Unintended Consequences: How Child Support Programs Discourage Employment for Low-Income Families

This article is the fourth in Child and Family’s five article series on the intersection of child and family policy and entitlement programs. For the rest of the series, click here.

Child support programs are designed to reinforce stability for children from disjointed families. A recent study, however, shows that these programs negatively impact low-income families. In the 2013 article published in the Journal of Policy Analysis and Management, authors explore how accumulating debt tied to childbirth costs negatively impacts a father’s employment status and child support payments owed. The authors find that low-income, adult males willingly reduce the amount they pay for child support to mothers, as well as their participation in the workforce, as their personal debt from childbirth costs increases.

Agencies like the Office of Child Support Enforcement collect child support payments from non-custodial parents. The authors treat this as an earned income tax (e.g., automatic wage withholding) and describe the unintended consequence of taxation-like policies as having one of two effects: 1) a substitution effect by which the individual works less in order to reduce child support payments owed or 2) an effect through which the individual may “work more hours in order to attain the same level of net earnings.”

The study uses regression analysis to review data from the administrative records of 8,263 fathers from Wisconsin between 1997 and 2003. It focuses on families where the mother, the custodial parent, is eligible for Medicaid coverage at the time of childbirth as a method for measuring low-income families. Importantly, the noncustodial father must pay the costs of childbirth – defined as birth costs – which create a form of additive debt for the father. The birth costs are a measure that allows the authors to compare patterns across employed versus unemployed fathers and child support payments, as well as show that the additive debt is correlated largely to childbirth costs and not previous effects.

Employed fathers typically make larger child support payments than unemployed fathers because of the formers’ earnings from work. Therefore, based on labor force participation in the seven to 18 months prior to childbirth, the authors expected higher child support payments by fathers that are employed. Interestingly, fathers who worked for a single employer prior to childbirth reduced their child support payments to the mothers by over $300 in the two years following childbirth. This anomaly is confirmed when the authors find that employed fathers who were previously working hours that required high child support payments consequently reduced their participation in the workforce – revealing the substitution effect. Therefore, because the fathers decreased their work hours, their child support payments were reduced from what they would have been had they continued working the same hours that they were working prior to the childbirth. These findings point to a disincentive to work less for fathers burdened by the high costs of child support payments.

Alternatively, fathers unemployed before childbirth increased the child support they paid, by $138 and $169 in the first year and second years following childbirth. This may describe a minor shift to the labor force for unemployed fathers in order to support their child. Since low-income, single mothers depend on child support payments as 40 percent of income on average, the pattern shown among fathers to reduce payments by working less is increasingly detrimental to the family.

The article draws attention to the potential ineffectiveness of existing child support programs while seeking achievable and beneficial policy solutions for the family. The unemployment rate among men over 16 years of age was 7.3 percent in October 2013, compared to 6.5 percent in October 2008 (Bureau of Labor Statistics). It is strongly in policy makers’ best interest to provide incentives and policy mechanisms (such as stipends for full-time work coupled with career advancement training) that encourage workforce participation. This may increase child support compliance in single parent families. As they currently stand, child support policies are putting the targeted recipients – the children – at risk of becoming victims of financially unstable homes.

Feature Photo: cc/(Josh Liba)