The Economics of Divorce

by Hans Bader on December 4, 2007 · 6 comments

I agree with most, but not all, of what Eli has to say below in his thoughtful post about the costs of divorce, such as the massive harm it does to children. (His post was provoked by a study that said divorce hurts the environment, by resulting in two households using utilities rather than just one).

But I don’t agree with his suggestion that women “particularly” fare worse than men in divorce. In fact, studies that claim that men fare better economically then women in a divorce invariably contain massive design flaws, and the most famous such statistic has since been repudiated by its own author. Divorce is often a disaster for both husbands and wives.

Divorce is a net economic loss for a couple, collectively, since two households are more expensive than one. And if there are children, the ex-husband may incur substantial transportation costs to visit his children. Moreover, second marriages have higher divorce rates than first marriages, so divorce doesn’t usually lead to a happier subsequent marriage, much less a fairytale romance.

But there’s no reason to assume that men fare any better in a divorce than women. If they did, it’s more than a little odd that two thirds of divorces are initiated by the wife over the husband’s objection (typically, no-fault divorces), according to data from the National Center for Health Statistics, and several studies cited by Arizona State University’s Sanford Braver in his 1998 book, Divorced Dads. Moreover, male mortality rates rise after a divorce, both in absolute terms and relative to women’s.

The false claim that men do better than women is often based on a statistic from Lenore Weitzman, author of The Divorce Revolution (1985), who claimed that men’s living standards rose after a divorce. Her statistic was debunked almost as soon as it was publicized, as John Stossel and lawyer Ron Henry have noted. Indeed, Weitzman herself admitted that the statistic was erroneous in a 1996 AP story (See “Study Goofed on Gap in Post-Divorce Standard of Living,” MANCHESTER UNION LEADER, May 17, 1996). Yet courts continue to cite the statistic to justify increasing alimony and child support awards. Weitzman’s admittedly false statistic has been cited in hundreds of court decisions, including dozens of appellate court decisions, and an opinion joined in by two U.S. Supreme Court justices. It continues to be taught to some law students as if it were an undisputed fact.

Arizona State University’s Sanford Braver conducted his own study in the late 1980s, using better methodology, and found that ex-husbands do no better than ex-wives following a divorce, as he recounts in Divorced Dads (1998). Indeed, his study probably understates divorced husbands’ losses as a result of a divorce nationally, since it was conducted in Arizona, which has lower than average child-support collections (as the U.S. Supreme Court observed in Blessing v. Freestone (1998)) , and since it was conducted before increases in child support resulting from Congress’s passage of the 1988 Family Support Act, which prompted state legislatures to substantially increase state child support guidelines, awards, and enforcement.

Perhaps as a result of the unfounded belief that men suffer less than women after a divorce, states periodically rewrite their divorce laws to change the balance in favor of wives. For example, Texas, which once forbade alimony as against public policy, now permits it under certain circumstances. North Carolina, which required a showing of fault by the husband for spousal support until the mid-1990s, no longer does. And as prominent divorce lawyer Richard Crouch notes, courts apply child and spousal support laws in a gender-biased fashion.

There were, of course, a few studies, some quite old and outdated, that did claim that men benefit financially from a divorce. But they all had obvious design flaws. Some of them simply ignored income that is not treated as income for purposes of federal tax laws, such as child support, which is not reported on the custodial parent’s tax return, is not taxable, and is not deductible on the non-custodial parent’s tax return. But tax-exempt income is even better than taxable income for your standard of living, since you don’t have to pay taxes on it, and can enjoy all of it, without deducting any taxes. In states like Massachusetts, most of the income in a custodial parent’s household is typically child support, since child support is typically 25 percent of a middle-class father’s gross income for just one child (more than a third of the father’s after-tax income). Yet this income is entirely ignored in those studies, which treat a mother receiving $100,000 a year in child support as a pauper because none of the child support qualifies as taxable “income.” Similarly, in 2000, a Virginia study (the JLARC study) claimed Virginia’s child support guidelines were too low only because it compared apples and oranges. It compared just one part of the state’s child support guidelines (the “basic” schedule, excluding statutory add-ons for health insurance and day care expenses) to all child-rearing costs, making the guidelines appear artificially low.

As a result of this flawed understanding of the economics of divorce, some legislators think that divorce is caused by divorced husbands’ profiting from divorce. They sometimes respond by seeking to punish divorced husbands through legislation that ratchets up alimony and child support levels. But since husbands are typically not the ones initiating a divorce (two-thirds of divorces are initiated by wives), and are not profiting from a divorce, this legislation does nothing to discourage divorce filings. Indeed, it is possible that such legislation increases the divorce rate, by reducing the cost of divorce to wives, who are typically the ones filing for a divorce.

