The Impact of Child Support:

Balancing the Economics Needs of Children and their Noncustodial Parents

 

September 2002

 

 

The purpose of this report is to analyze the economic impact of child support by comparing the differential effects on the noncustodial and custodial parentsí households. Two related, primary questions are pursued:

What is the impact of child support on the economic well-being of the custodial and noncustodial households?

What is the impact of child support on the poverty status of the custodial and noncustodial households?

Methodology

In the first question, economic well-being is measured by the income-to-needs ratio, a standard employed by social scientists. For the analysis reported here, the numerator (income) is based on the gross monthly incomes of the mothers and fathers, as stated in the child support order. The denominator (needs) is the poverty threshold associated with a given family size, as defined by the U.S. Census.

Example: Assume the child support order is based on one child. If the family were intact, the family size would thus be three members: two adults and one child. Given that particular household composition, the annual needs, as determined by the poverty threshold, would be $13,861. The monthly income figures of both parents in the order are annualized and summed to establish intact family income. This is then divided by the needs measure to determine family well-being. Thus, we begin with a single measure of economic status based on one intact household.

Once the child support order is established, we consider two separate households: the custodial and noncustodial. For the one-child example above, assume the mother is the custodial parent. The economic well-being of the custodial motherís household is based on her gross income plus the amount of the child support order. To arrive at the custodial householdís well-being, this figure is then divided by the poverty threshold for a family of two: one adult and one child. In 2000, the needs for such a family was $11,869.

Similarly, the noncustodial fatherís well-being is based on his income minus the amount of the child support order, which is then divided by the poverty threshold for a one-adult household: in 2000, this was $8,959.

Thus, the analysis will compare the well-being of the intact household to that of the custodial and noncustodial households. An income-to-needs ratio equal to one means the household has just enough income to meet their minimum needs: the householdís income is equal to the poverty threshold for their family composition. Those households who enjoy an income-to-needs greater than one live about the poverty threshold, while those whose income-to-

needs is less than one would be classified as "poor," according to the official US poverty measure.

As the above discussion indicates, the income-to-needs ratio as a measure of the familyís standard of living is dependent upon income and household composition. To create the subsample for this analysis, we thus need to identify those orders for which we have the most reliable data on income and family size. With respect to the numerator, this entails that all orders which included any reference to potential additional income for either the custodial or noncustodial household were eliminated. Examples of such orders include those which indicate income from other adults, such as a new spouse or another adult living in the household; child support received for children not included in the order; and income earned or received by the children. Thus, all orders which indicated any income other than that of the mother and father identified in the order, were eliminated.

Similarly, any orders with included reference to additional constraints on income, such as child support paid for other children, were omitted for the purpose of this analysis. Finally, with respect to household size, all orders which included any reference to potential other children or other adults living in either the custodial or noncustodial parentís household were eliminated. A complete list of the variables used to create the subgroup analyzed throughout this report is listed on the next page.

 

Findings

Tables One and Two show the economic well-being of the intact household, the custodial parentís household, and the noncustodial parentís household. Table One provides this analysis for the non-IVD cases, while Table Two presents it for the IVD cases. The top half of each table shows the results for the orders where the father is the noncustodial parent while the orders for noncustodial mothers are displayed in the bottom half.

Turning first to the non-IVD orders shown in Table One, the data clearly indicate that a much higher standard of living would be enjoyed by the family if it were intact than is available to either the custodial or noncustodial parentís household. This is true whether the noncustodial parent is a mother or a father.

 

List of Variables Used to Omit Orders

to Determine Income and Family Size

All orders were eliminated which included any non-zero or non-missing values for the variables listed below. Note that a value for any of these variables would suggest either: 1) potential additional sources of income, thus increasing the household income; 2) potential additional uses of income, thus reducing household income; and/or 3) additional household members, thus changing the "needs" requirements.

1. Reason for Deviation

a. New Spouse Income

b. Income from Other Adults in the House

c. Child Support from other Relationships

d. Possession of Wealth

e. Extraordinary income of a child

f. Nonrecurring income

g. Extraordinary Debt

h. Court-ordered Reunification

i. Residential Schedule Credit

j. Blended Family Approach

k. Whole Family Approach (Arvey Split Custody)

2. Other Children Living in Either the Mother or Fatherís Household.

3. Child Support Paid for Other Children, either by the Mother or the Father in the Order.

4. Names and ages of other children associated with the Mother or the Father in the Order.

5. "Other Factors." These notes in the file often referred to other children in the custodial or noncustodial parentís household.

