What happens to people’s incomes when their or their parents’ marital union dissolves? Virtually all previous analyses of this question - for Britain, the USA, and a large number of European countries - has focused on short-term changes in income, comparing income for the year before the marital split with income for the year after the marital split. These studies have found, almost without exception, that there are large falls in income in the year after a marital split for separating women and children, but not for separating men.
This paper is the first British study to address whether the short-term economic consequences of a marital split have changed over time. Using data from waves 1-14 (survey years 1991-2004) of the British Household Panel Survey, I show that marital splits continue to be associated with short-term declines in income for separating wives and children relative to separating husbands, but the size of the decline has declined over time markedly for women with children, and for dependent children. For the period 1991-1997, the average fall in income for separating mothers between the year before and the year after the marital split was -30%, whereas for the period 1998-2004, the average fall in income for this group was -12%. The corresponding figures for separating husbands were 36% and 31%.
The explanation for why the economic consequences of a marital split are no longer so adverse for women with children appears to be relatively straightforward: employment rates for mothers rose secularly over the 1990s and were given a particular stimulus by the introduction of Working Families Tax Credit in 1998. WFTC both raised the incentives to take a job for workless families with children regardless of the marital status of the parent(s), and made work pay to a greater extent.
I also consider how post-split incomes evolve over the longer-term, tracing the incomes of separating husbands and wives from the year before their marital split through to the fifth year following the marital split. The analysis of these six-year income trajectories suggests that, after their large fall immediately after the marital split, incomes for separating wives do recover but not to their previous levels: five years after a split, incomes remain about 10% below their pre-split levels on average. However women who do not have a job in any of the five years after a marital split, or who do not find a new partner, do much worse than this. Women who remain in paid work or who have a new partner fare best.