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Does getting married really increase wealth and income?

By Luke Landes

For Consumerism Commentary.

Published: Friday, July 25 2014 12:15 p.m. MDT

Updated: Saturday, July 26 2014 8:12 a.m. MDT

The Urban Institute has issued a report stating the millennial generation will have the lowest rates of marriage by age 40 than any previous generation. What does that mean for their finances?

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Editor's note: This article originally ran on Consumerism Commentary. It has been reprinted here with permission.

The Urban Institute has issued a report stating the millennial generation will have the lowest rates of marriage by age 40 than any previous generation. The report contemplates a variety of reasons for this shift, including a reduced role of marriage in a family household and the effects of the latest recession. But what does this mean for the financial future of today’s young mostly-singles?

Marriage certainly affects a couple’s finances. Laws make certain effects unavoidable. Nine states have community-property laws, and in those states any money earned by either spouse or any property bought by either spouse from money earned while married is owned equally by both spouses. But as a whole, this law doesn’t change the financial situation of the couple. If between two people cohabiting, the combined annual income is $150,000, that law is in effect whether they’re married and whether they combine their bank accounts.

There may be some subtle differences. A nonmarried couple may need to buy separate health insurance, despite the fact that more frequently, employers consider nonmarried couples “domestic partnerships” and cover a domestic partner, regardless of the sex of the partner. Yet, if a partner is not covered automatically, health insurance for the family could be more expensive.

That, in itself, does not seem a strong enough reason for a researcher to make this argument, as one does in a CNNMoney article about the Urban Institute’s report:

“The evidence shows that getting married increases wealth and income,” said Pamela Smock, a sociology professor at the University of Michigan.

Why would the act of getting married cause an increase of wealth and income? It may be true that wealthier people and those with higher incomes are more likely to get married in the first place, but that’s not what this researcher is saying. She is saying that marriage, independent of all other variables, not only correlates to higher wealth and income, but is a direct cause. I looked at the researcher’s list of recent publications and did not see any articles or books focusing on wealth and income, any in which she has researched cohabitation extensively.

The truth is actually the opposite of Smock's contention: Marriage has a detrimental effect on an individual’s long-term wealth. Here are some of the more obvious reasons.

Couples who get married are more likely to have weddings. Weddings can be, but aren’t always, expensive events. Even otherwise frugal people are driven to spend more money than they normally would to make a memory for themselves and their families that matches the dreams they’ve had. Even with the best do-it-yourself wedding efforts, couples find weddings to be significant expenses that take resources away from other priorities, and, in the worst case, pile onto already unmanageable debt.

A couple who decide not to get married can certainly opt to hold a ceremony to celebrate their togetherness, bringing friends and family together for a joyous occasion, but many do not. And if a lack of financial resources is one of the reasons to indefinitely delay a wedding, it wouldn’t make sense to hold a similar celebration for cohabitation.

I see nothing wrong with weddings, but I’d just like to encourage people to continue to think about their future financial security while planning them.

Couples who get married are more likely to have children. More and more, I’m seeing friends and family and their spouses opt to skip having children, and this reflects a national trend. It must be related to what I’ve already mentioned in this article — as fewer millennials get married before age 40, fewer choose to have children, even though there has been an increase of children born to couples who are not married.

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