Post-divorce financial suffering: Swiss women winning, Korean women not so much

Divorce is a risk any married person takes, but the fact is, women - on average - suffer economically far more than men after a marriage takes a nosedive.

There are several factors involved in this that we could point to off the top of our heads, and they remain largely true (lower pay, more time spent in part-time, casual, unpaid caring, and lower-paid jobs), however this interesting study by the Australian government has uncovered some valuable insights into why some women in some countries are worse off than others, despite things being sort of the same. The study looked at Australia, Germany, the USA, UK, Switzerland and Korea, and compared outcomes. 

Support structures for post-divorce

In OECD countries, arrangements are in place to support people who need it after a divorce, including family law, child support, spousal maintenance, and social security.

This report found that usual data analysis can be misleading when it comes to divorce and economics based on the style of study conducted, however data has consistently shown that women most often end up worse off. Having comparable estimates for financial life after divorce in different countries to help guide policy were needed, because it had become clear that there were differences. Unexplainable differences. 

We delve

Longitudinal data was collected during the 2000s to estimate the short- and medium-term economic impacts of divorce in the UK, USA, Switzerland, Korea, Germany and Australia. After some analysis, outcomes varied depending on country. 

Divorce had (on average) negative effects on the equivalised household incomes of women, but the extent and duration differed markedly. 

USA and Korea: women were substantially worse off in terms of equivalised household income in the short-term, with no evidence of recovery over the long-term. 

UK, Germany, Australia, Switzerland: divorce had a substantial short-term negative effect on finances of women, less than Korea and USA, with incomes starting to recover (though still substantially lower six years after divorce). In Switzerland, women's income recovered very quickly to what it would have been (by estimate) if they had remained married.

The effect of divorce on the equivalised household income of men was smaller than on women.

It is not known why the differences in outcomes for women occur in the different countries, but the paper discusses some ideas. These ideas will then help guide us into the future of a life where women do not economically suffer unequally to men after a divorce. 

Why do women suffer economically more than men after a divorce?

Government benefits
The British, German and Australian government benefits provided are important for reducing the impact of divorce on women's income. In the USA, Switzerland and Korea, government benefits are not as much of a factor in post-divorce financial recovery. 

Labour markets
Post-divorce income varies inside different labour markets and settings, so for example in the case of Switzerland, everyone is paid more, including women. This means a new partner post-divorce offsets Swiss women's incomes in a greater way, since she already likely has a good job with good pay. 

New partners
Entering into a new relationship where the new partner contributes financially can offset the post-divorce economics problem substantially. In Germany and the USA, partner income is a relatively small contribution, however in Switzerland and Australia, it plays a greater role, and more so in the UK and Korea. 

What's interesting

Our re-partnering and women's labour market earnings are key factors in financial outcomes for women post-divorce, which is interesting, particularly the re-partnering habits we have - who knew? 

In Germany and the USA, partner income makes a relatively small contribution to women's post-divorce income, but it is much more prominent in Australia and Switzerland, and lesser so in the UK and Korea. 

Other influences are the social security system, family models, family law and the labour market, but they don't explain the differences alone, since for example Switzerland has the smallest government contribution post-divorce, but Swiss women recover the fastest with the smallest amount of financial damage. 

Employment rates, pay, and being married: how it differs

In Australia and Switzerland, female employment rate and earnings are higher. Swiss women who divorced had high rates of employment prior to divorce, and this remained high post-divorce.

Australian women who divorced had lower employment rates than women who remained married, but were employed faster in their 'recovery' time than women who remained married.

Korean women who divorced had high employment rates, much higher than those who remained married, but divorced women employed full-time had lower earnings than their full-time married counterparts.

In the USA, both married and divorced women had high rates of employment, but full-time divorced women workers had lower earnings relative to full-time employed married women. 

So, it seems being married is good for your pay rate at least. 

Countries with very different social security systems (Germany and Australia) can produce similar post-divorce outcomes. 

Ultimately, the cross-country differences were in large part due to how much women get paid and how quickly a divorcée get a new partner who financially contributes. 

Download or read The economic consequences of divorce in six OECD countries