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well we know that high mortgage rates
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are impacting some important decisions
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in our lives right now but would these
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high rates as well as some of the
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problems around getting a house right
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now impact other decisions in our lives
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even things like getting married but
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believe it or not the ownership of a
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home and its value can be an important
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factor into the success or failure of a
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marriage Karen low is associate
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professor of business e economics and
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public policy here at the Wharton School
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she's done research into this and she
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joins us right now Karen great to talk
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to you again great to be here again Dan
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this is interesting I I mean you're
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talking about something I think that a
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lot of couples who could potentially get
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married wouldn't necessarily consider
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but there is a correlation between
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owning a home and the success or failure
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of a marriage yeah that's right so I
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have new research out together with Jean
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La foron um and it's a paper we call
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collateralized marriage because we talk
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about how a home and other assets act as
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collateral in the marriage contracts so
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while marriage might have some romantic
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components it's also a legal contract
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and that legal contract specifies you
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know what happens if the marriage
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doesn't work out and what we talk about
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in the paper is that for people who are
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able to afford a home or have other
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assets that contract has this extra
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strength of collateral because that
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collateral that home is going to be
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divided in case the relationship doesn't
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work out and it used to be that marriage
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was sort of the only contract that was
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available to people if they wanted to
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form a relationship and have children
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but that's not the case anymore since
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around the 90s we've had many um legal
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changes that have made non-marital
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fertility a possibility that still
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enables fathers to have rights and
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responsibilities and so that meant that
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people now have two substitutes that
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they can consider they can think about
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do I want to enter this relationship
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start this family in with a non-marital
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contract which still offers some rights
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and responsibilities or do I want the
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marriage contract and what we show in
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the paper is that for people who are
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able to afford the a home the marriage
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contract is stronger and better but for
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people who aren't those two contracts
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are going to be more similar but the
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dynamic we obviously have right now in
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terms of the housing sector is unique
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because you have mortgage rates that are
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up around 8% you had so many people that
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refinance mortgages a couple of years
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ago and kind of are are in that area uh
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and and then you also have the uh the
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lower level of housing that's available
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in general so how are those Dynamics
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potentially impacting some of those
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decisions right now yeah I mean based on
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my research you know what we use is we
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use variation in house prices at the
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time that people are entering into a
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relationship and then we look at how
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that impacts the decision to get married
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and then what the marriage looks like
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and for people who had were facing
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cheaper housing prices at the time they
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entered a relationship and therefore are
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more likely to own a home we find that
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their relationships are stronger in a
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couple of key ways so getting into a
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marriage involves taking certain kinds
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of risks it involves saying all right
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I'm going to put my interests to the
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side in this case and do what's right
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for us as a family or us as a couple but
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that's risky if the relationship could
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dissolve and you could be left you know
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sort of bearing the burden of those
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risks that you took so take for example
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a couple that has to decide one of us
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has a really good job opportunity in
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another city it's going to negatively
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impact the other person's career do we
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go for it if you're not married you're
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probably unlikely to do that because
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that's a giant risk but if you're
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married you would say okay we have that
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assurance that we're in this contract
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and if there's assets those assets are
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going to be divided if one person's
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career really takes off and that helps
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them you know accumulate a lot of assets
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those assets are going to be divided and
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I know it sounds unromantic to talk
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about it that way but that is part of
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what marriage is about it is a legal
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contract nobody enters into a marriage
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thinking it's going to end and yet that
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possibility is there we just know that
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the statistics mean that that
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possibility is there right and so
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nowadays these couples that are facing
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these super high mortgage rates what my
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research says is that because they're
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it's going to be harder for them to own
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a home they're more likely to maintain
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as staying as renters um that that might
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affect the type of relationship they
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choose that might cause them to be less
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likely to get married and if they do
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marry it might cause them to be more
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cautious about taking those kinds of
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risks one of those risks is somebody
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taking an extended period of Parental
