The Effect of State Labor Market Conditions on Cohabitation

Sharon Sassler, Cornell University
Katherine Michelmore, University of Michigan
Xing Zhang, Cornell University

Much research on young adults’ living arrangements is premised on the importance of macroeconomic conditions. That is less often the case for research on cohabitation. Yet a sizable literature suggests that financial factors expedite young adults’ transitions into cohabitation, and those most likely to cohabit – young adults with a high school education or less – are most likely to be affected by state earnings policies and economic conditions. We use data from the Survey of Income and Program Participation (SIPP) to examine how state-level labor market characteristics affect cohabitation rates among women ages 18 to 45 years old. Women with low levels of education are more likely to cohabit when state unemployment rates increase, and cohabitation rates fall when states increase their minimum wages. Financial considerations play an important role in cohabitation decisions among low-educated women, and highlight the importance of paying closer attention to macroeconomic factors that shape living arrangements.