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Paying the high price of divorce


http://www.theage.com.au/articles/2002/04/12/1018333416832.html

The Age (Melbourne)
April 13, 2002

Paying the high price of divorce
by Bettina Arndt

What does it really cost to raise a child? And how much more expensive is
it to raise a child in two households - for example, where a child lives
mostly with Mum but goes to Dad's for every second weekend and half the
holidays?

When you have figured out the answer, you are still only halfway to a
solution to the fraught question of equitable child support now consuming
governments around the world. The next challenge is to come up with a
formula for separated parents to fairly divide the costs of raising their
children - one that recognises that both parents need a home and a budget
that can cope when the children are in their care.

When the Georgia Superior Court in the United States considered these
issues last month, it wound up tossing out its child-support guidelines
after declaring them unconstitutional. The court found the guidelines had
been "hastily enacted and left unchanged without sufficient examination of
relevant economic data" relating to the cost of raising children, and
declared them "arbitrary and capricious".

The Australian child-support formula is wide open to similar charges. When
he learnt of Georgia's decision, Federal Labor backbencher Roger Price
could not help an ironic chuckle. "Here was a court throwing out a
child-support formula, which has similar problems to the one we have here."

In 1994, Price chaired a cross-party federal parliamentary committee,
which, like the judge in Georgia, concluded Australian parents paying
child support were being obliged to hand over amounts of money that were
not supported by adequate data on the costs of raising children. The
committee unanimously recommended the formula be overhauled with
up-to-date research.

By 1999, the Department of Family and Community Services (FACS) had
the research on costs of raising children and, from that, devised changes to
the formula.

This led to legislation that proposed lowering the maximum amount of child
support that high-income parents are required to pay and minor adjustments
to allow more money for the costs of contact for non-custodial parents (or
contact parents, as they are now called) who have the children in their
homes for more than 10 per cent of the year. But concern that this would
see a reduction in child-support payments to some resident (formerly
"custodial") parents led to key changes being blocked in the Senate,
leaving many thousands of Australians locked into paying child support on
a basis that had been proven illegitimate. Price believes the failure to
introduce reforms for these acknowledged flaws has discredited the
child-support scheme.

"The tragedy is we have reached the stage where the current scheme is
almost at the same level of disrepute as the system it replaced. Everyone,
whether in the government or opposition, knows the formula is not working
but we don't have the political will to move on."

In Australia, hope of reform lies in the political process rather than the
courts, since our legal system fails to offer protections available under
the American system, such as the Bill of Rights. But many of the arguments
that won the case in Georgia have relevance here. For instance, the
Georgia Court found that the Georgia child-support awards included "such
large amounts of hidden alimony" that the non-custodial parent was often
unable to meet the financial needs of the children when they were in their
care. The court found this was not in the best interest of the child.

This "hidden alimony" aims to maintain the living standards of the child
by requiring support that far exceeds the actual costs of raising the
child. Mark Rogers, the economist who provided many of the economic
arguments underpinning the Georgia court decision, argues it is economic
nonsense to set up child support on this basis.

"From an economic perspective, it is impossible to maintain the
pre-dissolution standard of living when you split the family into two
households without creating an extraordinary burden on the non-custodial
parent," he said last week from his Georgia office.

High levels of child-support liabilities in Australia have sometimes been
defended as attempting to maintain the pre-separation living standards of
children. The folly of this argument is demonstrated in recent work by
Macquarie University researcher Paul Henman, in association with social
policy analyst Kyle Mitchell, showing that since both resident and contact
parents are required to provide household infrastructure for the child - a
bedroom, clothing, food, etc - the total costs of children rise markedly
after separation. Their research, published in the 2001 Journal of Social
Policy, found that "for contact with one child for 20 per cent of the
year, costs of contact represent about 40 per cent of the yearly costs of
that same child in an intact household with a medium income and more than
half the yearly costs of that child in a household with a low income".

