The Economics of Cohabitation

It’s common to assert that the rise of cohabitation — couples living together outside of marriage — is a sociological phenomenon. Consider Michael Gerson: “In the absence of a courtship narrative, young people have evolved a casual, ad hoc version of their own: cohabitation. From 1960 to 2007, the number of Americans cohabiting increased fourteenfold. For some, it is a test-drive for marriage. For others, it is an easier, low-commitment alternative to marriage. About 40 percent of children will now spend some of their childhood in a cohabiting union.”

But a social scientist will tell you that the economics are just as important, if not more so. (Granted, they say that about most things.) The cost of housing has increased precipitously in cities. Wages have held stagnant for most classes of workers for the past decade. Young folks more often have burdensome education loans, and low-benefit and low-security jobs. Couples today pool resources more often — living together partially because it is no longer shameful to do so, and partly out of economic necessity.

Via the Wall Street Journal, the Census Bureau has a fascinating study on how the recession has proven that true. It is a bit hard to get through, but Rose M. Kreider’s paper (PDF) shows that between 2009 and 2010 — as the unemployment effects of the recession really started to be felt — the number of opposite-sex couples living together increased a whopping 13 percent.

If more couples are moving in together, there might be some precipitating economic reason for the move, such as a job loss, or the inability to support the cost of two homes. If the primary factor driving the increase is economic, we would expect that the newly formed couples would differ from those who were already living together in terms of whether they were employed. [...]

Newly formed couples in 2010 had a lower proportion with both partners employed (39 percent) than couples who were already together (50 percent). This general decrease in employment among cohabiting couples might by itself demonstrate a contributing factor to the increase in cohabiting couples, since it is presumably more cost effective to maintain a single residence rather than each partner living separately.