How Does Divorce Impact The Economy — And How Should Economic Law Reflect This?

There have been about a bajillion studies done on divorce and its relationship with our economy. