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Why wealthy women don’t invest like men would

New research shows that decreasing the gap in husbands’ and wives’ education levels has significantly increased the tendency of women to be the chief financial decision makers in their family.

Kris Hanke/iStockphoto

Marriage just isn't what it is used to be. And while that might not be news, there is new research suggesting that changing marriage patterns predict a trend towards more cautious household investment behaviour.

As the next generation of Canadian newlyweds takes a walk down the aisle, market watchers might well consider the long-run consequences of women taking over as the economic decision makers in their families.

Women in Canada have been graduating from university at greater rates than men since the late 1980's. Today, among Canadians ages 25 to 34, those of prime marrying age, 34 per cent of women hold university degrees compared to only 26 per cent of men.

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This trend towards greater educational achievement of women has closed the educational gap between husbands and wives, and suggests that in the future a gap will be opening in the opposite direction – that of wives who are better-educated than their husbands.

According to Stats Canada, in 1981 only 38 per cent of university educated men had an equally well-educated wife compared to 67 per cent in 2006. Over the same period the share of university educated women married to less-educated men has increased by three percentage points.

Both these statistics include Canadians of all ages, and so under-estimate changing marriage patters for those in the younger generation.

New research, by economists Graziella Bertocchi, Marianne Brunetti and Costanza Torricelli, uses data collected by the Bank of Italy to show that decreasing the gap in husbands' and wives' education levels has significantly increased the tendency of women to be the chief financial decision makers in their family.

That trend might not have any further implication beyond the household, except that the same researchers (in an earlier paper) find that as educated women increasingly take over as their household's financial decision maker, they are also becoming more risk averse in their decision making.

That is to say, taking on this traditionally male role has not encouraged women to invest in the same way that men invest, the opposite is in fact true – they have become more cautious.

There is one more trend in marriage that cannot be ignored; many of the educated women who are in relationships with less-educated men are choosing not to legally marry. Among those university educated women, only 48 per cent are with an equally well-educated partner compared to 64 per cent of university educated married women.

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Not surprisingly, cohabitating women are even more cautious in the financial decision making than are married women.

It is impossible to say whether or not changing marriage dynamics will have a long-run impact on the macro-economic environment, but preliminary evidence suggests that this is a trend to watch.

Marina Adshade is an economist at the University of British Columbia and author of the upcoming book Dollars and Sex.

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