Separation: Consequences for Wealth in Later Life

Caroline Dewilde Karel Van den Bosch Aaron Van den Heede

SHARE-Meeting Odense, 21/07/2010

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Introduction

• A substantial part of the elderly experienced the dissolution of one or more partner relationships, either through divorce or widowhood.

• What are the economic consequences?

• Increasingly important because of:- the rising incidence of divorce since the 1960’s- growing concerns on welfare dependency

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What we know…

• Most studies have concentrated on the short or middle-term impact of this life event on household income.

• Results are fairly consistent:

Short-term economic consequences:- Women: financially deprived (and welfare dependent) after divorce- Men: less negative effects, sometimes even an improvement in

disposable income

> Work history, labour regime, different wage structure, custody of the children involved, ...

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What we know…

Long-term economic consequences:- incomes of separated women gradually recover, though not always to

their previous levels (Andreß et al., 2006)

- > decline is mainly countered by paid work and/or repartnering.

Institutions matter:• Britain and Germany: initial losses are very high, but rapid

recover• Sweden: initial losses relatively small, but both men and women

seem to financially suffer for a longer period of time.

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What we know…

• One-sided view of the economic consequences of (marital) separation: income

• Divorce entails significant additional economic changes: .e.g . housing situation of the ex-partners

Short-term consequence: - divorce raise the risk of leaving owner-occupation for men and women- This risk seems smaller for women in those countries where the

economic consequences of divorce are more severe, i.e. in the liberal and Southern-European welfare regimes

Long-term consequence: ?

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What we think…

• Both men and women who ever experienced the dissolution of a marriage or cohabitation are less likely to be a home-owner, even when repartnered.

• Both men and women who ever experienced the dissolution of a marriage or cohabitation are more likely to have a lower level of financial assets in old age , even when repartnered.

• We expect that women in countries with high female labour market participation are more likely to be economically independent, and therefore suffer less from negative consequences on their wealth after separation.

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What we hope for…

• Most research of (marital) separation:

Based on panel data and thus focuses on the short or middle term for the current generations of respondents in their ‘adult’ years

“What are the economic consequences of divorce in the first year after divorce?”

“What is the decline in income in the five years following a separation?”

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What we hope for…

SHARELIFE offers the possibility to look at this issue ‘from the other way around’:- wealth in later life is influenced by the relationship

trajectories of European men and women.

- Information on the variation between European countries in terms of the institutional arrangements

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Data and methods

• SHARELIFE:• Marital history:

- (1) the continuously married/cohabiting (reference), - (2) cohabitors who were never married ,- (3) remarried after experiencing at least one divorce, - (4) cohabiting after experiencing at least one divorce- (5) never married, - (6) single after experiencing at least one divorce,- (7) single following widowhood.

Excluded- Combination of widowhood and divorces (329 respondents)- Remarried or cohabiting widows/widowers (350 respondents)- unknown marital history (751 respondents)- individuals who cohabitated but never married (156 respondents)

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Marital history, by gender and cohort

Men born 1900-1939

Men born 1940-1949

Men born 1950-1975

Women born 1900-

1939

Women born 1940-

1949

Women born 1950-

1975

0%10%20%30%40%50%60%70%80%90%

100%

Cont. married/cohabiting Never married Divorced, remarriedDivorced, cohabitor Divorced, single Widowed, single

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Owner-occupiers (%), by gender and marital history

Cont. mar-ried/cohab-

iting

Never married Divorced, remarried

Divorced, cohabitor

Divorced, single

Widowed, single

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Men Women

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Net wealth, by marital history

Continu-ously

married/

Never married

Divorced, remarried

Divorced, cohabitor

Divorced, single

Widowed, single

0

20000

40000

60000

80000

100000

120000

Men Women

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Impact on home-ownership

Men, West

Women, West

Men, North

Women, North

Men, South

Women, South

Men, East Women, East

0

0.5

1

1.5

2

Never married Divorced, remarried

Divorced, cohabitor Divorced, single

Widowed, single

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Impact on net wealth

Men, West

Women, West

Men, North

Women, North

Men, South

Women, South

Men, East Women, East

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

Never married Divorced, remarried Divorced, cohabitorDivorced, single Widowed, single

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Impact of divorce (single) on net wealth by female labour participation, 1980

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Impact of divorce (remarried) on net wealth by female labour participation, 1980

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Summary

• Persons who experienced a divorce have less wealth and lower chances of being home-owners than continuously married persons. The effect of marital dissolution is larger for women than for men.

• Although remarried and cohabiting individuals who have ever experienced a divorce have higher levels of wealth and higher chances of owning the house they are living in, compared to single individuals, we find a lasting effect in old age of marital separation in many countries.

• We found mixed support for our hypothesis that there would be large differences between Europeans countries in the impact of marital separation on the wealth of elderly. However, the differences are not easily interpretable in terms of welfare state typologies, or specific welfare state interventions.