 

Table One: Income-to-Needs

Non-IVD Cases

For those orders where the father is the noncustodial parent, the median income-to-needs ratio for intact families is 4.69. Once we split those families for our analysis, the standard of living falls for both the households of custodial mothers and for noncustodial fathers.

However, the drop in the well-being of custodial mothers and their children is much more severe than that experienced by noncustodial fathers. Table One shows that the decline for custodial mothers and their children is from a median income-to-needs of 4.69 to 2.70, representing a decline of more than 42 percent. Noncustodial fathers do experience a drop in their standard of living as well, but it is only 11 percent, from a median value of 4.69 to 4.17.

The data in the bottom half of Table One further indicate that mothers are also much worse off when they are the noncustodial parent. This suggests, however, that children are economically better off when the mother is the noncustodial parent. Specifically, the data show that both custodial and noncustodial households experience a decline in their economic well-being compared to the intact scenario (as we also observed in the findings above for noncustodial fathers). However, the situation is reversed in terms of which household suffers the greatest decline in their well-being. When mothers are the noncustodial parents, their household experiences a 48 percent decline in their standard of living, as compared to the 11 percent decline for noncustodial fathers.

Custodial fathers and their children, on the other hand, see their well-being decline also, but by much less than that of custodial mothers: 14 percent compared to 42 percent.

Table Two provides the same analysis for IVD orders. As expected, we observe a much lower overall standard of living for the IVD orders: these households have a standard of living less than half of the non-IVD orders and in some cases, much less than that.

Table Two: Income-to-Needs

IVD Cases

Despite the dramatic difference in their overall standard of living, a similar pattern is observed in the orders for noncustodial fathers, which represent the vast majority of the cases. Like the non-IVD orders, the intact family enjoys a much higher standard of living, with a median income-to-needs ratio of 1.95, than that achieved by either the custodial or the noncustodial parentís household.

Again, similar to the non-IVD orders, the custodial mothers and their children fare much worse than the noncustodial fathers. These mothers and their children face a drop from a median standard of living of 1.95 to a level just above the poverty threshold, at 1.09. This means they experience a 44 percent drop in their standard of living, one very similar to that faced by the non-IVD custodial mothers and their children.

Also, similar to that of non-IVD orders is the experience of noncustodial fathers: while they face a decline in their standard of living from a median 1.95 to 1.60 (an 18 percent decline), it is much less than that observed above for custodial mothers and their children.

The singular reversal in the patterns observed above for both the non-IVD and IVD orders is observed in the final scenario: that seen in the bottom half of Table Two, displaying the outcomes associated with the IVD noncustodial mothers. This is the one situation where the intact family is not better off: well-being rises for noncustodial mothers. The median income-to-needs associated with these intact families is below the poverty threshold at .98, and noncustodial mothers see their standard of living rise by 34 percent, to a median of 1.32.

However, among all orders, the standard of living falls most precipitously for the custodial fathers and their children, from a median of .98 to a drastic low of .16, representing a disastrous 84 percent decline.

Child Support Orders Based on Divorce Orders

As suggested in the methodology section, the analysis of economic well-being is dependent upon a reliable measure of the income available to the family and the familyís size. In this round of analysis, we attempt to refine our earlier measure even further. Here, in addition to the elimination of those cases discussed earlier, we further limit our analysis to only those orders brought about by a divorce. These orders are the most common type in the database and, moreover, they may be the least likely to have "other family" responsibilities and/or other sources of income.

Tables Three and Four present the findings for those child support orders associated with a divorce. They show very similar results to those discussed from Tables One and Two. Typically, the standard of living for split families is much lower than that of the intact household. And, identically to Tables One and Two, the only exception is observed in the case of noncustodial IVD mothers, who experience an increase in their standard of living in comparison to the intact family situation.

Additionally, the magnitudes are quite similar. The one significant difference between the results in Tables One and Two and those in Tables Three and Four is seen in custodial IVD fathers and their children: they do not face anywhere near as disastrous a decline in their well-being.

Table Three shows the divorce cases for the non-IVD orders. For those involving noncustodial fathers, custodial mothers and their children experience a decline in well-being of 42 percent, with a decrease in median income-to-needs from 4.66 to 2.70. This is identical to that seen in Table One for all order types. Noncustodial, non-IVD divorced fathers also experience a decline in their standard of living, but it is much smaller: 12 percent.

