Introduction
Financial Patterns for Children
Financial Patterns for Non-Custodial Fathers
Implications for Maintenance Payments
References
Father's income is usually a reasonable indicator of a family's economic outlook if all goes well, for he is likely to be responsible for the larger share of household income. What happens to the financial status of children of `wealthier' and `poorer' fathers should their parents separate?
The Institute's fololw-up study of parents of two children who divorced in either 1981 or 1983 was used for the following analysis (McDonald 1986; Funder 1989), and the present discussion is restricted to cases where both children continued to live with their mother - by far the most common arrangement.
Income data were available for three periods: prior to separation (as recalled in 1984), in 1984 and in 1987. The earlier income figures were inflated to 1987 dollars.
The children were divided into three groups according to their father's pre-separation income (net per week): Group 1 had fathers who were earning less than $350 (77 cases); Group 2 had fathers who were earning between $350 and $449 (42 cases); and the fathers of Gropu 3 were earning at least $450 per week (41 cases).
Figure 1 shows the median household incomes of these three groups for the pre-separation, 1984 and 1987 periods. Prior to separation, household income levels reflected the fathers' personal income levels as would be expected, but all groups had experienced losses in household income by 1984. By 1987, there was a cross-over effect: families with the lowest earning fathers (Group 1) had the highest average household incomes, while families with the highest earning fathers (Group 3) had the lowest average household incomes.
Before their parents separated, 10 per cent of the children with the lowest earning fathers had living standards below the poverty line, whereas none of the children in the other groups were in this position. When we talked to them some years later in 1987, 16 per cent of those with the lowest earning fathers were living below the poverty line, while 27 per cent of those with the highest earning fathers had drifted below the poverty line.
The most obvious reason for financial loss upon separation was that, whether they wanted the separation or not, fathers took with them the major income earning asset of the household (their careers_, and tended to pay maintenance according to a `going rate' rather than according to their capacity to pay. Indeed, higher earners paid proportionately less of their income in maintenance than lower earners (Harrison 1989).
One related factor contributing to the differences in trends for the three groups concerns decisions made during marriage about mothers' roles as income earners versus full-time home makers. Where fathers have relatively high incomes, mothers are more likely to assume full-time home making responsibilities. As a result, they and the children are more financiall vulnerable should the marriage break down. Forty- two per cent of the children in the highest income families (before separation) and 64 per cent in the other two groups had mothers who were in paid work immediately prior to separation. Thus, families in the highest income group were more likely than the other families to rely upon Social Security benefits or pensions upon separation: (51 per cent versus 38 per cent in 1984; 37 per cent versus 17 to 25 per cent in 1987).
Generally, the best financial adjustment that could be made was for mothers to repartner and for stepfathers to take over the role as the chief income earner for the household. For both post-separation periods, mothers whose former husbands had the lowest incomes were the most likely to have repartnered (49 per cent in 1984 and 58 per cent in 1987), while mothers whose former husbands had the highest incomes were the least likely to have repartnered (24 per cent in 1984 and 32 per cent in 1987).
What are the financial effects of marriage breakdown on non-custodial fathers? Do the fortunes of some income groups also change dramatically upon separation?
In order to answer these questions, non-custodial fathers were gruoped accoding to the same three personal income levels. Periodic maintenance paid by these fathers was deducted from their household incomes for this analysis.
Household incomes and living standards continued to correspond with pre-separation personal income levels. That is, for each period assessed, the lowest earners (Group 1) had the lowest household incomes and living standards, and the highest earners (Group 3) were the best off.
Rates and timing of repartnering corresponded with the financial eligibility of these men. Thus, in 1984, the rates of repartnering for Groups 1, 2 and 3 were 55 per cent, 64 per cent and 82 per cent respectively. The differences in these rates were not as great when we interviewed in 1987, but repartnering continued to correspond with financial eligibility: 69 per cent (Group 1), 82 per cent (Group 2) and 84 per cent (Group 3).
While repartnering for fathers may bring in extra income, this may be offset by the extra costs of a wife and, possibly, step or new children. Fathers in Group 3 were the most likely to have children in their households in 1987 (63 per cent compared with around 47 per cent in each of the other two groups).
Although the living standards of all groups of men had improved by 1987, the improvement was greatest for the lowest earning fathers; from pre-separation to 1987 their household incomes moved from 15 per cent to 77 per cent above the poverty line. Improvement was smallest for highest earning fathers - from 106 per cent to 124 per cent above the poverty line.
Thus, the previously better off children and mothers (Group 3) and the lowest income fathers (Group 1) tended to experience the most dramatic changes in fortunes - the former suffering financial loss, the latter gaining financially.
These trends highlight the strong need over the survey period for change in setting maintenance payments - a need which the Federal Government has attempted to meet with the new Child Support Scheme, which ties maintenance payments to income levels of non-custodial parents (see Harrison this issue). However, this radical procedure only applies to parents who have separated after 1 October 1989. Most of the children of divorced parents in Australia today and in the next few years willnot be affected by the sheme.
The Institute is currently assessing the operation of the Child Support Scheme. It is to be hoped that the coming ten years of the Institute's life will bring more favourable financial prospects for children whose parents separate.
McDonald, P (ed) (1986) Settling Up: Property and Income Distribution on Divorce in Australia, Australian Institute of Family Studies and Prentice-Hall of Australia, Sydney.
Funder, K (1989) `Financial support and relationships with children', Report No. 6, Child Support Scheme Evaluation Study, Australian Institute of Family Studies, Melbourne.
Harrison, M (1989) `Parents and children after marriage breakdown: patterns of maintenance payment over time', forthcoming paper, Child Support Scheme Evaluation Study, Australian Institute of Family Studies, Melbourne.