LCC Working Paper Series: 2016-18

Authors

Hayley Fisher and Anna Zhu

Non-technical Summary

Relationship breakdown is associated with a substantial reduction in financial resources, particularly for mothers with dependent children. Lone mothers can adjust to this financial shock in a number of ways, including increasing their labour supply, receiving government benefit payments, relying on social support networks, and repartnering. In this paper we show that when the generosity of government benefit payments for lone parents falls, this leads to an increase in the speed of repartnering for separating mothers. This gives new insight into the mechanisms used by mothers to cope with the financial stresses of lone parenthood.

The paper analyses the Welfare-to-Work reforms implemented in Australia in 2006. These reforms restricted access to the Parenting Payment Single (PPS) to mothers with a child aged seven or less for new applicants. Previously, any applicant with a child aged fifteen or under received this payment. New applicants with children aged eight or more were instead eligible for Newstart Allowance, an unambiguously less generous payment. We compare the repartnering speed of mothers separating before the reform to those separating after the reform to estimate the impact of the reduced financial support for lone mothers on the decision to repartner.

We use biweekly administrative data on Family Payments to examine the short term repartnering effects. We find that this reform increased a mother’s short-term repartnering hazard by 38%, equivalent to an increase from a 6% to an 8.4% probability of repartnering by 14 weeks after separation. The majority of this repartnering is reconciliation with the former partner, and the response is concentrated among mothers with low labour force attachment and those living in areas with high housing costs. We then use nationally representative survey data to show that this increased rate of repartnering is present in the five years after relationship breakdown.

These results raise a number of questions for the wellbeing of separating couples and their children. The short-term repartnering effects we identify may reflect couples who would always reconcile do so more quickly, with neutral or even positive implications. On the other hand, the increased rate of reconciliation may reflect vulnerable women being forced back into abusive living arrangements with significant negative consequences for their wellbeing. A broader understanding of the implications of this repartnering will inform policy decisions about the appropriate level of welfare payments for lone parents.

Published

September 27, 2016