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leave usually it's the mother to stay
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home with kids because think about the
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risk that creates to her so now she's
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putting her career care growth to the
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side focusing on the kids the other
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person usually it's the man is still
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continuing to invest in his career his
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salary is growing if you don't have a
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contract and he can just walk away you
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could be left with that lower earning
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potential well meanwhile he has this
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great career that he's built and that's
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what the marriage contract protects
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people from and but without assets
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without accumulating those assets like a
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house you have much less protection and
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a home is the main assets that people in
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the United States have and so these
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couples that are facing these very high
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mortgage rates are also facing risks to
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their relationship security and
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obviously we know that the the the
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potential of a breakup or divorce is
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possible with the historic uh focus on
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uh on divorce rates to begin with so it
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it's part of the the formula
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unfortunately that you go into when
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you're going into a marriage that you
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know it's a possibility but you maybe
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don't think about it on a day day-to-day
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basis that's right and so you know
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sometimes people ask me like do you
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really think people go around kind of
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maximizing these utility functions with
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like probability of divorce in there and
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I don't right but I do think that
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something happened when divorce became
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much easier in this country because it
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used to be very uncommon and it used to
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be difficult and when it became much
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easier and it became unilateral that one
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person could decide oh I want to walk
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away from the marriage I think women
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heard stories I think they heard stories
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from my aunt or my mom's friend got
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really screwed over in a divorce right
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because she spent her whole life staying
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home with the kids taking care of the
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house investing in that's still economic
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value you're creating through home
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production right but investing in that
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form of economic value that you can't
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take with you as easily if the
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relationship dissolves meanwhile her
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husband became partner at the law firm
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became a surgeon had all of this money
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and she got screwed over and so I think
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women heard those stories and they said
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I need to protect myself right and
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that's how I think people think about it
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you know it's not okay I have this
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probability I'm placing on this but it's
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okay I'm taking into account
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these stories that I've heard and then
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I'm going to be more cautious in my
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decisions and so that means if I enter a
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relationship where I don't have the
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security of a home I'm going to be more
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cautious in the Investments I'm going to
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make in my family and that ultimately
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ends up affecting kids because those
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Investments are things that are good for
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child human capital um that's a fancy
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word economists use to you know it's
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like it's all those time you spend doing
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homework with your kids on the kitchen
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table right but that's an investment
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that's choosing to take your time and
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instead of putting it into your own
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career instead of investing finishing
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those legal briefs or you know staying
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up late working on that spreadsheet to
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advance your own career you're investing
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in your child's future potential right
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and again those Investments are risky if
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you don't have any kind of insurance
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well you're talking about you what is a
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very unique and kind of it seems like
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multifaceted trickle down effect from
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this component like as you said if women
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are more hesitant or or restrained about
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some of these decisions then it impacts
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the decision of marriage then it impacts
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the decision of career and of having
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children which we know has a a larger
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economic impact on the country you know
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multiplied by millions of people as we
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go down the road and investing in
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children because that affects economic
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inequality because if people who are
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wealthier and able to um afford homes
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are more able to take this risk of
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investing in children then that's going
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to create a further spread between the
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have and the Have Nots and so I also
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connect this to um there's this really
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interesting book right now um by Melissa
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Kierney that's been getting a lot of
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attention called the two parent
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privilege and she talks about how much
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better off children are when they're
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part of a two parent married household
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you know rather than the sort of
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non-marital fertility setup that I
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talked about and I think we need to look
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at the economic forces that might make
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it harder for or easier for families to
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form that relationship and so if we know
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that owning a home is something that
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provides the collateral that's why our
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paper is called collateralized marriage
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that provides the security for that
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contract how do we make it easier for
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people who are poor to access this
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especially at a time of 8% mortgage
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rates so I was goingon to ask you is
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there in the research that you did is
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there a level or value of the home of
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the couple coming together that
