The Two-Income Trap (18 page)

FIGURE 5.2
Discretionary income, before and after divorce

When a husband and wife file for divorce, they may tear up the contract between themselves, but they cannot tear up their obligations to the rest of the world. Kenesha Brooks, a California mother of two, got a very expensive lesson in the law of legal liability. She discovered that her ex-husband had been keeping his business afloat on the couple’s credit cards: “I didn’t work in the business and didn’t have anything to do with what happened.” The family court judge agreed with Kenesha, ordering her ex to pay child support and to pay off all of the couple’s debt. But his business failed, and Kenesha’s ex-husband could not find a high-paying job. Instead, he drifted into
odd jobs at minimum wage. He never paid back any of the credit card or utility bills, so the interest, penalties, and late charges compounded month after month—while Kenesha thought they were all being paid. Eventually, the balance swelled to more than $50,000, a sum that was more than double her ex’s annual salary. So the creditors went after Kenesha, who soon discovered that in the eyes of the law that governs debtors and creditors, it doesn’t matter who ran the family business or what agreement the couple has worked out between them. If both names are on the original loan documents, and if one spouse misses a payment, the creditors have every legal right (and every incentive) to go after the other one—and that holds true regardless of what the divorce court orders. The couple may decide not to share their lives any longer, but their economic fortunes will remain united for many years.

A generation ago, when the average family didn’t even have a credit card, postdivorce debt splitting wasn’t all that important.
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But today, a family begins divorce proceedings deep in a financial hole, so that negotiating who pays which debts can be a matter of survival. Sometimes the judge will simply split the debt down the middle, ordering each to pay half. In other cases the judge will order lower child-support payments in return for a father’s commitment to take on the whole load of debt. One way or another, both parents pay for the fact that they face divorce already awash in red ink. Over the past generation, average savings has dropped from 11 percent of income to negative 1 percent, while credit card debt has climbed from 4 percent of income to 12 percent (see
Figure 5.3
).
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As a consequence, the modern mother starts out her postdivorce life with higher fixed costs, more debt, and less money in the bank—a recipe for financial disaster.

The single mother is under enormous pressure to scale back, but scaling back is now harder than ever. A generation ago she had to compete with male-breadwinner families for a house in the suburbs.

Source:
Analysis of data in SMR Research Corporation,
The New Bankruptcy Epidemic.

FIGURE 5.3
Less savings, more debt

Everything that defined a middle-class life for children in her community—decent schools, a safe car, health insurance—was typically purchased with the income of a higher-earning male, which made it tough for a divorced mother to keep up. The women’s movement promised to make things easier for these women, since a bigger paycheck was supposed to translate into financial security for single mothers. But this formula missed one important fact. Single mothers weren’t the only ones to enter the workforce; married mothers went to work too.

For every increase in the paycheck of a single mother, there is now a corresponding increase in a married couple’s income as well. As a growing number of married mothers enter the workforce, the income gap between single and married parents is growing, notwithstanding rising wages for single mothers. In the mid-1970s, a typical married couple with children earned $29,800 (inflation adjusted) more than the average single mother; today that gap is more than $41,000.
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No matter how hard she works, how many extra hours she puts in or training sessions she attends, the modern single mother will never catch up.

The irony is palpable. Lured by the promise of financial security for themselves and their children, millions of women marched into the workforce. And yet, if their husbands leave, they discover that despite their growing paychecks, they are in no position to compete in a two-income world. Moreover, the postdivorce woman must deal with the fact that she and her ex had built a middle-class life that depended on two incomes, and now she must cope without that second paycheck. By all predictions, the middle-class single mother should be better off than her counterpart of any generation before her. Yet despite her education, her work experience, and the support of the courts, the modern single mother is more likely to face financial failure than ever before.

Some women take an alternate path to survive the economic blows raining down on their families: They remarry. Sure, we know that marriage—even second marriage—is supposed to be about chemistry and companionship, but getting a foreclosure notice can make anyone rethink what she really needs from a relationship. Even now, a generation after the Women’s Revolution, the surest way for a woman to regain her financial footing after a divorce is to find a husband—and to do it quickly.
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Like many single mothers, Gayle dreams about a quick way out of her economic hole: “If I was to get married again, and he only had a part-time salary, I could make it.” In a world of economic hurt, even a guy with half a job looks good.

What about the mother who was never married to begin with? The majority of single mothers in bankruptcy are divorced or separated, but there are some who never had a husband.
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Divorced women got into trouble when they lost one of the incomes they were counting on. But how did mothers who never married end up in trouble? For some, the answer is pretty much the same as for their divorced sisters: A man moved out. Although they weren’t legally married, many were in long-term relationships. When the couple broke up, these
women went through an economic—if not a legal—divorce, and they were sent into the same kind of economic tailspin as their previously married sisters.
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Other unmarried mothers never had a partner to begin with, but they learned that with only one adult in the household, even a short period of unemployment or a medium-sized medical bill could send them from survival to collapse in a few months.

