Does the high U.S. divorce rate pose any problems to the economy?
Does the high U.S. divorce rate pose any problems to the economy?
Divorce is unquestionably an economic detriment to individual family members and to the public at large. While the odd man, woman, or child may financially benefit from divorce, the overall impact of divorce is adverse for families and for society. The evidence is overwhelming. No question about it. Here are excerpts from numerous articles on the subject:
Divorce Slows Economic Growth
There are few things that can slow economic growth like a high divorce rate. According to a study performed by the Marriage and Religion Research Institute, marriage is an important contributor to economic growth. Healthy marriages have been proven to promote economic growth, while divorce adversely impacts the economy.
The Bottom Line
While the divorce rate in the U.S. has certainly decreased in recent years, divorce continues to play its part in dragging down the country’s economy. With divorce comes the need for more housing, energy, transportation, and other important resources. If the changing family dynamic continues to improve divorce statistics, the U.S. may experience the financial benefits that come from a healthy marriage—financial stability over a long period of time.
Single parents have much lower incomes and much higher poverty rates than their married counterparts. Some of this, to be sure, is because they also have other characteristics such as less education that limit what they can earn. But two incomes, even if they are low, are always better than one. Two full-time $10-an-hour jobs bring in roughly $40,000 a year, hardly a princely sum but enough to support a family well above the poverty line, even after child care or other expenses. For better or worse, the days when a typical family with children could get by with just one income are over.
Marriage is a causal agent of economic growth. It constitutes one-third to one-fourth1) of the human capital contribution of household heads to macro-economic growth (Chart 1).2) 3) Divorce removes this agent of economic growth.
Divorced men become less productive through divorce (Chart 8 and 9).20)
- Effects on the U.S. Economy
The divorce revolution has undermined growth in the U.S. economy.21) Since marriage has a “remarkably large”22) accruing effect on a worker’s productivity, divorce eliminates this agent for growth. Besides for population effects originating in the 1960s and 1970s, there are no other consequences of policy change that have had a greater effect in slowing economic growth than the divorce revolution. Divorce, having now become acculturated, perpetually inhibits growth of the U.S. economy.23)
A common misconception is that a higher divorce rate will lead to a stronger economy. This is simply not true. Divorce rates have an inverse relationship with the economy, as they go begin to decrease, the economy will begin to rise.
- Link Between Divorce and Economic Stability
Almost half of American families experience poverty following a divorce,1) and 75 percent of all women who apply for welfare benefits do so because of a disrupted marriage or a disrupted relationship in which they live with a male outside of marriage.2)
Although a household’s income substantially diminishes following a divorce, little public attention is paid to the relationship between the breakdown of marriage and poverty. Consider, by comparison, the reaction to a comparable decrease in the national economy. When America’s economic productivity fell by 2.1 percent from 1981 to 1982, it was called a recession. And when the economy contracted by 30.5 percent from $203 million to $141 million (in constant 1958 dollars) from 1929 to 1933,3) it was called the Great Depression. Yet each and every year for the past 27 years, over one million children have experienced divorce in their families with an associated reduction in family income that ranged from 28 percent to 42 percent.
Divorce has many harmful effects on the income of families and future generations. Its immediate effects can be seen in data reported in 1994 by Mary Corcoran, a professor of political science at the University of Michigan: “During the years children lived with two parents, their family incomes averaged $43,600, and when these same children lived with one parent, their family incomes averaged $25,300.”4) In other words, the household income of a child’s family dropped on average about 42 percent following divorce.5) By 1997, 8.15 million children were living with a divorced single parent. As the Chart below illustrates, there has been an increase of 354 percent since 1950.6)
Impact on Finances
Divorce—during and after—takes a toll on a family’s income. When couples get divorced, it’s important that the custodial parent understand that child support eventually ends. Also, courts don’t always award alimony. And recent tax laws ending deductibility for alimony payments may result in a downward trend in alimony awards.
Divorced women and their children are more likely than divorced men to receive public assistance while living in poverty. Further, even if women don’t drop into extreme debt, their standard of living decreases more so than divorced men. Although both spouses are worse off financially after divorce, research shows that women’s finances are negatively impacted at a higher rate.The Economics of Marriage and Divorce: Those who get hitched are more likely to get rich
Among its many advantages, marriage is a potent anti-poverty strategy.
Perhaps the most cited study on the economics of divorce is Jay Zagorsky’s 2005 “Marriage and Divorce’s Impact on Wealth.” Zagorsky used data that tracked Americans in their 20s, 30s, and early 40s, and found that “single respondents slowly increase their net worth. Married respondents experience per person net worth increases of 77 percent over single respondents.”
Married couples’ “wealth increases on average 16 percent for each year of marriage. Divorced respondents’ wealth starts falling four years before divorce and they experience an average wealth drop of 77 percent.” In terms of percentage, women were more likely than men to be harmed by divorce, but the absolute difference between the two was “relatively small.” More recent research supports Zagorsky’s basic insights.
First Published December 1, 2005 Research Article
What impact do marriage and divorce have on wealth? US data from the National Longitudinal Survey of Youth (NLSY79), which tracks individuals in their 20s, 30s and early 40s, show that over time single respondents slowly increase their net worth. Married respondents experience per person net worth increases of 77 percent over single respondents. Additionally, their wealth increases on average 16 percent for each year of marriage. Divorced respondents’ wealth starts falling four years before divorce and they experience an average wealth drop of 77 percent. While in percentage terms divorce hurts women more than men, the absolute difference is relatively small in the US.
Splitting up after age 50 — often called “gray divorce” — may be particularly hazardous to your emotional and financial health, far worse than doing so at younger ages. A wave of new research is quantifying the damage.
The economic effects are even more stark. As more and more Baby Boomers end marriages, sometimes for the second or third time, they’re wrecking their finances on an unprecedented scale. “Getting a gray divorce is a major financial shock,” Brown said.
If you get divorced after age 50, expect your wealth to drop by about 50%, Brown and her colleagues found in yet-to-be-published research that analyzed a long-running longitudinal survey of 20,000 Americans born before 1960. That’s not really a surprise: After all, any divorce involves dividing a family’s resources.
But incomes also collapse after a gray divorce, particularly for women. The researchers looked at standard of living — income adjusted for household size — reflecting the fact that a solo adult needs less income than a single parent with two children still at home. They found that when women divorce after age 50, standard of living plunges 45%. That’s about double the decline found in previous research on younger divorced women.
Even more troubling is that older people aren’t bouncing back from these financial shocks. Brown and her colleagues were able to follow survey respondents’ finances for up to a decade post-divorce. “There is no appreciable recovery on the wealth front,” she said. “There’s no appreciable recovery in standard of living.”
Late in their careers, older Americans simply don’t have time to undo the financial destruction that a divorce causes. Women who spent years at home caring for children find it difficult to re-enter the workforce.
By retirement age, they can be in dire straits. Another 2017 study by Brown and colleagues found U.S. women 63 and older who went through a gray divorce have a poverty rate of 27%, more than any other group at that age, including widows, and nine times the rate of couples who stay married.
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