The idea that uncoupling means “men gain, women lose” financially is often true, but it’s complicated. Dr Michael Fletcher crunches the numbers.
Splitting up is an emotionally fraught time, especially when there are children involved. Even for those who manage to maintain good relations with their exes, it is always a time of big change – whether it’s agreeing on childcare arrangements, dividing belongings or deciding on housing changes.
There is also the question of money and incomes. What does happen to men’s and women’s incomes and living standards when couples split up? Many readers will probably think that’s an easy question. Look around at the people you know, or maybe at your own experience. And you’d be mostly right, although it is more complicated than the common belief that “men gain, women lose”.
You may also think that would be a pretty well- researched question by now, given the serious implications it can have for children and parents alike. But in Aotearoa New Zealand we had no quantitative answers to that question when I began my PhD research 10 years ago.
The problem until then was a lack of data (although that of course raises the question of why there was no data. Was the issue not considered serious enough?). I was lucky in that I was able to draw on a huge data set put together for an entirely different purpose which contained anonymised tax, income and welfare information for a high percentage of New Zealanders and which told me partnership status and whether they were looking after children.
What’s more, the dataset included seven years of monthly information. I had no idea who the people were, of course, but I could see when couples got together, split up, earned more or less, had a new child come into the house and so on.
So what does happen? I followed 8628 women and 7311 men who separated in a given calendar year and who lived with dependent children before separating. To get an accurate picture of the financial effects of splitting up, it is important to compare the incomes of people who separate with a similar group of people who stayed together, and also to adjust for how many adults and children are living in the family – that is, how many mouths the income must feed.
Taking those things into account (and the effect of inflation), the data showed that on average, men’s adjusted income (the technical term is “equivalised”) rose by 15.5 percent in the first year after separation, while for the women average incomes fell by 19.3 percent. That’s a stark difference. Furthermore, over the following two years, while the average gain for men did drop a bit (to 11 percent in year three), for women the decline got worse relative to their never-separated counterparts (to -25 percent by year three). In other words, this big gender gap in the average effects appears to be long-lasting.
A key word here, though, is “average”. Roughly three out of 10 separating women were the same or better off. And more than one-third of separating men were worse off (albeit a roughly similar percentage of men who didn’t separate were also worse off, although for different reasons obviously).
Splitting up also increases the likelihood of poverty for both men and women – doubling it to 16 percent for the men and more than doubling it to 25 percent for the women (and by extension for the children living in these households).
Three things drive these effects. Firstly, the men had higher average incomes than the women, so when the couples separate, although both lose some of the benefits of sharing household costs, the men’s higher incomes more than offset that.
Secondly, the women were more likely to take care of the children post-separation and so the available income had to be shared across more people.
Thirdly, the systems we have in place that are supposed to ameliorate the negative effects of parental separation do, at best, only a partial job. Child support payments, for example, had only a relatively small counter-balancing effect. Working for Families Tax Credits helped, but those on lower incomes before separating were often already getting near the maximum, so only gained a bit. On average, welfare benefits increased substantially for the women but the low rates of benefit at the time of this study meant the families who did end up on a benefit were likely to be living below the poverty line.
Interestingly, separation did not trigger much of an overall increase in employment earnings. While some were prompted by separation to take on more work, others, it seems, reduced their work earnings.
The other way to look at divorce and separation is to compare ex-partners with each other rather than with people who didn’t separate. Looking at more than 7700 ex-couples, in almost half the separations (46 percent) the man was better off, and his ex was worse off (again this is after taking account of household size). In a quarter of cases, they were both worse off. In one in 10, the woman gained financially but her ex was worse off.
And lastly, perhaps surprisingly, a high 16 percent of the ex-couples were both better off in income terms after separating. This last group stood out for two reasons – they had a low combined income before separating and the women were much more likely to move into work, substantially increasing their income that way.
Another strong result from comparing ex-couples was that big changes in living standards for at least one partner is the norm – only in one in seven cases did one or both partners not experience a change in equivalised income of at least 10 percent.
Marital separation has for a long time now been a common occurrence. One recent study suggested only a minority of NZ children born into a two-parent family will live with both those parents up to age 16. What came out of my research raises a number of questions: How much better have we really got at sharing child-rearing equally both as couples and after separating?
Why has earnings gap between men and women remained so stubbornly persistent (see previous question, but also what other factors are in play?).
How come our child support scheme, which is, after all, intended as the first line of defence in balancing out post-separation incomes, not more effective?
For separated parents on a benefit, how much are the rules in that system making it harder for those parents to move on with their lives and form new relationships that would, among other things, improve their financial situation?
Lastly, a word of caution about this fancy number-crunching. All of it assumes that families share their incomes so that parents and children all have an equal standard of living. No doubt that is often true but we actually have almost no information on how couples share their resources.