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Journal Issue: Children and Divorce Volume 4 Number 1 Spring/Summer 1994

Financial Impact of Divorce on Children and Their Families
Jay D. Teachman Kathleen M. Paasch

Policy Implications

The economic consequences of divorce are of sufficient magnitude that we may ask ourselves about possible ameliorative measures. What can our society do to lessen the economic burden placed on women and children by the disruption of a household? What hurdles do they face in their attempts to regain economic security? Below we outline some of the road-blocks to economic recovery faced by women and children and some possible policy alternatives to assist them. A first policy prescription would appear to center on the transfer of economic resources from absent fathers to their children. Our society presumes that the care and support of children rests with their parents. Accordingly, a major thrust of domestic policy over the past two decades has been to strengthen child support programs. And, as shown by several researchers, the amount of money that absent fathers could provide appears to be three to four times the current amount. For a portion of divorced mothers, increased child support payments offer the opportunity for a substantially better standard of living. However, these are the mothers who have greater economic resources in the first place. It is much less likely that increased child support collections will significantly change the economic well-being of mothers at the bottom of the income scale for at least two reasons.

First, AFDC mothers are allowed to keep only the first $50 of any child support collected; any additional money reverts to the state. A possible reform in this area would be to allow mothers to keep all or a substantially greater proportion of child support received. Second, at the time of divorce, fathers of children of AFDC mothers often have very low incomes and may be required to pay little or no child support. Interestingly, recent analysis of Wisconsin data indicates that divorced low-income fathers nearly double their predivorce income seven years later.50 Future policy could take advantage of this rise in income, perhaps by reevaluating child support awards at regular intervals following the initial award.

However, on deeper reflection, it is not yet clear how easy it will be to increase child support collections substantially. Some evidence suggests that the Wisconsin system, with strong guidelines for awarding child support and wage withholding, can increase the flow of income to noncustodial parents.29 Secondary evidence pertaining to the Family Support Act of 1988 indicates that the new guidelines may increase child support collections by as much as 50%.51 But a 50% increase in collections is far short of a three- to four-fold increase, and we believe that the evidence that even the lower increment will occur is weak. Additional data are therefore needed concerning appropriate mechanisms for collecting additional child support.

The overall impact of efforts to increase child support payments is also not clear. There is virtually no evidence pertaining to the effect of child support payments on the social and economic behavior of custodial and noncustodial parents. Most researchers have simply assumed that all else will remain the same as efforts to increase child supports are put into place.  But how will shifts in child support payment and receipt affect migration, marriage, remarriage, and labor force decisions of both parents?  Will mothers be more likely to enter the labor force if child support is available to pay for child care? Conversely, will they be less likely to remarry if they fear loss of child support payments? Will fathers be less likely to seek additional income if they must pay more child support? Will they be less likely to remarry if they pay child support? The answers to these questions may change the calculus by which one measures the value of efforts to increase collection of child support, especially if done in isolation from other policy efforts.

Another avenue for providing support to divorced mothers with children is through public assistance. However, the amount of assistance provided has never been sufficient to bring most families above the poverty line. The structure of the current system also provides disincentives to working because of heavy implicit taxes on earned income (that is, through the loss of benefits). In addition, there is little public sentiment in favor of providing public assistance on a long-term basis, and evidence indicates that welfare stigmatizes and creates emotional stress among recipients.52 What is needed, therefore, is a system of public assistance that is structured for the short-term and does not stimulate dependence. Current proposals by the Clinton Administration, such as work training, appear to be based on a similar conclusion. Other alternatives might consist of a slower phaseout of noncash benefits, especially Medicaid, as women move off public assistance. In this vein, other Clinton proposals, such as a national health care program, would likely impact public assistance programs.

Irwin Garfinkel has proposed an assistance program that combines elements of child support and more traditional welfare programs.25 Such child support assurance programs would guarantee a minimum benefit level for custodial parents and their children. If the absent parent contributes less than the minimum benefit, the state would pay the difference. Garfinkel argues that a child support assurance program could be implemented with little cost to the state if child support was ordered and collected more rigorously. While not sufficient to eliminate poverty, a child support assurance program combined with other forms of short-term public assistance or programs such as earned income tax credit could help to alleviate the economic stress associated with divorce.

A third alternative for increasing the economic well-being of divorced mothers and children is to increase the mother's earning capability in the labor market. As noted above, a first response on the part of divorced mothers to the economic deprivation that often follows divorce is to increase labor market activity. However, as also noted, many women are unable to sustain employment. The most likely reason for being unable to do so is the high cost of child care, combined with low wages and the threat of losing benefits associated with public assistance. Thus, a national child care program53 combined with workplace reforms such as flexible work schedules could act to reduce the stress single parents experience when trying to combine work and parenting. Welfare reform should also ensure that important benefits associated with public assistance, such as health care, are not lost until an adequate replacement is found. Again, proposals currently under review by the Clinton Administration may serve this function if adopted.

Perhaps more difficult to achieve but equally important is equality in earnings between men and women. Currently, women earn about 70% of what men make.54 This difference is reduced when the incomes of men and women with similar jobs are compared, but nevertheless, women earn less. Rectifying this inequality would probably increase female labor force participation and subsequent economic returns. It is also important to recognize that many mothers who enter the labor force after a divorce have not worked for a period of time, have worked part-time, or have worked in areas not related to their training or background. It is therefore likely that programs designed to increase their labor market skills, flexible work schedules, and available and affordable child care would go a long way toward equalizing women's position in the labor market following marital disruption. Such programs would also have to recognize the particularly disadvantaged positions held by black women. As noted earlier, black women are especially susceptible to the negative economic consequences of divorce.

Fourth, the evidence suggests that stable marital unions are beneficial to the economic well-being of children. Obviously, this benefit accrues primarily because of the economic benefits associated with pooling the economic resources of two parents and returns to scale when purchasing housing and other significant consumer items. A variety of evidence also suggests that stable unions reduce potentially negative intergenerational consequences of marital disruption.55 Given evolution in the meaning and structure of marriage, however, it is not clear how policy could be constructed that would stabilize marriage without penalizing single parents.56 Alternatively, programs that support single parents may do so at the expense of married parents. As with all policy positions, trade-offs are inevitable.

Finally, it is likely that a program emphasizing one of these alternatives without considering the others would fail or have only a negligible effect. For example, as discussed above, there is little evidence about the consequences of increasing child support on other behaviors such as mothers' labor force participation and fathers' marital transitions. Positive direct effects associated with increasing child support may be offset, at least in part, by negative indirect effects operating through other behaviors. We already have evidence strongly suggesting that public assistance by itself is not sufficient to eliminate the economic suffering associated with marital disruption.

Public policy must therefore be conducted cautiously, with an eye toward unintended consequences. Consideration must also be given to the diversity of family experiences. The economic constraints and opportunities facing whites and blacks are much different, meaning that a single policy may not be equally successful for each group. A proving ground for particular policies may be found in the variety of options offered by different states. Indeed, state policies may provide the experimental proving ground for developing national family policies of the future. Policy conclusions must also await more recent data that cover periods of substantial policy change. Most important, we note that the SIPP data we utilize predate the implementation of the 1988 Family Support Act. More recent SIPP data, which should become available in 1994, may provide us with some idea about the effect of the Family Support Act and whether the economic well-being of divorced women has changed appreciably.