11. What's a Wife Worth?
Myra H. Strober
What's a wife worth? What's a wife worth in a marriage that started with zero assets but after thirty years of marriage has assets of about $100 million, which came from the husband's earnings and stock options? What's the “equitable distribution” at the time of divorce of that approximately $100 million when, during most of the marriage, the wife has been a full-time homemaker, mother, and corporate wife? In other words, how should we think about valuing women's unpaid, invisible work?
In the 1996 Connecticut divorce case of Wendt v. Wendt, the facts were precisely those I just described. Since I testified in that case in December 1996, I have served as an expert witness in four additional highasset divorce cases, where, as in the Wendt case, I have been asked to value the unpaid work of wives who were full-time homemakers in longterm marriages and to give an opinion as to how the couple's assets should be divided. These cases have led me to think at some length about
A version of this chapter was originally presented at the annual meetings of the International Association for Feminist Economics, Taxco, Mexico, June 19–22, 1997. I am grateful to Lawrence Friedman for suggesting several revisions. A second version was presented as a talk at the Radcliffe Public Policy Institute in May 1998 and was later published by the institute as “Feminist Economics 101: Valuing the Invisible Work of Women.”
In this chapter I discuss three questions.
- What theoretical framework should economists use to value the unpaid work of full-time homemakers in a marriage?
- What theoretical framework should economists use to determine the proportion of assets husbands and wives should get at the time of divorce?
- Why does there seem to be resistance to thinking about marriage from an economic point of view?
THE WENDT CASE AND DIVORCE LAW
IN THE UNITED STATES
The Wendts
Lorna and Gary Wendt met in a small-town high school in central Wisconsin, and both attended the University of Wisconsin. They were engaged during Ms. Wendt's junior year in college and married in 1965 when she graduated. She had a bachelor of music degree and he a bachelor's degree in civil engineering. Neither had any money to speak of. After graduation, they moved to Cambridge, Massachusetts, where he attended Harvard Business School. She worked briefly at MIT during his first year and then as a music teacher in Sudbury during his second year.
After he received his MBA, they moved to Texas, where he took his first job as a real estate developer. She continued to teach music for a little over a year but stopped when their first child was born in 1968. Over the next several years, the couple moved from Texas to Georgia, and then to Florida, each time for job-related reasons. In 1972, their second child was born. In 1975, he took a job with G. E. Capital in Stamford, Connecticut, and the family moved again. He remained with G. E. Capital, rising to CEO in 1986, and they continued to live in Stamford.
In 1995, after thirty years of marriage, Mr. Wendt asked for a divorce and offered his wife $10 million, saying that surely was more than she “needed” to be comfortable. While accountants for the two parties disagree on the value, it seems that the estate was worth about $50 million
Ms. Wendt said that equitable distribution of assets was not about “need,” but about the value of her contribution to the marriage and that $10 million dollars, 20 percent of their assets, did not constitute equitable division. She then sued to obtain 50 percent of the estate.
Divorce Law in the United States
All states in the United States now have some provision for no-fault divorce. That is, neither the divorce itself, the distribution of property, nor the arrangements for child support or spousal support depend upon which side had legal “grounds” for divorce. However, the conceptual frameworks for determining the distribution of property and spousal support vary by state (American Law Institute 1996).
Eight states have community property laws, where essentially all property except separate property brought into the marriage by either spouse or separate property inherited during the marriage by either spouse is considered to be community property, regardless of who holds title to it. In three of the eight community property states, California, Louisiana, and New Mexico, in case of divorce, state law mandates that the courts divide the community property, regardless of its value, equally between the two spouses. In the other five community property states and in all of the remaining forty-two socalled common-law states, courts are instructed to divide property “equitably,” rather than equally (ALI 1996, 2).
At the present time, in all states, regardless of whether they are community property or common-law states, in divorce cases involving property value less than about $10 million to $12 million, the property is divided equally. However, in cases where the value of the property exceeds $10 million to $12 million, women often do not get half of the property, unless they live in one of the three states that mandates equal division. If the husband was the primary breadwinner and the wife a homemaker, the courts usually revert to the old principle, “He who earns it, owns it.” They argue that, in these large-asset cases, it would not be equitable to give the wife half of the property (Oldham 1996).
