Reduction In Lifestyle Following a Divorce

Expect a reduction in lifestyle for one or both parties following a divorce

The budget process makes one consequences of a divorce clearly (and, perhaps, painfully) evident. In the majority of cases, the standard of living of at least one of the parties will go down. This occurs because the divorcing parties matched their standard of living to their available resources. That is, the couple purchased the highest standard of living they could afford. Consequently, when the single economic entity of the couple becomes two individual economic entities, economies of scale are lost. The resources of the couple are needed to purchase two residences. Discounts for quantity are lost on services such as property and health insurance. It is more expensive to buy food for four people in two residences than four people in one residence.

In addition, duplicating all of the things necessary to live (furniture, kitchenware, linen, etc.) creates an initial and continuing additional expense when the couple separates. Inevitably, these additional costs mean the standard of living of both parties (with all else being equal) will decrease. However, all else is not equal. Generally, men make more money and have more chances for advancement in their occupations than women. Consequently, in spite of advances toward equality of the sexes, men continue to hold an economic advantage over women. In a divorce, this economic disparity means that on the average, the standard of living for men after a divorce will go up (or remain the same), while the standard of living of the women will go down.

The following example will illustrate the situation. Assume that a couple met in law school. They married shortly after graduation and went to work for law firms making the same amount of money. After two years, the husband and wife mutually agree that they would begin a family. The wife quit practicing law and had two children. After ten years, the couple sought a divorce. The wife returned to the work force in a position making $65,000 per year. The husband, however, has made partner in his law firm and is now making $235,000 per year. Consequently, due to the mutual decision to have children, the wife is $170,000 behind the husband in annual earnings.

The judge orders the family home to be sold and divides the equity in the home equally between the couple. The judge orders $2,500 per month child support and, “because the wife can meet her own financial needs,” no alimony. Even under the assumption that the child support may enhance the standard of living of the mother (estimated at $800 in the example below, rather than $2,500) and the husband will pay more of his income out in taxes, it is obvious that the husband will be able to afford a much higher standard of living:

Wife Husband
Income 65,000t 235,000
Income Taxes (15,686) (85,279)
Child Support 9,600 (9,600)
Total Annual Income 58,914 140,121
Initial Annual Difference 81,207 81,207

This disparity may decrease over time. The wife’s income will probably increase, and the husband’s income may reach its upper limits. However, it is entirely possible that the wife’s income may never reach the level of the husband’s. She is female and entering the workforce later in life. While gender and age discrimination are discouraged in our society, the fact is that they exist and may cause the difference in earning ability between the husband and wife to be permanent.

This disparity in economic position is not routinely recognized by courts. One reason for this may be that it puts courts in the position of having to anticipate what the wife would earn in the future. Evidence related to this issue may be seen as speculative, assumptive, or merely theoretical. Courts are often reluctant to venture away from tangible assets into concepts involving esoteric economic principles. In addition, courts can be hampered by the divorce laws under which they are required to operate.

For example, in a community property state, the law requires that the marital estate be divided equally between the husband and wife. If that state also has a law that restricts alimony only to those cases where the wife cannot support herself, then the judge is effectively hamstrung. He cannot give the wife more of the marital estate or provide alimony to recognize the disparity in income. Mediators and other neutrals also do not have extensive options related to this issue. They can recognize the issue, but generally have no power to insist that the difference be equaled. Even so, your divorce lawyer may choose to raise the issue and argue the point in court. Success will vary depending on the judge, the mediator and the mindset of you and your spouse.