Therefore, a child may cost up to 50 per cent more after separation than
in the intact family.

Research conducted for FACS by Murray Woods and Associates showed
many parents exercising contact found it "a real struggle" to make ends meet,
particularly those living some distance from their children.

Kyle Mitchell says the research on contact costs proves the need for
change to the Australian formula. "The formula was designed in 1987 when
there was little data on the costs of children and none on the costs of
contact. The formula takes no explicit account of the costs of contact,
though there is claimed to be some minor unquantified allowance in the
level of formula percentages," he said.

The rejected legislation proposed a drop of two or three percentage points
for payers providing contact care, a change Mitchell regards as "a
supportable and minimal reform that balanced the reality of the costs of
contact with the fact that many resident parents already don't receive
much child support".

Mitchell argues that "it is key to the perceived legitimacy that it takes
some explicit account of contact costs. Similarly, the formula has to be
corrected where higher-income, non-resident parents pay much more than
the total amount high-income intact couples spend on their children".

These issues are being debated in many countries, and several have moved
ahead with reforms. Britain has a new formula, which reduces child-support
liability by one-seventh for every one-seventh of the year that the child
spends in contact care.

Norway has also made a radical shift towards a more equitable scheme.
Last year, the government legislated to more closely base child-support levels
on the actual costs of raising children. Careful estimates are made of the
costs of raising each child, which are then shared between the parents,
with full deductions for contact costs.

While critics of the reforms suggest the arrangements may increase the
relative disadvantage of resident parent households, Norwegian Labour MP
Jon Olav Alstad dismissed these arguments. "For the Labour Party, the
important matter has been to develop a system where children are put first
and have the opportunity to maintain contact with both parents after the
break-up," he said.

Anne Skevik, a research fellow at the Norwegian Social Research institute,
explains in a recent paper on the reforms that as far as the politicians
were concerned "what mattered was parenting . . . The most important thing
a child-maintenance system should do was to encourage continued extensive
contact with the child by both parents".

According to Skevik, a majority of the Norwegian politicians felt
unreasonable maintenance demands were contributing to the poor situation
of many non-resident fathers and hindering contact with the children. Even
if children spent more time in the resident parent's home, it was in
children's interests for both households to have adequate resources to
provide for their care - so this should be the priority for the
government, rather than simply concerning itself with the finances
available to the resident parent.

With Norway a world leader in supporting paternity leave and other
policies supporting fathering, it is hardly surprising that this country has
led the way towards a child-support system that encourages fathers to
care for their children.

But the essential argument that won the day in Norway - that proper care
of children requires both households to be adequately resourced - is
equally applicable in Australia. The minister in charge of child support
in Australia, Larry Anthony, is hoping to inspire the political will to
change the child-support formula so children achieve that care.

"There are some aspects of the child-support formula that do need reform,"
he said.

"I was disappointed that the Senate didn't agree to the changes I
introduced to reduce child support payable when the parent has contact
with their children and also to reduce the maximum of child support that
is payable. These are sensible and modest changes, which the research data
shows would be of benefit to children and make the system fairer.

"Where possible it is in the child's best interest to maintain contact
with both parents following separation," Anthony said. "Our society must
continue to assist parents to achieve this by recognising that parents
have additional costs when they have contact with their children and
reducing the child support payable in these circumstances."

When the issue was debated in the Senate, Labor supported the need for
financial support to cover the costs of contact but argued against the
resident parent contributing to this cost. Instead, they proposed the
government foot the bill for a "contact payment", at costs estimated by
the government at $80 million a year.

Mitchell says this puts the cart before the horse. "Child support is a
legally enforced private transfer that must be based on sound cost of
children research," he said.

"The amount of family assistance paid to separated parents should take
account of their circumstance after fair child support is paid."

--
Bettina Arndt is a staff writer.

Copyright 2002 The Age Company Ltd.
The Age Home: 
http://www.theage.com.au/


 

 

 

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