In the five other community property states and the common-law states that seek to divide property “equitably,” the value of the contributions that each party made to the marriage is one of the factors the
Ms. Wendt's Unpaid Work
Ms. Wendt's unpaid work as a homemaker, wife, and mother included the following tasks: first and foremost, providing companionship, sexual partnership, and emotional support in the context of an intimate relationship and raising two children; then, managing the household: cooking, cleaning, grocery shopping, doing laundry, and gardening; budgeting, record keeping, and bill paying; purchasing her husband's clothing, packing it for travel, and having it properly cleaned and maintained; maintaining relationships with family members; and creating and maintaining relationships with friends and neighbors. Also, in later years, her duties included hiring and supervising household help. Much of this work was invisible, behind the scenes, often unnoticed, and generally taken for granted. (For additional discussion of the work performed by women in the upper class, see Ostrander 1984.)
In addition, Ms. Wendt did unpaid work associated with being in what Hannah Papanek (1973) and Rosabeth Kanter (1977) have called a two-person career, a situation where the breadwinner's career is so demanding that it requires not only the breadwinner's efforts to succeed but also the efforts of the spouse. The spouse's contributions in a twoperson executive career are of several types: intellectual, status maintenance, public performance, and the provision of emotional aid (Papanek 1973). These contributions vary by stage of the breadwinner's career (Kanter 1977) and age of the couple's children (if any). In the early years, the spouse generally provides what might be termed “technical support,” such as typing term papers and arranging travel schedules. As the breadwinner moves up the career ladder, technical support is generally provided by the employer, and the spouse's efforts turn more toward expert skills in people handling, including assistance in recruiting and entertaining personnel and clients. Once the breadwinner reaches the upper regions of management or entrepreneurship, spousal duties change again; expert people handler remains on the list of
Many people, including feminists, when hearing this list of duties, say: “Yes, these women certainly had a great deal on their plates. But are you really saying that performing these duties, even performing them in an outstanding manner over a long marriage, is worth half of the couple's assets, worth something like $50 million?”
VALUING UNPAID WORK
How should economists value the unpaid work of a homemaker/wife/ mother in a two-person executive career? The two methods usually used, the opportunity-cost method and the market-replacement method, are, in my view, not appropriate for valuing the work of executive wives. In my expert witness work, I suggested a new method. Here, I review the two usual methods and then introduce the new method.
Traditional Methods
The opportunity-cost method of valuing unpaid labor proceeds from the assumption that if the homemaker chose not to engage in paid employment, she and her family must have believed that the value of her homemaking contributions were at least as high as what she would have earned in paid employment. So, using this method, the annual value of a homemaker's unpaid labor is said to equal the average annual earnings of women with her same education level and in her same educational field.
There are three problems with this method of valuing unpaid work. First, because the opportunity-cost notion says that a full-time homemaker must be worth at least what she could earn in the marketplace, it provides an estimate of only her lowest possible value. And the estimate
Second, the opportunity-cost estimate forces us to assume that, had the homemaker in question remained in the labor force, she would have had the same motivation, talents, opportunities, work experiences, and earnings as those of the average woman with her same level of education and field who did in fact remain in the labor force. There really is no basis for such an assumption, nor is there any basis for determining the direction of bias resulting from it.
Third, using earnings foregone as the measure of unpaid work transfers to the household all of the gender bias experienced by women in the market. Given the extent of occupational segregation and earnings discrimination against women in the labor market, why would we think that women's market earnings provide a useful measure of the value of women's unpaid labor in the home?
A second way of valuing unpaid work is by estimating the marketreplacement value, determining what it would have cost to replace the services provided by the homemaker if we hired substitutes. To make such an estimate, we would start by estimating the number of minutes per day the homemaker devoted to various unpaid tasks. We would then call an employment service and get wage rates for hiring people to do each of these tasks. Multiplying the number of minutes per day for each task by the wage rate for that task and summing the results, we would know the total cost of using hired labor to replace the wife's unpaid labor.
This method, too, is unsatisfactory. In the first place we would have to decide what kind of labor would replace the wife's labor. For example, what sort of person would we use to replace her cooking skills? Would we use a high-class chef or a short-order cook? What sorts of people would we seek to hire to replace her managerial, clerical, and chauffeuring skills?
But even more important, for many services it would be impossible to replace the wife's labor. There would simply be no adequate market equivalent for her work. Raising children, providing love, sex, and emotional support and companionship both at home and during periods of travel are valuable precisely because the wife does it herself. In this connection, it is interesting that in all of the cases in which I was involved, after the husbands separated from their wives and lost their unpaid services, they did not attempt to buy these services in the marketplace. They all chose to live with another woman in a new intimate relationship.
Human-Capital Theory and a Partnership Theory of Marriage
Finding the opportunity-cost and market-replacement methods of valuing unpaid work unsatisfactory, I valued the invisible labor of the women with whom I worked by combining human-capital theory and a partnership theory of marriage.
