The Economics of Tying the Knot (or Not)

Gusto Editors

Episode 24

Episode summary

There’s been a lot of discussion around marriage in economic circles lately, so Liz and Caleb take up the topic in this episode, putting into perspective for small business owners and entrepreneurs.


Liz Wilke (00:00:33) – Hi, I’m Liz Wilkie. 

Caleb Newquist (00:00:35) – I’m Caleb Newquist. 

Liz Wilke (00:00:37) – And this is the Gustonomics Podcast. In each episode, we bring you a little bit of economics knowledge so you can be more informed, use the information in your business or work, or if you have exhausted all of the Princess Bride clips on YouTube. 

Caleb Newquist (00:00:55) – Please remember to rate, review, and subscribe to the show or share it with an economics curious friend. Anything you can do to spread the word about the podcast is greatly appreciated. Hello again, Liz. 

Liz Wilke (00:01:07) – Hello Caleb. 

Caleb Newquist (00:01:08) – Okay, Liz, you recently brought up marriage as a potential topic for us to discuss on the podcast. And I am very curious to know why you wanted to talk about it. So yeah, why are we talking about marriage today? 

Liz Wilke (00:01:22) – Well, Caleb, for one thing, Valentine’s Day was not all that long ago. So the topic of matchmaking and love is sort of in the air. And the second reason is that since at least the mid-70s, economists have been applying economic logic both to describe how people pick marriage partners and then also to describe the economic consequences of being married or not married. 

Caleb Newquist (00:01:49) – Okay, cool. And if you’re listening and you’re thinking to yourself, okay, this has nothing to do with me running my business. Hang on. Don’t go away. We’re going to get to that. But Liz, I obviously have questions. So for starters, maybe this is a very basic question, but in this era, like the 21st century, are fewer people getting married? That’s my first question. 

Liz Wilke (00:02:17) – Caleb, it is almost certainly falling. There are lots of ways that people look at whether or not somebody gets married over the course of their life. It’s actually a trickier thing to measure than you might think. But a common way to do this is to look at the share of people who are 40 and who have never been married. That number is definitely going down over time. As of 2021, about one in four, 25% of 40-year-olds in the United States had never been married. The share of 40-year-olds who have never been married has varied over time. 

Liz Wilke (00:02:49) – So around 1900, it was 16%. And in 1980, it was 6%. But even though it varies, we are definitely at all-time highs for this metric. 

Caleb Newquist (00:03:00) – OK, interesting. And I guess my follow-up question is, is this a bad thing? It seems as though a lot of people believe it is a bad thing. 

Liz Wilke (00:03:11) – To be honest, Caleb, I think whether or not you think this is a very bad thing depends on how you define the problem. As any good economist will say, I will say there are trade-offs to every side. There are definitely economic gains to be had from marriage, and I’ll name a couple of them here. The first one is by far wealth accumulation. When two people live in a household, you only need to rent one apartment or buy one house. You can share a car. 

Liz Wilke (00:03:45) – When people remain single, they have to support all of the costs of living just themselves, whereas married people or partnered but unmarried people can share those costs. 

Caleb Newquist (00:03:58) – A lot of the stuff that I’ve seen and read, the stuff that makes the case for marriage is because it makes for better outcomes for the children of those couples. What about couples who, for whatever reason, don’t have or don’t plan on having children? Are they also better off economically than their single childless counterparts? My hunch is the answer is yes, based on what you just said. 

Liz Wilke (00:04:27) – That’s a hard question to answer, actually. People who have higher incomes are more likely to get married, but actually less likely to have children across the board. It’s really hard to make an apples-to-apples comparison, because a lot of other things vary along with whether or not you have children, like your income and your education and your general health and your lifestyle and all of those things.

Liz Wilke (00:04:51) – And I’m not an expert in this particular area, so I’m just going to sort of broad brush strokes this. From the articles and the data that I’ve looked at, apples to apples comparison, people without children do tend to do better financially in the long term, even if they have sort of same incomes. That is because, I think, as most parents know, children are very expensive to keep and maintain, right? 