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seemingly kind of ensures or at least
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leads to a greater level of security
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within the relationship
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yeah so I think what we link it back to
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is about the contract that you have
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access to you know and so we think
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people when they have access to this
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contract because when house prices were
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low people choose this stronger
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relationship with more risk more skin in
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the game right more I'm G to make these
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Investments and then that's okay because
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I know that later you know I'm going to
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be taken care of when they have access
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to these lower housing prices and more
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ability to do it that's what people are
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choosing to do um and so think that that
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has value to people and our issue is the
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policy changes in the US that have
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weakened the marriage contract through
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making divorce you know a lot easier
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making it one-sided that one person can
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just say I want to get divorced that
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didn't used to be the case it used to be
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if one person wanted to get divorced
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they had to compensate the other person
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for walking away to get that person's
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agreement right there's a lot of
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benefits of making divorce easier and I
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don't want to downplay that of course we
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can think about women in you know
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abusive or otherwise you know really bad
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marriages that need that ability to walk
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away but I don't think we've talked
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about the other side of it we've made
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the marriage contract weaker we've made
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this non-marital fertility contract
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stronger and now we've created this
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bifurcation where for people with assets
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the marriage contract still has extra
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teeth because the marriage contract says
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whatever assets are accumulated during
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the marriage no matter who paid for them
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those are to be divided at the time of
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divorce the non-marital fertility
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contract specifies child support it's
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specifies parental rights but it doesn't
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say anything about assets so for people
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with assets they still have access to
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this stronger contract that we call
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collateralized marriage yeah and so
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they're going to choose that marriage
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contract the issue is we've taken that
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option away for people without Assets
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Now there's no way for them to access
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this stronger contract and this stronger
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contract is what we think is also
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creating a better environment to invest
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more in children again contributing to
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this broader inequality
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um in a country that's already deeply
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unequal so you start with people have
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more assets people have less assets and
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now you're exacerbating this by saying
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that people with more assets can also
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access this stronger relationship that
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again as Melissa kier's book showed is
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better for children so unfortunately I
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don't think that the policy side is
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going to change anytime soon so then
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what do you think is the takeaway and
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the thought process that couples should
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really have as they move forward with
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this component as they work on their mer
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and they try and make them strong yeah
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so I think that there there are
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takeaways for couples to say if you want
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to be able to take these kinds of risks
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that are mutually beneficial you need to
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figure out how are you offering that
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security so if you can't afford a home
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what are the other things you're doing
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to ensure that you're offering that
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security to the person who's going to
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take those risks right so how are you
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structuring your relationship even
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though again nobody wants to think about
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divorce it's an unromantic thing to
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think about at the time you enter into a
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relationship but how are you setting
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things up so that both people are
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protected in the case of this future
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scenario where one person has spent
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their time investing more in children
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one person has spent more time investing
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in a career how do you make sure that
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both people are protected but I also
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don't think that we can give up from the
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policy side because there are things
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that we can do to make homeownership
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easier for people with lower assets
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right we can create programs where the
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federal government sort of backs um
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people with lower levels of assets or
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Worse credit so they can be get those
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prime mortgage rates because people with
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you know worse credit are facing those
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subprime rates that aren't even the 8%
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mortgage they're facing a higher rate
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right so we can the federal government
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can do things to make sure that people
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are able to get that insurance um that
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could be backed by you know a federal
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agency the federal government also could
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create programs to help people with down
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payments or you know to again back the
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mortgages that there is no down payment
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required and so there are things that we
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can do to make it easier for people to
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access that collateral and I think it's
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something that we need to think about
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especially in the current environment
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that we're in where mortgage rates are
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high in a lot of cities properties are
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scarce and expensive and all of this is
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going to be deepening inequality Karen
00:13:21
great to talk with you thanks very much
00:13:23
always great to be here Dan thank you
00:13:25
you too as well Karen low associate
00:13:27
professor of business economics and
00:13:28
public public policy here at the Wharton
00:13:30
School
