Briefly explain how divorce and the number of breadwinners in a household affect calculations of inequality. Give an example.

Question

What will be an ideal response?

Answer 1

Student examples will vary. A sample answer follows. The increased number of
divorced couples and the rise of two-income families cause the measured distribution of
income (which is measured in terms of household income) to appear more unequal. For
example, in the 1950s, the overwhelming majority of families had single incomes.
Today, many households have two breadwinners instead of one. Suppose their
incomes rise from $50,000 a year to roughly $100,000; thus, these households move
into a higher-income quintile and create greater apparent income inequality. At the
same time, divorces create two households instead of one, lowering income per
household for divorced couples; thus, they move into lower-income quintiles, also
creating greater apparent income inequality. For example, as single people in their
twenties, Jack and Diane each earned about $40,000 and were in a lower quintile.
When they married, their combined income was $80,000, and they moved up a quintile.
After ten years, Jack and Diane got divorced. By that time, their household income was
$100,000, putting them in an even higher quintile as a married couple. Divorcing
dropped them each into a lower quintile. In addition, each of them now had to finance a
separate household on his or her individual income, instead of the combined incomes
they had while married.