The government’s pandemic response, which has caused people to drop out of the workforce and wages to rise, offers an opportunity that we haven’t seen in 50 years. Back until about 1960, one-wage homes where the husband would work while the wife would take care of the children and the home, was the norm. That started to end through the 1980s as women more and more chose to have a paid working career and the single-worker household was virtually gone by the 1990s. By the 2000s, most homes had both parents working, leaving the children in daycare for long hours or to fend for themselves. This was true even if one parent would prefer not to work because it was felt that two paychecks were needed to pay the bills.
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Now, it is arguable whether two paychecks are as needed as most people think. If you really look at the bills, most couples will find that they could go to one check if they really wanted to. This is because a lot of the expenses a two-income family has could be avoided if one person stayed home. Costs of child care are a huge burden, then there are meals out because both people are hungry and tired; extra clothes, gas, and car expenses because of the second commute; and other time-savers where income is traded for convenience.
Taxes are also higher on higher incomes, so many of the extra dollars are taken away before they even reach your bank account. A family that really does a budget often finds that they can cover everything when they do more themselves with the time saved by not working a job and the money saved from the expenses of working. Plus, you aren’t paying taxes on work you do for yourself, so your time goes farther. Make a jar of jam from the strawberries you grow in your garden yourself, and it’s tax free. Buy a jar of jam from the store, and you’ve paid income taxes on your salary and sales taxes on the jam that isn’t as good as the jar you make at home. Having a lower family income also means more deductions and a lower marginal tax rate.
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More workers lowers wages
While many families could get by on one salary, they wouldn’t be doing as well as the families in the 1950s. That’s because with everyone working, the supply of workers is higher. Like everything, the greater the supply, the lower the cost. If most families have two workers, the amount needed to pay each worker decreases because there is more demand for jobs and less demand for workers. Companies are free to keep salaries low because they know there is someone who will take the job. They also don’t need to treat their employees well because there are plenty of people behind you, ready to take your job even with working conditions as they are.
Having one worker per family also increases the expected wage. If it is just you or your spouse working for your family, the job needs to be bringing in enough to cover your expenses. That means workers will be more choosy about the jobs they take and negotiate harder for the salary they accept. Workers will also always be looking for ways to move up and/or increase their pay rather than be happy where they are, so companies will need to offer higher salaries and room for training and advancement to keep good workers. This means that most workers will have the opportunity to get to the salary level that they need to raise their kids and support their lifestyle.
Are you saying that the woman should stay home?
One defect in the lifestyle before the 1960s was that the man was always expected to be the breadwinner and the woman the homemaker. But this does not take into account the skills and strengths of the individual. Some women have a great deal of skills that are marketable outside of the home and have the desire to be in the workplace. More women than men are also going to college and earning advanced degrees, increasing their potential future salary if they’ve chosen a major that allows them to enter lucrative fields. Some men do not have the skills or the desire to do well in the workplace, just working jobs to get by, but have a lot of skills that would be valuable at home.
The ability to effective manage and teach children is a special skill that some men have and some women do not. Men may have other household skills in areas for tasks that women have traditionally performed that can stretch a budget like sewing, baking, and preserving, but even if they don’t they may be able to do things like car and home repairs that many families traditionally farmed out. Where the housewife of the 1940’s may have made many of the clothes the family wore and called on plumbers and technicians to handle household maintenance, the househusband of the 2020’s might handle home repairs and car repairs while the family buys all of their clothes.
So, I am advocating for one-income households to become the norm, but the individual that works might be the man or the woman. It would depend on both capability and desire. In looking for a partner, those who wanted to work would look for a complementary mate who wanted to take care of the home. Just as in the pre-1960’s many women intended to get married and become housewives and therefore took jobs they expected to work for only a few years, there would be men expecting to leave the workforce in their mid to late 20’s and spend the rest of their lives taking care of the household. Instead of looking for a man who had good earning potential, a woman who planned to be the breadwinner would look for a mate who would be a good caregiver, was good at home economics, was calm under the chaos of the normal household with small children, and had skills that would useful around the house. Men who intended to become househusbands would look for women who had the skills and education to make a good living and support the family.
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Enter the pandemic
In a colossal, totally predictable, totally avoidable misstep, governments around the world shut down businesses and sent workers home. This has caused a labor shortage as many people do not desire to return to work, causing wages to rise. If most of the people working in the past simply returned to work, they would do so at higher wages, but the additional money in the economy would result in inflation. Because there would again be plenty of people to fill each job and employers would be in the driver’s seat, the rate of raises would decline while prices continued to climb, resulting in workers being at about the same pay scale relative to the cost of goods are they were before the pandemic.
If many chose to remain at home, however, with only one partner in a marriage returning to work, a labor shortage would remain. This would cause wages to remain high, allowing more families to become one-earner households but be at a higher standard of living than they would have been before. Combine this with the economics that could result if people at home did things directly for the family rather than things for an employer, saving in both income taxes and sales taxes, and many more families that ever could enjoy the many benefits of havng one spouse be a full-time child and home caretaker.
Let’s not waste this opportunity. Having a loving person at home makes a huge difference in the life of a child. This is particularly true given the state of our educational system, creating a huge need for a spouse to be available to homeschool children. Also, there are plenty of people who would prefer to work at home but feel trapped in a job because they feel they need the additional salary. Many people feel far more reward taking care of children and a home than they do in a dead-end job. Rather than transitioning back, let’s transition to a better model.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.