Relationship breakdown is a common life event with often severe economic consequences. Childhood poverty is most prevalent among children with divorced or separated parents, and older, single women are also over-represented in the population below the poverty line. If, as a society, we want to combat poverty, it is crucial that we understand what effect separation has on poverty risk and financial wellbeing, and whether employment is a useful tool of protection.
The analyses in this paper show that women with children below school age are 20 percentage points more likely to be poor in the year after separation, than they would have had they remained partnered. Women with older children or without children have a less elevated poverty risk caused by separation, but the effect is more persistent for them. The impacts for men are much smaller and more short-lived. Poverty risks differ by women’s pre-separation employment. In couples where women were not employed pre-separation, separation causes a 27 percentage points increase in poverty risk for women, and no significant increase in poverty risk for men. If women were employed before separation, the increase in poverty rates because of separation was much more similar for both partners: 6 to 8 percentage points for women, and 4 to 5 percentage points for men. However, we did not find significant effects of separation on subsequent employment.
The study highlights the protective effect of economic autonomy, and the risk that is inherent in strong marital specialisation. Moreover, a separation induces only very small responses in women’s labour supply: once a woman has lost economic autonomy while in a partnership, it is difficult to regain. Policymakers need to continue to highlight this insurance effect of maintaining economic autonomy to men and women at every life stage. Finally, we find that even for employed women and men, the increase in poverty after separation is by no means negligible. The loss of economies of scale induces poverty in couples who could maintain one household, but not two separate households above the poverty line on their combined income. For this group of couples, a transfer from one household to the other can only shift the problem – and there is limited room to increase their earnings to solve it. This directly implies that financial assistance will always be needed for a substantial minority of separating families.