Marriage and Earnings

Uncovering the determinants of earnings is an important and well-researched area in labor economics. In studies of race or sex discrimination, it is imperative to use statistical methods that control for various factors so that the researcher can obtain an unbiased measure of discrimination. Another area that has attracted interest is the interaction of wages and union membership. Again, controlling for certain factors enhances our understanding of how unions affect wages. Of course, knowing exactly what to control for is at the heart of the problem. In this paper, we examine one particular control variable that is often used in earnings regressions—an indivdual’s marital status. In analyzing and interpreting the results obtained from earnings regressions, we hope to develop a better measure of how any policy affects (or does not affect) individual behavior. The wage premium attributable to marriage has been well documented in the literature and is typically as large as that associated with union status. The source of this premium, however, remains debatable. Two common explanations of why married men earn more than unmarried men are 1) the division of labor in a married household allocates more of the man’s time to the market, and 2) married men have a lower cost of human capital acquisition, since a spouse may be working to help finance the additional human capital. Both of these stories imply that marriage enhances productivity, and therefore wages, as a result of an increase in human capital. We suggest an alternative explanation for the marriage premium, derived from the job-matching literature, in which marriage signals certain unobservable individual characteristics that are valued by employers—including ability, honesty, loyalty, dependability, and