The concept of investment in human capital is an old one, having originated with Adam Smith; it has been revived in recent years by the work of Theodore Schultz (1961) and Gary Becker (1964). It begins with the proposition that investments in education (as measured by educational attainment and quality of educational institution) and investments in on-the-job training (as measured by work experience) result in economic rewards throughout one's life. At any point in time, these rewards are measured by adding three numbers: current income, current assets, and the present value of future income.
Human-capital theory is usually applied to the situation in which an individual makes an investment in his or her own career and the rewards of the investment accrue to that same individual. But it is also applied when outside parties invest in an individual and some of the rewards accrue to that outsider—for example, state governments, businesses, or parents.
The human-capital investments that the state makes in an individual are solely in the form of money and solely for the purpose of formal education or (less usually) for formal on-the-job training. The humancapital investments that parents make in their children also are mostly in the form of money for formal education, although some parents may also contribute significant emotional support during their children's education.
When I think about the economic aspects of marriage, what I see are two people who make human-capital investments in themselves, in one another, and in their marriage. The investments are both monetary and emotional and go on throughout the marriage. When a full-time homemaker wife cooks meals or a breadwinner husband works in the marketplace, those activities are human-capital investments in his career, her unpaid career, and the marriage.
In a breadwinner/homemaker marriage, there is an asymmetry in the economic returns from the two parties' human-capital investments (Cohen 1987). By providing monetary support to his wife, the breadwinner husband invests in her homemaking. The returns from his investment in her homemaking come early in the marriage; indeed, in many cases, the
As noted earlier, at any point in time, the total economic return on the two parties' investments in themselves, in each other, and in the marriage is equal to the sum of current income, current assets, and the present value of future income. The difficult question is how this sum should be divided between the two parties.
Determining how to divide the economic returns from the two parties' human-capital investments is easy if they spelled out their intentions on this matter in their marriage contract. However, until recently, when formal prenuptial agreements began to be increasingly used, the vast majority of couples entering marriage did not formally spell out their economic intentions or expectations, so we are left to infer the property agreements that were implicit in their marriage contracts. In my view, in the absence of any agreement to the contrary and prior to the time that prenuptial agreements became popular, it is fair to say that couples assumed that their marriage was a fifty-fifty partnership.
It is instructive, in this regard, to look at business partnerships in which, if there is no explicit understanding to the contrary, the presumption is that the partnership is fifty-fifty. When business partnerships dissolve and divide their assets, unless specific contrary arrangements were specified in the partnership agreement, each partner gets an equal share of the assets. Neither the partners nor the court asks, for example, whether the contributions of the partner with expertise in marketing were greater in quantity or value than those of the partner with expertise in production. It is assumed that the partners were in partnership because each thought the other's contribution was necessary to make the partnership work.
The same is true in a marriage. When parties begin their marriage with no understanding to the contrary, the default presumption is that they have a fifty-fifty partnership. And the fact that they stayed married for a long period of time should lead us to the conclusion that each was satisfied that the other's contribution was necessary to the successful functioning of the marriage and the two-person career.
In the Wendt case, and indeed in the other four cases as well, I argued that in a long homemaker/breadwinner marriage, say one that lasts fifteen years or more and in which no contract contradicts the implicit
I also argued that, using a human-capital framework and a partnership theory of marriage, giving the wife half of the estate and a declining portion of her husband's future earnings should not be viewed as a gift to her. Nor should it be seen as related to her economic need. Rather, it should be seen as her earned right. Since her investment in her husband's career had paid off handsomely, she should now receive her economic due.
The Judge's Ruling in the Wendt Case
The Wendts' divorce complaint was dated December 1995. Their divorce trial began a year later, in December 1996. The trial took eighteen days, with each party calling multiple expert witnesses. In December 1997, Judge Kevin Tierney handed down a 519-page opinion (Wendt v. Wendt 1997). He gave Ms. Wendt half of the socalled hard assets—that is, personal property, real estate, cash, stocks, bonds, mutual funds, and Mr. Wendt's fully vested qualified pension plan. In reaching his decision, he used neither the human-capital framework nor the partnership theory of marriage. Indeed, he did not use any economic theory or methodology, a point to which I return in a moment.
The judge awarded Ms. Wendt considerably less than half of the couple's other assets, which were Mr. Wendt's supplementary pension plan, restricted stock, special long-term performance award, and vested and unvested stock options; and he awarded her none of the value of Mr. Wendt's deferred executive compensation. In total, Ms. Wendt got about $20 million, considerably less than the approximately $50 million that would have constituted about half of the estate.
