The Interaction Between Child Support and the Income Support Systems of the US, Australia, New Zealand and the UK

Background/Purpose: Governments around the world concerned about the economic vulnerability of single-parent families can look to non-resident parents to provide more income through child support payments, or look to the state to provide more income through a variety of social benefit payments (welfare), or both. Some countries might view child support and welfare as substitutes, so that children who receive more from a non-resident parent will receive less from the state. This substitution approach could be attractive to countries trying to limit public costs. An alternative position treats welfare and child support as complements, with systems designed to enable parents to combine these sources. This complementarity may be an attractive strategy for governments looking to decrease child poverty. However, we currently know very little about the approaches different countries take.  Research questions include: (a)How much child support do these countries expect in different scenarios? (b)If that support is paid, how much is kept by the government to offset welfare expenditures versus going to the family?

Methods: We examine the government policies of four countries (Wisconsin representing the US, Australia, New Zealand, and the UK). We use a vignette approach, in which we examine 8 scenarios in which two separated parents have different levels of earnings.  We use policy rules to calculate whether each parent would be eligible for a variety of government benefits based on their earnings.  We then calculate the amount of child support that would be due in each country in the 8 scenarios.   Finally, we assume the required child support is paid and reexamine the level of other benefits (and thus total income) that results. This approach allows us to examine the extent to which child support is actually increasing the resident parent’s income or is being used to offset welfare expenditures.

Results: (a)While the amounts of child support due vary across scenarios, in general the US requires substantially more in child support than the other countries, especially in the low-income scenarios.  The UK, Australia and New Zealand generally expect comparable amounts that are much lower than the US. (b)In all the scenarios in which the resident parent has no earnings or typical part-time earnings, New Zealand uses the highest proportion of child support to offset welfare expenditures, followed by the US.  When the resident parent has low-wage but full-time earnings, the UK stands out because it allows resident parents to keep all of the child support paid, with no loss in other benefits.   These results come in part from the explicit rules within various programs about the extent to which child support is passed through to parents, but they also come from hidden program interactions.

Implications: We discuss the relative advantages of the alternative schemes in the four countries. Our approach illustrates the varying social policy contexts of single-parent families and highlights that policies can have large effects on both single parents’ incomes and government resources.