Abstract This paper is about the affects of divorce on the economy and to enlighten others with the information as well. I selected this specific economic topic because of personal reasons. I am a recent divorcee myself; I was inquisitive and wanted to know how divorce financially affected other people as well. My divorce situation put me through the figurative “ringer” in the long run my finances, credit worthiness, job type all major and minor life decisions were affected by divorce in a negative manner; which affected my economics and in turn my local economy.
So due to my situation it made me wonder, “Being that 50% of marriages end in divorce there must be a great deal of an effect that is had on the national economy? ” So curiosity and circumstances caused me to choose this topic. The average American male and female spends the majority of his or her life unmarried, many people wouldn’t disagree with this fact. There are nearly 93 million unmarried Americans over age 18, representing roughly 42% of the adult population (U. S. Census Bureau, 2008). In 2005, unmarried households became the majority of all U. S. households.
Between the mid seventies and the beginning of the nineties the share of non-married individuals grew dramatically in the United States, it increased from 17% to 30% in only twenty years (Unmarried. org, 2009). So just imagine what that number is now in 2010. In 2008, 29. 4% of men and 22. 7% of women ages 18 and over had never married (U. S. Census Bureau, 2008). As of 2009, the most common household type in the U. S. is a person living alone. According to 2006 data released from the U. S. Census Bureau’s American Community Survey shows that the majority (50. %) of U. S. households are headed by unmarried adults. The number of cohabiting unmarried partners increased by 88% between 1990 and 2007, over 12 million unmarried partners live together in 6,008,007 households (Hobbs, 2005). Is this surprising since 55% of Americans approve of men and women living together without being married and 57% of Americans consider an unmarried couple who have lived together for five years just as committed in their relationship as a married couple who have lived together for the same time (Gallup, 2008).
The majority of couples marrying today cohabited first, 50% of different-sex cohabiters do marry within five years of moving in together and 40% break up within that same time period leaving about 10% remaining in an unmarried relationship for five years or more (Kreider, Rose and Fields, 2002). Based on a 2006 Gallup poll 68% of divorced or widowed Americans plan to remain unmarried. I believe and agree with this poll because personally I don’t have strong feelings about getting married again either.
Several trends come into play to account for this, including an increasing tendency to delay marriage, growing numbers of adults who never marry, persistently high divorce rates, and a growing number of adults who choose to cohabit but not to marry. Divorce affects individuals voting habits as well. Americans tend to measure their quality of life by their relative economic well-being. Americans impact the economy by voting for their leaders’ economic policies, and by consumer spending habits.
The economy is, indeed, the most prevalent issue always on voters’ minds, because American voters usually vote with their pocketbook, so the importance on the economic leadership shown by candidates is a deal breaker. For example, Americans want the federal budget surpluses that Bill Clinton’s gave during his term instead of the massive federal deficit under President George W. Bush’s administration. In 2004, more than 55 million married Americans were registered to vote and among them, nearly 47 million actually voted (U. S. Census Bureau, 2004).
People these days are worried about their jobs, children’s education, being able to pay mortgages, paying off student loans, paying utilities, putting food on their tables and fuel in their vehicles. And they want men and women in office who will protect their finances because Americans know the economy and government are interwoven (O’Connor/Sabato, 2009). In other words, economic policies matter and Americans will vote with who has the better plan for their situation In 2008 on till present the confidence of Americans in the economy was seriously traumatized by a series of many economic blows.
Crisis’s such as mortgage crisis, credit crisis, followed the big three U. S. automakers collapse, along with President Bush’s lack of action to deal with the crises left many Americans’ confidence traumatized. Most of the United States has been hard hit by this economic downturn; it has actually been called a financial crisis of “historic dimensions”. And with strains this high on families and individuals you would think the divorce rate would go up, but to the contrary, surprisingly the divorce rate actually went down.
Don’t get excited, unfortunately it isn’t because relationships, and marriages are getting stronger, it is because with the economical crisis that most the United States is in people simply cannot afford to get a divorce. Couples for whom divorce is the right option are being forced to have to remain together merely because of the economy. Now I know what divorce did to my finances, which in turn affected my local economy then probably trickled out to the national economy which probably didn’t feel a huge difference because I was spending less.
