States and Congress Can Act to Fix Large Working-Class Marriage Penalties

Our safety net substantially penalizes young working-class couples who marry. Adding the patchwork of welfare programs together, the marriage penalty for a typical lower-income couple can equal at least 10% of household income. That’s taking critical resources off the table for young Americans who are already working hard just to get by. This isn’t fair—and given the vast benefits of children growing up in stable homes with two married parents, it isn’t good public policy.

Welfare has marriage penalties because program eligibility rules require household income to be below a certain level, and don’t account for the fact that two working-class adults will likely earn about twice as much as one working-class adult. Consider a mother and father of a one-year-old girl, where each adult individually earns below the eligibility threshold of a particular program—child care assistance—which is about $45,000 per year. If the young mother and her one-year-old daughter are counted as a “two-person household,” the mother will qualify for childcare assistance. But adding the income of the child’s father will disqualify the family. The eligibility threshold moves slightly higher based on a “three-person family” instead of a “two-person family,” but not by much and just as much as it would if another child were added to the family—the rules take no account for the fact that dad is also an income-earning adult. 

When determining which incomes will count toward eligibility, the biological father and mother of the child will always have their incomes counted if they are living in the same home, married or not. But if the same young mother has a live-in boyfriend, his income is not counted toward eligibility, meaning that the mother is likely to still receive the benefit.

On paper, this penalizes both biological parents living with their children, in favor of the live-in boyfriend unrelated to the children residing in the home—a situation that places children at 10 times greater risk of abuse. That is reprehensible, and smacks of sloppy and indifferent policymaking. In practice, the existing setup disincentivizes marriage. A cohabiting couple can easily hide their living situation from welfare authorities, but a married couple is easily detected by welfare authorities via a quick search of the marriage license database.

Families are hit hardest when each adult earns around or below the eligibility threshold for welfare—in the case of child care assistance, about $45,000 per year if the family has only one child. Couples with the largest penalties are those where the man and woman earn relatively equal amounts, with combined incomes between $50,000 and $90,000 per year.

The young couple with the one-year-old child, each earning $35,000 per year, face over a $15,000 marriage penalty in Minnesota, not even counting Medicaid’s marriage penalties. The same couple has a $9,000 marriage penalty in Georgia, and more than a $6,000 marriage penalty in Texas. In Texas, where penalties are relatively lower than the other two states, the cost of marriage still rises to about 9% of family income, excluding government provided healthcare. 

This is deeply concerning because most young Americans without a 4-year degree are in this income category, especially when they are first starting their careers and at the prime age of family formation. The average salary for those age 25 and older with only a high school diploma is $35,000. For persons with some college but no degree, the salary is $38,000, and $42,000 for persons with an associate degree. Keep in mind these individuals without a four-year degree still constitute about 65% of the country. The salary for young people in the prime age of family formation, regardless of educational attainment, tells the same story: the median salary of 20 to 24 year-olds is $33,000 per year, and the median salary for 25 to 34 year-olds is $48,000 per year, about the median income of full time workers in the U.S. as a whole and barely above the eligibility threshold for various programs.

Of course, while women and men earning equal amounts for full time work are more common, other family types exist. Families where one spouse earns significantly more than the other spouse face lower marriage penalties if the family can survive on the lower-earning spouse staying home full time and the higher-earning spouse continuing to work. But most families in this situation likely need the extra income from the second lower-earning spouse, and the second spouse may only be earning less because she is taking on child care responsibilities at home and is unable to work full time. 

These penalties hit working men who are looking to get married the hardest. Working-class men earning between $30,000 and $60,000 per year suffer from reduced marriageability because, while they make good money in a vacuum, they are less competitive as a marital partner when measured against welfare. This is especially the case for men earning below the eligibility threshold for welfare. When men earn more than $80,000 per year, they become very marriageable, since their income is more than enough to compensate for any lost benefits, and their income is at the point where one spouse can become a part or full-time child care provider. 

The solution to this problem is twofold. First, end the income eligibility test that counts the biological father but doesn’t count the income of the live-in boyfriend. Second, follow the lead of the tax code and increase the eligibility threshold for married couples, which accounts for the fact that two adults in a home can be, and today usually are, breadwinners. The child care assistance program is a specifically targeted for reform because it is pro-work, limited in many states (which allow experimentation), and has the largest marriage penalties due to the high cost of child care.

Specifically, the eligibility threshold for the two-parent family with a young daughter should increase by 1.4 times the eligibility threshold that would exist if the father was out of the household. That moves the threshold for general eligibility from $45,000 to $63,000. Next, to end the benefit cliff that exists in the existing program, reformed or not, eligibility for this same family should continue up to 1.7 times the original $45,000 eligibility threshold, or $76,500. Between $63,000 and $76,600, the benefit would steadily taper off via higher program copayments. 

The same family earning $35,000 each, two parents with a baby daughter, would experience a reduction of the marriage penalty of $8,000 annually in Minnesota, $4,000 in Georgia, and over $2,000 in Texas. This doesn’t completely end marriage penalties, but the same reform can be applied to other programs, and reforms can be touted to young families as part of a marriage drive, along with a public service campaign about the long-term benefits of marriage. 

This reform is simply good policy and begins to end decades of a misguided framework for our safety net. State governments should pursue reform immediately, and Congress should act to increase the incentives for states to smooth or eliminate marriage penalties in the safety net.

Willis Krumholz is a Research Fellow at the Archbridge Institute and a financial services professional living in Minnesota.