The ironic result may be that legislative concern about divorce is actually leading to laws that promote it, and the harms related to it (such as its adverse impact on children).

(I am, incidentally, not divorced, and have no children with anyone other than my wife).

Hans Bader December 4, 2007 at 10:17 am

In the above post, when I said,

"In states like Massachusetts, most of the income in a custodial parent’s household is typically child support,"

I should have said "much" rather than "most," as in:

"In states like Massachusetts, MUCH of the income in a custodial parent’s household is typically child support."

Hans Bader December 5, 2007 at 12:15 pm

Child support levels actually tend to exceed the cost of raising children. Above I discussed the 2000 JLARC study of Virginia’s child support laws, which was based on the blatantly false premise that a Basic Child Support Schedule, such as Virginia’s, is supposed to cover all the costs of raising children. See JLARC, Technical Report: The Costs of Raising Children (Senate Doc. No. 9) (2000), pg. III, Summary (including all “health care” and “child care” costs in the costs to be covered by the Basic Child Support Schedule).

Virginia law, by contrast, says that the basic child support obligation is not itself supposed to cover all child rearing costs, since some child-rearing costs, including but not limited to “health care coverage,” are to be awarded on top of it. See Va. Code § 20-108.2 (E) & (E) (additional child support obligations covering “costs for health care coverage,” day care expenses, and “extraordinary medical and dental expenses” “shall be added to the basic child support obligation”).

The JLARC Report's failure to exclude health insurance and day care costs from consideration in reviewing the adequacy of the Basic Child Support Schedule was a major error, especially for poor households, for whom these costs awarded on top of the child support schedule can be bigger than the schedule itself. See Herring v. Herring, 33 Va. App. 281, 531 S.E.2d 923 (2000) (of the $1498 total child support obligation, 55 percent ($823) was from day care ($667) and children’s health insurance ($154) combined, and only 45 percent ($675) was from the child support schedule). Effectively, the JLARC study would require non-custodial parents to pay health insurance and day care costs twice: once as part of the costs included in the child support schedule, and a second time as an extra statutory add-on for health insurance and day care (see Va. Code § 20-108.2(D)&(E)). Such double-counting is no justification for increasing the child support schedule.

That same double-counting occured in a less egregious form in subsequent Virginia bills to increase the child support guidelines, such as 2006 HB 733 and SB 220, which failed to exclude health insurance costs (which rise faster than the general inflation rate), and day care costs from consideration in making inflation adjustments to the Basic Child Support Schedule.

Speaking of inflation, child support guidelines in most states, such as Virginia, already contain built-in inflation adjusters that are adequate for all but the wealthiest households and excessive for certain poor households. For example, Virginia’s Basic Child Support Schedule is self-adjusting for inflation, for two reasons: (1) it increases child support awards as the parents' income increases, and income rises with inflation; and (2) inflation is disproportionately accounted for by the categories of expenses not included in the child support schedule but awarded on top of it (such as medical expenses and health insurance, see Bureau of Labor Statistics, Table 1A, Consumer Price Index for All Urban Consumers, available at http://www.bls.gov/cpi/cpid04av.pdf).

Hans Bader December 17, 2007 at 6:40 am

A recent article by Dr. Stephen Baskerville suggests that the economic losses from divorce for non-custodial parents, and divorced husbands, are generally quite large:

"Contrary to highly sensationalized but now discredited statistics on the alleged financial hardships of divorce to women, economic researchers have concluded recently

that 'it is the non-custodial parent, usually the father, who suffers the most [following divorce]. In every case and for every income, according to our analyses, the payer of child support is never able to cover household expenditures if paying child support at guideline levels' (Folse and Varela-Alvarez 2002, 273). The study’s authors add, 'These simulations may actually under-represent the circumstances of non-custodial parents because they do not include expenditures for their children beyond child support' (285)."

Dr. Stephen Baskerville, "From Welfare State to Police State," Independent Review, Volume 12, No. 3, pp. 401-422 (2008), at page 407, quoting Kimberly Folse & Hugo Varela-Alvarez, "Long-Run Consequences of Child Support Enforcement for the Middle Class," Journal of Socio-Economics, Volume 31, No. 3, pp. 273-286 (2002), at pages 273 & 285.

Dr. Baskerville was formerly at Howard University and now is at Patrick Henry College.

His article also contains an interesting discussion of the evolution, flaws, and perverse incentives contained in federal child-support regulations.

He has also written an interesting and thought-provoking book called "Taken Into Custody." It provides a fascinating look into contemporary child custody, divorce, and family law.

Cash Advances April 9, 2008 at 8:56 am

Workers might like such swell tips dealing with nomics of Divorce | OpenMarket.org. Thanks for the super knowledge!

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