Ms. Wendt was also awarded unmodifiable alimony of $252,000 per year, to continue until her death or remarriage. But the judge did not give her these alimony payments as ongoing returns on the investment she made in Mr. Wendt's career. In fact, he offered no rationale for awarding continuing alimony.
From a feminist economist's point of view, several aspects of the
The views of Estin and Radin are not dissident voices among feminist legal theorists. Legal theorist Deborah Rhode says she is uncomfortable with the human-capital metaphor as a way of looking at marriage and divorce (Rhode 1998). Joan Williams (1994), in an article not cited by Judge Tierney, says: “The proponents of human capital theory rely on commercial analogies that seem jarring and out of place when applied to family relations” (2227) and “human capital theorists' highly commercialized language…threatens undesirable commodification of intimate relations” (2276).
Nor is Tierney the first judge to find human-capital theory distasteful when applied to marriage. Williams quotes a West Virginia court in Hoak v. Hoak as follows: “characterizing spousal contributions as an investment in each other as human assets demeans the concept of marriage” (1994, 2276).
The judge was also hard on the concept of marriage as a partnership. After reviewing the testimony of legal scholar, Martha Fineman, who, as one of Ms. Wendt's expert witnesses, also argued that marriage is a partnership, the judge concluded that in Connecticut, marriage is not a partnership and that he was unwilling to “engraft this commercial standard into the vagaries of family life” (1997, 233). These were his words: “Although early humans once roamed postglacial Connecticut, there has been no Connecticut evidence of ‘Homo Economicus.’ This court will dig no further into the moraine to discover such a being, for the first to discover ‘Homo Economicus’ can then declare ‘marriage is a partnership,’ but, until that day dawns, no. Marriage is not a commercial partnership in Connecticut (1997, 234).”
Judge Tierney also cited legal scholar Bea Smith (1990) on this point,
RESISTANCE TO THINKING ABOUT MARRIAGE FROM AN
ECONOMIC POINT OF VIEW
What should we make of all this? Judge Tierney of course was under no compulsion to use economic theory to value Ms. Wendt's unpaid labor. In effect, he said that the Connecticut legislature left it to him to decide on what basis to determine an equitable division of property, and that the legislature did not require him to use economic theory, or indeed any other theory, to do so. In fact, he indicated that he thought it was wise of the legislature to give courts considerable discretion in making equitable property divisions. He simply was not seeking a systematic way to think about the value of Ms. Wendt's unpaid labor.
Feminist economists are, I think, more interested in developing theory in this arena. But there has been very little writing by feminist economists on these matters. It is interesting to ask why many feminist legal scholars, courts, and, from anecdotal dinner party and classroom evidence since my testimony, numerous others seem to be allergic to the application of human-capital theory to marriage and divorce. For many people, it appears to be threatening to think about marriage as an economic endeavor at all, even in part, and more threatening to think about it as a series of mutual human-capital investments.
Why? The myth of marriage as romance dies hard. Listen to the songs on the radio—still! Watch TV or movies, talk to young people. Many of them continue to believe that marriage is mostly about falling in love or being in love. Some will tell you that marriage is a spiritual union. But distasteful to many are economic analyses of marriage markets, talk about the benefits of prenuptial agreements, or recognition by husbands and wives that they bargain with each other all the time.
In her survey of dual-career couples in San Francisco, Wenda O'Reilly (1983) was told repeatedly by both women and men that “we never bargain; I bargain with my boss, but not with my spouse.” Despite their protestations, O'Reilly found they bargained about numerous aspects of their marriage—where to live, whose career to favor, when to move, when to have children, and how and when to spend money. But thinking about marriage as ongoing bargaining was simply not very romantic, so, while they did it, they refused to acknowledge it.
Romance has been hard to hold on to in recent years. With the rapid rise in the divorce rate beginning in the 1960s and the more recent ongoing disclosures of domestic violence, one needs greater and greater doses of delusion to hold on to the myth of marriage as a haven in a heartless world.
Perhaps resistance to economic analyses of marriage is strong right now precisely because the rise in the divorce rate and increasing reports of domestic violence have made it difficult to hold on to the romance myth. Perhaps collective resistance to acknowledging the realities of the economics of marriage is directly proportional to the degree to which the view of marriage as romance is challenged by daily observation.
