The Effect of Divorce on Workers’ Incomes

Marital status matters for one’s labor income. In a 2018 Economic Synopses essay, I discussed the fact that married men tend to earn more than other workers, including single men. In this blog post, I discuss the effect of divorce on a worker’s labor income.

Even though the divorce rate has been decreasing over time, there remains a sizable fraction of the population that is divorced. The first figure below illustrates this: In 2022, nearly 14% of the population between ages 25 and 65 was either divorced or separated. In 2001 the figure was nearly 16%.

Marital Status of U.S. Adults Ages 25 to 65

SOURCE: U.S. Census via IPUMS USA.

Income of the Newly Divorced

Income data from the U.S. census reflect the annual wage and salary income of employed workers from age 25 to age 65. The 2022 data are divided between those who were divorced in the past 12 months and all other employed individuals. The figure below shows that, on average, employed individuals who went through a divorce in the past 12 months earned less than those who did not. The average income difference across all ages (not shown in the figure below) is 12%.

Wage and Salary Income by Age and Recent Divorce Status

SOURCE: U.S. Census via IPUMS USA.

The Reasons for Earnings Loss Are Unclear

It is customary to consider the effect of divorce on expenses. Divorces impose new living arrangements on the affected parties and, hence, changes in housing expenditures. Divorces also matter for one’s tax status, health care spending, child care expenses, etc. Divorces also have wealth effects since retirement accounts and other assets are often split between the parties.

Yet, the data in the second figure do not pertain to expenditures or wealth; they pertain to income. Why do recently divorced workers earn less than the others? One possibility is these individuals change their work patterns: Either they work fewer hours or they work different, lower-paying jobs. The data in the second figure do not answer this question.

Unfortunately, the census survey on work hours typically asks questions such as: “During the past 12 months, how many hours did you usually work?” This question implies that the answer combines pre- and post-divorce hours for recently divorced workers. Thus, it is difficult to use hours data from the census to assess whether the labor supply of recently divorced workers differs from that of the rest.

Another important question not answered by the data in the second figure is whether the income loss is persistent or temporary. Do these recently divorced workers ever recover, income-wise, from the divorce? Is it the case that five or 10 years later those individuals still earn less than the never-divorced?

Income Differences between Men and Women

Despite the data limitation, an interesting calculation is to compare the income loss of men and women following a divorce. This is represented in the figure below: At each age, the figure indicates the percent difference in income between those who experienced a divorce in the past 12 months and the rest. (The average of the “All” line in the third figure is the percent difference between the two lines in the second figure, where men and women are not distinguished.)

Income Differences of Recently Divorced Men and Women

SOURCES: U.S. Census via IPUMS USA.

On average, the difference is negative, indicating that both men and women lose income after a divorce. Interestingly, however, the income loss tends to be less for women than for men. Even though women earn less than men on average, the income loss is on average 9% for women instead of 17% for men. This difference between men and women is most visible in their 30s, during which men lose close to 40% of their income following a divorce, while women lose noticeably less.

By analyzing the wage data, this blog post reveals an earnings penalty for divorce, particularly among men. We are left with three intriguing questions: Why are recently divorced workers earning less than the rest of the employed population? Why is the income loss of women less than that of men after a divorce? Are these losses permanent, or does the income of newly divorced workers recover? These questions cannot be answered with the data displayed here, but they are worth pondering in future research.