After the Pritchards split up, Brad rented an efficiency apartment on the north side of Houston, near his new job. His girlfriend moved in, but she drifted off just a few months later. It seems that Brad was not much fun any more.

Brad landed a job as an assistant supervisor at an oil refinery, earning $27,000 a year. “I guess the money’s not that bad. It’s just they take so much out of my check. Seems like all I get are the leftovers.” Between his payments to his first wife and to Gayle and the kids, his employer withholds almost $1,200 a month. This means that 60 percent of Brad’s take-home pay goes to child support—the legal limit.
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Technically, Brad lives above the poverty line, but just barely. He lost his health insurance when his earlier job was outsourced, and his attorney wants $1,000 for the divorce paperwork. His apartment is an empty shell, with nothing but a television perched on a box, an old couch that folds out into a bed, and a card table in the kitchen. Usually an easygoing man who liked to go out on the town, Brad has begun to wake up sweating in the middle of the night. He has two failed marriages, five kids he sees only sporadically, and not enough money left to fill up the tank in his van.

 

So how can a single-parent family get out of the trap? We begin with the solution put forth by nearly every politician, women’s group, and angry mother: Make Dad pay more.

The argument has plenty of emotional appeal. It resonates with some of our most basic values: equity between men and women, following
through on commitments, protecting our children. It also fits with our common sense. After all, everyone knows some unfortunate woman who is having a dreadful time making ends meet since she got stiffed by her ex. And we have all heard news reports about the men who are absconding without making their payments.

The experts of a generation ago (and even today) predicted with such confidence that better child support enforcement would ensure financial security for single mothers. But does increasing child support really hold the key to survival for millions of middle-class single mothers? Do ex-husbands hold the untapped wealth that single mothers need for financial security, and all that remains is to seek it out?

America has spent a generation hunting down the devious deadbeat dad, but single mothers are in more trouble than ever. It doesn’t come through in most news reports, but the overwhelming majority of middle-class fathers today are like Brad Pritchard. They pay the support they owe. According to one survey, nonresident fathers who earned more than $30,000 a year reported that they were paying more than 95 percent of their court-ordered child support.
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This statistic may be somewhat distorted by men who overestimate their own payments. (Single mothers usually report receiving less than fathers report paying.) But another survey of single mothers found similar results. Among fathers who were steadily employed (which includes a number of men who work for low wages), 80 percent of their ex-wives reported receiving full payment.
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These numbers stand as a reminder that there is not much left to collect. Additional enforcement of child support can provide only limited help to struggling middle-class women and their children.

And what about the dads who don’t pay? About two-thirds of these men do not pay because they are not legally required to pay; they have not had paternity established or they are separated but not yet divorced.
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What about those who have child support orders in place but don’t pay what they owe, the infamous “deadbeat dads”? It turns out that the nonpayers are far more likely to have low incomes and to live in poverty.
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According to one estimate, six out of ten nonresident
fathers who fail to pay child support either have low incomes, are substance abusers, or have outstanding obligations to support new children.
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Another study found that most nonpayers had recently been unemployed.
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These guys may be down on their luck, irresponsible, or just plain mean, but the stone-cold reality is that unemployment, poverty-level wages, drug addiction, and additional kids to provide for make it far more difficult for these men to come up with regular support payments. And no amount of legal pressure will change that.

Some activists argue that women like Gayle Pritchard are in financial trouble because, as Lenore Weitzman observed: “Current child support awards are too low . . . and place a disproportionate financial burden on mothers.”
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According to this line of thinking, judges should demand more money from men in the beginning, making child support awards substantially larger. Again, the arguments are highly charged. Women’s groups point to the fact that custodial mothers are far more likely to end up in poverty than their ex-husbands, and increasing child support awards is one way to ensure more equitable living standards for kids.
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Fathers’ groups, for their part, argue that child support guidelines are already too rigid because they ignore a man’s obligations (such as those to support a new family) and changes in his ex-wife’s income (such as the earnings of her new husband). Support orders also disregard changes to a father’s income. According to one study of men who experienced a sharp drop in earnings, only 4 percent were able to persuade the courts to lower their child support payments.
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In either case, activists on behalf of single mothers are probably right in their basic conclusion: Privation could be spread more evenly between men and women. Child support guidelines could be changed to ensure that no man would have a penny more discretionary income than his ex-wife does, and that if one ex-spouse suffers, so does the other. Several family law reformers have embraced what we call the Share-the-Pain model, whose “ultimate goal is for all
family members to emerge from a marital breakdown with roughly equal standards of living, so that no one, specifically children and those who care for them, suffers disproportionately from the failure of a marriage.”
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According to this approach, if the mother and children live at twice the poverty rate, then so should the ex-husband.

Fair enough. But the critical question is, how far would these changes get today’s single mother? Would the Share-the-Pain model lift single mothers and their children out of their financial hole? Brad is already paying
more
than the Share-the-Pain model would call for: Gayle lives at 2.8 times the poverty level, whereas Brad, after paying child support to both his ex-wives, scrapes by at just 1.4 times the poverty level. By this measure, Gayle and her kids are doing much better than her ex-husband, yet she is still bankrupt.