But this fact got me thinking about the 50% of all married couples that are divorced or going through divorce, now that should have a tremendous effect on the economy. The emotional aspects of divorce are challenging, but the economic side can be just as troublesome for national economy and personal finances are. Couples who are wishing to pursue divorce further have been forced to postpone their plans. The unpredictable economy has changed certain assets into burdens. Houses that were once rising in value have come to be worth less than their mortgages.
Stock portfolios that were a source of comfort have dropped or are nonexistent. Even employment that seemed likely to last until retirement is no longer reliable. This situation reminds and makes me ponder on an old blues song where the lyrics went, “It’s cheaper to keep her. ” Couples that are still considering divorce should take the shaky economy into consideration when they craft the terms of their divorces. The distribution of assets is the most important part of divorce because it affects the future financial standard of living of both parties.
There are many aspects to consider when taking a step toward divorce these include child support, child custody, spousal support and division of assets and debts, all have to be considered to accommodate the realities of the economy. Also it is wise to understand how divorce will affect taxation, for example, alimony is tax deductible for the person who pays it and taxable for the person who receives it. On the other hand, child support is neither tax deductible for the payer nor taxable for the recipient. This is an important consideration when one of the spouses is the primary wage earner.
If you have ever prepared your own taxes and are a two income household married or otherwise, then you know firsthand that the best filing status to have is married filing jointly and the worst is married filing separately. So what’s with the bias “Uncle Sam”? If you think about it maybe it is because the married household or two income households stimulate the economy more than any other and I will show you how this is. Annually, married Americans contribute more than $6 trillion to the economy now if divorce breaks that in half I would say that is a definite huge blow to the economy.
There are more than 56 million unmarried American workers, representing roughly 40% of the workforce (CPS, 2008). Which means 60% of the workforce are married individuals which means double the income and about a 60% stronger economy. In 1994 professor Mary Corcoran of the University of Michigan researched and found that, “during the years with two income households, their family incomes averaged $43,600, and when these same families split and became a one income household that one person only averaged $25,300. Married people are even more likely to have an offer of health insurance through an employer than unmarried individuals, because they may have an offer either through their own workplace or that of their spouse. Even education is affected by marital status while 30. 1% of the married population have a bachelor’s degree or higher, only to 19. 7% of the unmarried population have obtained one (U. S. Census Bureau, 2008). Demographics have an effect on living standards after divorce; for example age, number of children, remarriage, and levels of education all factor in to the impact of a divorce on both parties.
Some aspects that are changed with divorce are individual’s home-buying behavior and or home improvements of already owned home, financial needs, attitudes, their work lives, health habits, and income levels; and the roles that spirituality and religion play in their lives. Everything changes with divorce, the above mentioned demographic factors help all parties involved, offset the negative impact on income after divorce. The standard of living decreases, for all parties after, this information is brought changes to the divorce laws such as prenuptial agreements (Divorcereform. rg, 2010). In general when divorce “rears its ugly head” it reduces the income of a household and seriously diminishes the potential of every household member to accumulate wealth. For families that were not poor before the divorce, the drop in income can be as much as 50 percent. Divorce has significant negative economic consequences for families. The breakup of families’ leaves one person trying to do the work of two people, and simply put one person cannot support a family as well as two can. The result is decreased household income and a higher risk of poverty.
Almost 40 percent of households with children undergoing divorce move into poverty following the divorce (Smock, 2000). So divorce might emotional be the right way to go but a vast majority of the time it financially leaves all parties involved bruised, battered losers of the fight whether individuals of divorce feel the economic pangs instantly or later. References Corcoran, M (1994) professor of political science at the University of Michigan Gallup. com, (2010). Hobbs, F. (2005). “Examining American household composition: 1990-2000. ” U. S. Census Bureau. ttp://www. divorcereform. org/rates. html (2010) http://www. unmarried. org/statistics. html (2010) Kreider, R. ; Fields, J. (2002). “Number, timing, and duration of marriages and divorces: 1996-2000. ” Current population reports. O’Connor & Sabato, (2009) American government roots and reform; Texas edition, p. 326 Smock, P. (2000). “Cohabitation in the United States. ” Annual review of sociology U. S. Census Bureau; (2008) Current population survey (CPS). U. S. Census Bureau (2004) “Voting and registration in election of november 2004. ”