Caleb Newquist (00:05:18) – I can confirm this. I can confirm this as somebody with children. OK, sorry, as you– continue. 

Liz Wilke (00:05:26) – Yeah, but then, obviously, on the flip side, most parents, I think the overwhelming majority of parents, would say that the financial costs of children are far outweighed by the personal, emotional rewards of having children. 

Caleb Newquist (00:05:40) – OK, Liz, so people have been waiting for this. So I’m going to ask it now. How is all of this relevant for business owners and advisors to small businesses? Do they need to care that much about whether they’re married or whether employees are married or whether anyone is married? Like, how is this relevant to businesses? 

Liz Wilke (00:06:01) – So I think this is relevant to businesses in sort of two ways. One reason it’s important is because people who start businesses are more likely to be married, and their spouse is more likely to be in a traditionally employed job. That is hypothesized, or that is supposed to be because having a partner or spouse with stable, steady employment creates more opportunity for the other partner to go out and try something that is inherently risky, like opening a small business. So we should think that. 

Caleb Newquist (00:06:42) – Kind of serves as a safety net. 

Liz Wilke (00:06:44) – Yeah, that’s right. It’s sort of a reserve, right? So if your business doesn’t work out, it’s OK. You’re at least still bringing income into your household by your spouse who is working. 

Caleb Newquist (00:06:54) – Because health insurance is often tied to employment. This is also how entrepreneurs can be covered by health insurance if they’re just starting a new business, and they can’t afford health insurance through that business. 

Liz Wilke (00:07:06) – Yeah, that’s right. So if you are thinking about starting a small business, looking at your household budget, and thinking about your spouse’s income, or how your spouse might be able to get a higher paying job or something to pull extra income into the household while you are venturing off into something sort of inherently risky, that’s a conversation that many couples can have if one of you is thinking about small business ownership or entrepreneurship. 

Liz Wilke (00:07:34) – So that is a fact that we know, sort of comes from marriages, that it creates space for one partner to take risk, right? And that just tends to happen. The other way that being married really has interesting effects on business ownership is this idea of skills complementarity. So way, way, way back when, before there were modern economies at all, you had an occupation. You were a herder, or you were a baker, or you were a farmer, et cetera. 

Caleb Newquist (00:08:06) – Blacksmith. 

Liz Wilke (00:08:07) – A blacksmith maybe, yeah. 

Speaker 4 (00:08:08) – Yeah. 

Liz Wilke (00:08:10) – And one of the first theories about marriage is that you should pick a spouse who can help you do that. So people who are bakers by trade would marry daughters of bakers. And people who were herders by tradition would marry people whose families have been herders. And the idea is that they are bringing skills to the marriage that help make the whole thing more successful economically. 

Liz Wilke (00:08:45) – And so when we think about that in a modern sense, couples that have complementary skills in ownership have the potential to really sort of accelerate or amplify their small business endeavor by combining forces, right? And so that’s how we get the story of partnered couples who are co-founders in their business and who are really making it work, because they are each bringing complementary skills to the business to make it more successful. 

Caleb Newquist (00:09:11) – Right. So I can imagine one person having the idea, one person in a marriage having the idea, and the partner, who isn’t maybe an ideas person, and I’m putting scare quotes around that, but that person does the books, for example, and supports the business by keeping very tidy and neat books. 

Liz Wilke (00:09:34) – Yeah, that is a very classic example, right, this kind of skill complementarity. 

Caleb Newquist (00:09:42) – Thanks, Liz. And that’s it for this episode. I hope you learned something new and useful for your business or maybe your romantic life. Please let us know what you think of the podcast by leaving a review or sharing it with a friend who might enjoy it. I’m Caleb Newquist. 

Liz Wilke (00:09:57) – And I’m Liz Wilkie. Thanks for listening.

Gusto Editors Gusto Editors, contributing authors on Gusto, provide actionable tips and expert advice on HR and payroll for successful business management.
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