Relationship breakdown is a common life event with often severe economic consequences. Childhood poverty is most prevalent among children with divorced or separated parents, and older, single women are also over-represented in the population below the poverty line. To combat poverty as a society, it is crucial to understand what effect separation has on poverty risk and financial wellbeing, and whether employment is a useful tool of protection. 

Drawing on Australian household survey data, this study highlights the protective effect of economic autonomy, and the risk that is inherent in strong marital specialisation. Moreover, a separation induces only very small responses in women’s labour supply: once a woman has lost economic autonomy while in a partnership, it is difficult to regain. Policymakers need to continue to highlight this insurance effect of maintaining economic autonomy to men and women at every life stage. 

Even for employed women and men, the increase in poverty after separation is by no means negligible. The loss of economies of scale induces poverty in couples who could maintain one household, but not two separate households above the poverty line on their combined income. Financial assistance will always be needed for a substantial minority of separating families.

Key findings

• Women with children below school age are 20 percentage points more likely to be poor in the year after separation, than they would have had they remained partnered.
• Women with older children or without children have a less elevated poverty risk caused by separation, but the effect is more persistent for them.
• The impacts for men are much smaller and more short-lived.
• Poverty risks differ by women’s pre-separation employment. In couples where women were not employed pre-separation, separation causes a 27 percentage points increase in poverty risk for women, and no significant increase in poverty risk for men.
• The study did not find significant effects of separation on subsequent employment.