the legal, institutional, and financial environment evolves. That evolution changes the economic costs and consequences of family decisions.

Economists have also long been interested in understanding how specific couples decide whether or not to marry. Nobel prize winner Gary Becker applied a market framework to family decision-making: searching for a spouse, evaluating outside options, and bargaining over marriage, children, and household division of labor.

That framework can be useful for understanding marriage and childbearing patterns over time, Wozniak believes, but it is not as useful to explain why people make choices at particular times under specific circumstances.

One of those circumstances that has long interested Wozniak is migration—people who move from one city or state to another. Studying migration scientifically is challenging, however, because it is usually a situation people opt in to. Those who choose to move might be different from those who choose not to in ways that are hard to observe or measure.

There is at least one population, however, that has moves imposed on them: soldiers in the U.S. Army. The Army moves soldiers around some 50 military installations in the United States based on soldiers’ qualifications and abilities to meet staffing needs. Soldiers’ personal preferences play little to no role, a fact Wozniak and Carter confirm in their analysis. About half of the enlisted soldiers who stay in the Army at least five years will move at least once; only 6 percent will move more than once. Because the move in this context is imposed, not chosen, soldiers make a credible group to study with this question in mind: How does a move affect marriage?

Wozniak and Carter use two analytical approaches to determine whether and why a move affects couples’ decisions to marry. The event study analysis looks at marriage rates over time for a group of soldiers who were unmarried six months prior to their first move and who did not move again in the next two years, plotted in Figure 2. Month 0 is the month when the soldier moved. The fraction of soldiers who are married increases steadily until about one month before the move, when it jumps 5 to 8 percentage points, then resumes its steady increase.

The event study analysis is strong evidence “that moves encourage the conversion of unmarried relationships into marriages,” Wozniak and Carter write. However, this analysis doesn’t tell us if these marriages would have happened anyway and the move simply sped things up because there are conveniences to being married when the move happens (for instance, married soldiers get different housing arrangements).

So Wozniak and Carter use a regression to examine whether the jump in marriage around relocations leads to permanent differences between those who are relocated and those who are not. The economists do this by looking at whether moving leads to higher marriage rates by the end of soldiers’ fifth year of service among soldiers who were not married when they enlisted. The results are substantial: A move raises the likelihood of being married by 8 percentage points, which is a 15 percent increase over the average marriage rate among soldiers who did not move.

Wozniak and Carter’s analysis suggests that the increase in marriages was not simply a matter of convenience. For one, moves also increase the likelihood that a soldier has a child. And two, while moves do increase divorce rates, that effect is quite small compared to the effect on marriages. This suggests that the marriages that were motivated by the news of a relocation were formed with long-run intentions.

The cost of decision-making

The regression analysis has another benefit: Wozniak and Carter can test what other factors might be affecting marriage rates. For instance, one theory of marriage formation views the decision as a bargaining process between two people. In this context, imagine two people happy in their committed, unmarried relationship. Then Partner A has to move to a new location. If the new location is an attractive place—natural beauty, low housing costs, ample job opportunities—Partner B should be happy to move. If however the new location is less appealing, then Partner B might only move if they are married as a form of insurance against un- or underemployment. If Partner A prefers marriage to breaking up, the couple will marry.

To test this theory, Wozniak and Carter see if characteristics of the new location to which a soldier is assigned affect marriage rates. But they find that the characteristics of the new location don’t seem to matter at all (beyond distance from the original location). Rather, it is the fact of moving that is affecting marriages.

What is it about moving that is causing marriage? The explanation, Wozniak and Carter believe, is that reflection about deeply meaningful, long-term decisions is hard, and so much of the time we don’t do it. But the shock of a move “encourages people to think about a lot of things,” Wozniak explains. “Is this a good assignment? A bad assignment? What kind of opportunities might it lead you to? Do you know if you want to stay in the new location?” This sort of reflection includes evaluating whether a couple wants to change their relationship status—stay together, break up, get married. By prompting such reflection, a move reduces its cost and thus increases marriage rates.

Implications for policy

While these papers evaluate family structure and decision-making, they’re about much more than that.

Notably, LSP’s impact on AFDC case rates and family structure was not a result of changes to the generosity of welfare benefits, Goodman-Bacon and Cunningham point out. Rather, they were the result of expanded legal access—a change to the institutional landscape that altered people’s options.

This insight has implications for leaders who are responsible for creating new programs: People may be deterred if they don’t have assistance navigating the administrative hurdles. “Safety net programs are not simply formulas,” Goodman-Bacon said. “There are other factors that determine whether or not people can access the benefits that are written into law.” This is relevant not only for welfare programs but other programs as well—vaccination efforts, for instance, or retirement savings, or health insurance.

The impact of a new government program on family structure may also depend on economic conditions at the time. “People don’t choose to raise their families in the same way when labor markets are super strong as they do when labor markets are weaker,” Goodman-Bacon said. Furthermore, a policy aimed at one group may well ripple out to other people’s decisions because families are linked to each other. Goodman-Bacon finds this type of spillover “hopeful” because it means policies can have impact beyond their direct effect.

Better understanding of how people make decisions is also important at a time when policymakers are starting to consider relocation as a way to mitigate harm from climate change or adverse economic circumstances, such as the decline of a region’s primary industry. “Our sense is that people have the idea that [relocation] would be bad for marriage formation, that it would disrupt friendship networks, it would disrupt communities,” Wozniak said. But her analysis suggests this isn’t the case. Other research has found there can be considerable economic benefits to moving, even when that move was forced due to a natural disaster.

“We often have this view of shocks as destructive—that anything unexpected must necessarily be destructive,” Wozniak said. Instead, she suggested, we should not necessarily think that “the whole purpose of policy is to counteract those shocks and make sure that people can stay in their pre-shock conditions as much as possible.”

Making decisions and making changes may be hard—but they’re also valuable.

Endnotes

1 In the first year of the Legal Services Program, eight cases brought by Program lawyers were argued before the Supreme Court. Notable cases include Shapiro v. Thompson (eliminated residency requirements to receive welfare benefits) and King v. Smith (eliminated “man in the house” rules that denied benefits if a mother cohabited with a man who was not the father of her children).

2 George Akerlof, Janet Yellen, and Michael Katz show that the legalization of abortion and adoption of female contraception also contribute to the decline of “shotgun” marriages in the United States between 1965 and 1985.