The experience of non-IVD noncustodial mothers and custodial fathers reverses that of noncustodial fathers and custodial mothers, an identical result to that observed in Table One. That is, both noncustodial and custodial households experience a decline in economic well-being, but divorced custodial fathers and their children fare much better, with only an 11 percent decline in their standard of living, compared to that of divorced noncustodial mothers whose median income-to-needs falls by 50 percent.

 

Table Three: Income-to-Needs

Non-IVD Cases

Divorces Only

 

The results for divorced IVD orders are shown in Table Four. For those divorced, noncustodial fathers the experience is quite similar to that shown in Table Two for all order types. Their standard of living falls by 14 percent, which is again a much smaller drop than that of their children and their childrenís mothers. Divorced custodial mothers and their children see their well-being decline by 42 percent, sharing the identical fate of that of divorced non-IVD mothers (albeit at a much lower standard of living).

As noted above, the one exception to the decline in well-being is that of noncustodial, IVD divorced mothers. As we saw in Table Two, this is the one scenario where well-being increases relative to the intact family. The magnitudes for the divorced orders in Table Four are also similar to those observed for all order types in Table Two: noncustodial, IVD divorced mothers enjoy a gain in their income-to-needs ratio, from a median 1.40 to 1.48, an increase of 29 percent.

The one magnitudinal difference between the analysis of all orders and the divorce-only orders is that of the custodial IVD fathers and their children: their decline in well-being, while still large at 31 percent, is much smaller than the decline of 84 percent observed in Table Two.

 

 

Table Four: Income-to-Needs

IVD Cases: Divorces Only

 

The analysis of economic well-being, shown in Tables One through Four, suggests the critical importance of adequate child support orders. Each component of the analysis has underscored the differential impact of the child support order on the custodial parent and their children compared to the impact of child support on the noncustodial parent. In the vast majority of cases, the economic burden falls disproportionately on the custodial parent and the children. Custodial parents and their children typically experience a decline in their standard of living of more than 40 percent, compared to a much smaller drop for noncustodial parents. Given the prevalence of noncustodial mothers, the significant declines in the standard of living is most often felt by women and their children.

 

The Impact of Child Support on Poverty Status

The final question to be pursued for this report is the impact of child support on the poverty status of noncustodial and custodial households. Given the virtual absence of poverty among the non-IVD orders, this analysis was only conducted for the IVD orders.

In order to determine the poverty rates associated with the orders in the database, a reliable subset must be extracted, identical to that needed for the construction of the income-to-needs measure. As we did in the previous section, all orders were omitted which included any reference to additional income or additional children to support. The same variables listed on page three were used to construct this subset.

To determine the poverty status of the households in the order, we use the official US poverty thresholds from the Census Bureau. This is the same measure we used in the construction of the "needs" portion of income-to-needs ratio. Those orders whose annualized gross income is less than the poverty threshold for their family composition are classified as "poor."

Identical to the analysis in the first section, for the intact family scenario, gross income consists of the two parentsí incomes summed; the noncustodial parentís income is their income less the transfer amount; and the custodial parentís income is their income plus the transfer payment.

Table Five shows the poverty rates for all order types, while Table Six displays the poverty status for the orders based on a divorce. As presented in Tables One - Four, the scenario where the father is the noncustodial parent is shown in the upper-half of each table, while the bottom-half of each table shows the results for those orders where the mother is the noncustodial parent.

These tables show the stark economic circumstances faced by custodial parents and their children. The poverty rates for these families far exceed the national poverty rate (approximately twelve percent) that prevailed at the time of the collection of these data. Moreover, the poverty status of custodial parents and their children is much greater than that of the noncustodial parent.

Table Five shows that for the orders associated with noncustodial fathers, the average poverty rate for intact households is 21 percent. Once the family resources are split among two separate households, the likelihood of being poor increases dramatically for a custodial mother and her children, rising to a mean of 49 percent. Thus, they are more than twice as likely to be poor as compared to the intact family situation. Moreover, they are more than three times as likely to be poor as the noncustodial fathers, whose average poverty rate is 15 percent.

The mean poverty rate of 15 percent for noncustodial fathers actually indicates an improvement in their economic circumstances, compared to the intact poverty rate of 21 percent.

 

Table Five: Poverty Rates for IVD Cases

Table Six: Poverty Rates for IVD Cases

Divorces Only

 

The bottom half of Table Five reflects the very low earnings and income associated with those orders involving noncustodial IVD mothers. The intact poverty rate for this group is much higher than that of the intact poverty rate for noncustodial fathers: an average of 55 percent compared to the 21 percent observed in the top half of the table. Thus, even when the resources of the two parents are combined, the children of these families face dark economic circumstances.