Yet there is more going on here. Resistance to economic analyses of marriage is, in part, resistance to the growing influence of economic rhetoric in the society as a whole. This is, in part, the basis of Radin's work. Increasingly, economic rhetoric is being applied more and more broadly. For example, it used to be that we rationalized foreign aid, at least in part, as helping poor people in poor countries. No more. Foreign aid is now sold as good policy because it builds trading partners. It used to be that we saw colleges and universities as nonprofit organizations, utterly unsuited to governance by for-profit principles. No more. We now have boards of trustees and state legislatures that regularly ask why a university can't be more like a firm. We used to have countries that presented alternatives to the market capitalist model: socialist countries in Eastern Europe, the Soviet Union, and China, and welfare-capitalist countries such as Sweden. But socialism has mostly been converted to market capitalism and the welfare part of welfare capitalism seems in great danger. Market capitalism appears to have become hegemonic. People may resist applying any kind of economic model to marriage as a way of resisting this hegemony, as a way of having at least one part of their lives not governed by the market paradigm.
At some level, I think people do in fact recognize that economics plays a major role in marriage. Protests against commodification and application of the commercial model to the household are in part attempts to change that situation or at least keep it from growing. Note some additional words from the West Virginia court whose opinion in Hoak v. Hoak, against using human-capital theory as a conceptual underpinning for marriage, I cited earlier: “…this court would be loathe to promote any more tallying of respective debits and credits than already occurs in the average household” (Williams 1994, 2276). I read this as
Where does this leave feminist economists? Divided, not of one mind. There are of course some things on which all of us agree: that the invisible work of women has value; that being a full-time homemaker is an exceedingly risky job, as Barbara Bergmann (1986) has argued, probably one of the most risky; and that men and women entering into marriage ought to see prenuptial property agreements as simply good hygiene. But in talking to feminist economists about the Wendt case, I find a good deal of disagreement.
Some don't like the fact that I'm spending my time defending “rich women.” They don't think it is fair that anyone, husbands or wives, should be permitted to earn such high returns on their human-capital investments. They question how much of these very high returns actually are returns to any human-capital investment by anyone and how much are essentially windfall gains, the result of luck and the vagaries of the stock market. I share some of these concerns. But it is my view that in a society that allows people to retain very high gains from investments, the same rules must apply to wives as to husbands.
Some of my feminist colleagues think that it is bad public policy to reward women who have spent their lives as full-time homemakers because that will encourage younger women to do likewise. They think that feminist economists ought to be in the business of designing public policies to discourage women from full-time homemaking, that the essence of feminism is to get women to be economically independent. I disagree. My work on the graduates of Stanford University, who were in their early thirties at the time I surveyed them, convinces me that women who are married to men in super-high-powered careers may well continue to be full-time homemakers. Not only can these women afford to do so, but also, their family's lifestyle, with frequent geographic moves, frequent demands for spur of the moment business travel, and absent husbands who provide precious little in the way of fathering, leaves them few alternatives. (See Strober and Chan 1999.) Feminist economists are critical of the notion of choice, but they don't always recognize that women married to men in high-powered careers often cannot have careers of their own unless they leave those marriages. Their choices are in fact quite constrained. I am interested in changing the system so that women can be in super-high-powered careers. And I am interested in changing super-high-powered careers so that people in them can have a life and share child rearing and household management
Refusing to acknowledge that rich women also face gender bias is a type of discrimination. Feminists resist when other social scientists tell us that we should work on the problems of minorities, that those problems are much more serious than those of women. We should also resist those who tell us that certain groups of women are automatically more deserving of our analyses than others.
CONCLUSION
Ms. Wendt appealed Judge Tierney's decision. She wanted the appellate court to make equality in marriage, as she put it, a principle of Connecticut law. However, the court of appeals affirmed the original decision in every respect (Wendt v. Wendt, 2000).
None of the other four cases in which I was involved came to court, although several came close, with settlements arrived at only after numerous days of depositions. In each of the cases, which were settled in the 1996–97 period, details of the property division were not made public. However, each of the four attorneys involved told me that the final distribution was very close to fifty-fifty.
In the summer of 1998, six months after the Wendt decision, the New York court was faced with a case quite similar to the Wendts', Goldman v. Goldman. The Goldmans had been married for thirty-three years at the time Mr. Goldman filed for divorce, and Ms. Goldman had been a full-time homemaker in all but the first three years of their marriage. In that case, Judge Walter B. Tolub Jr. awarded Vira Hladun-Goldman 50 percent of the $100 million estate she owned with her husband, Robert I. Goldman, including $44 million in restricted stock in the Congress Financial Corporation. Business Week quoted Tolub as arguing, “In a long-term marriage the distribution of marital property should be equal or as close to equal as possible” (Symonds, Burrows, and Forest 57).
The valuing of women's invisible work appears to vary greatly both across states and within states. Basing decisions on well-developed theories of human-capital investments and marriage as fifty-fifty partnerships would go a long way toward increasing consistency of judicial reasoning and providing couples with a clearer understanding of the economic consequences of a decision to divorce. Permitting judges discretion
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