By Mike Stetzer
One of the most intimidating prospects of a divorce for many women is facing a future with a changed financial situation. Whether it means trying to make ends meet with a single income, having trouble finding and paying for health insurance with new policies, or disputing the division of assets and other property, finances can be one of the biggest sources of stress and strife during a divorce proceeding.
A new paper by Elizabeth Ananat and Guy Michaels that is forthcoming in the Journal of Human Resources takes on the issue of income during divorce, and finds results that might be surprising to many. Instead of supporting the popular notion that divorce results in lower income, their study finds that divorce may not be financially harmful to women. A closer look at their findings explains why.
Economist Justin Wolfers at the Freakanomics blog lays out the problem with many studies of divorce and income: "A key problem with research linking divorce and income is that we can't tell whether divorce causes lower income, or whether lower income (or its correlates) cause divorce."
Ananat and Michaels avoid this in their study sample by taking a more random approach to the issue. They find a factor that correlates with divorce-the gender of the first-born child, which, oddly, does have an impact on whether a couple is more or less likely to divorce (female = more likely). This factor is perfect for their purposes, because though it correlates with divorce, it would not correlate with unmeasured factors that could influence income.
Based on their calculations of these factors, the mean incomes of women who are divorced are actually higher than those who are married. More specifically, they find that some women have lower incomes, and some higher incomes, and those with higher incomes tend to gain more than the women with lower incomes lose, tilting the mean income balance in favor of higher incomes.
Taken on an individual basis, this does not mean, of course, that going through a divorce will increase the financial prospects of any given woman. As Ananat and Michaels find, just as many find that their incomes decrease after a divorce. In each individual case, there are many factors that will contribute to the income level relative to during marriage, including education level, job type and many other factors.
However, the fact that many women aren't immediately doomed financially by divorce should be welcome news to any woman who is facing an inevitable divorce or who is clinging to a marriage going nowhere for fear of financial failure. It's much better to take a rational assessment of your future job and asset prospects and make a decision from that, rather than using a general anxiety about what society believes to cloud your better judgment.