Consequently, when these meager resources are split among two separate households, the situation becomes more dire: the poverty rate for the custodial fathers and their children is over 75 percent. The poverty rate remains high, but shows an improvement relative to the intact household data, for noncustodial mothers: decreasing from an average of 55 percent to 32 percent.

Table Six shows this analysis for the orders based on a divorce. Given the higher incomes associated with the divorce orders, the poverty rates observed in this table are lower overall compared to Table Five. However, similar trends are observed. The poverty rate for custodial parents and their children rises dramatically, compared to the intact household.

For custodial mothers and their children, the average poverty rate is 41 percent compared to the intact poverty rate of 12 percent. This represents a more than tripling of the likelihood of being poor for these mothers and their children. They are Ė as we have observed throughout this report Ė much more likely to be poor than noncustodial fathers, whose average poverty rate is just over 9 percent. Again, as in Table Five, we observe that noncustodial fathers experience an improvement in their economic circumstances while custodial mothers and their children become much worse off.

The bottom half of Table Six shows the poverty rates for those orders based on noncustodial, divorced mothers. Although the sample sizes are small at this juncture, the results are markedly similar to those we have observed repeatedly in this report: custodial parents and their children experience a sharp decline in their economic circumstances relative to the intact household, while noncustodial parents fare much better. The average poverty rate among noncustodial mothers falls to zero, compared to 23 percent for the intact scenario. This is contrasted to the bleak economic circumstances of custodial fathers and their children who face a poverty rate of 62 percent.

Summary

In conclusion, the data portray a coherent but distressing portrayal of the economic status of custodial parents and their children. Regardless of the measure used to define economic status (the income-to-needs ratio or the poverty rate) and regardless of which subset is analyzed (non-IVD or IVD, all child support orders or only those arising from a divorce), the evidence points in the same direction. Most households are much better off when the family is intact and the economic resources are shared. Splitting the resources among two households makes both the noncustodial and the custodial households worse off. However, the impact of splitting those resources falls disproportionately on the custodial parents and their children, who face a severe and often crippling decline in their standard of living.

 

 

 

 

 


Appendix:

Programming for Income-to-Needs

 

*

* First, let's estimate what total gross would be if they were still living together - use as

* estimate of income before separation. Calculate annual income, then divide by needs

* appropriate to number of kids.

*

compute totgross = fgross + mgross.

if ( numkids eq 1) y2needb4 = 12*totgross / 13861 .

if ( numkids eq 2) y2needb4 = 12*totgross / 17463 .

if ( numkids eq 3) y2needb4 = 12*totgross / 20550 .

if ( numkids eq 4) y2needb4 = 12*totgross / 23009 .

if ( numkids eq 5) y2needb4 = 12*totgross / 25772 .

*

* If the noncustodial parent is the man (ncp=1), compute monthly income for custodial

* parent as mother's gross plus father's transfer. Then proceed as above.

*

if ( numkids eq 1 and ncp eq 1) y2needcp = 12*(mgross+ftrxpymn) / 11869 .

if ( numkids eq 2 and ncp eq 1) y2needcp = 12*(mgross+ftrxpymn) / 13874.

if ( numkids eq 3 and ncp eq 1) y2needcp = 12*(mgross+ftrxpymn) / 17524.

if ( numkids eq 4 and ncp eq 1) y2needcp = 12*(mgross+ftrxpymn) / 20236.

if ( numkids eq 5 and ncp eq 1) y2needcp = 12*(mgross+ftrxpymn) / 22579.

 

* If the noncustodial parent is the woman (ncp=2), compute monthly income

* for custodial parent as father's gross plus mother's transfer. Then proceed as above.

*

if ( numkids eq 1 and ncp eq 2 ) y2needcp = 12*(fgross+mtrxpymn) / 11869.

if ( numkids eq 2 and ncp eq 2 ) y2needcp = 12*(fgross+mtrxpymn) / 13874.

if ( numkids eq 3 and ncp eq 2 ) y2needcp = 12*(fgross+mtrxpymn) / 17524.

if ( numkids eq 4 and ncp eq 2 ) y2needcp = 12*(fgross+mtrxpymn) / 20236.

if ( numkids eq 5 and ncp eq 2 ) y2needcp = 12*(fgross+mtrxpymn) / 22579.

 

*

* The noncustodial parent is easy - their gross minus transfer divided by

* needs for one person.

*

if ( ncp eq 1) y2neednc = 12*(fgross-ftrxpymn) / 8959.

if ( ncp eq 2) y2neednc = 12*(mgross-mtrxpymn) / 8959.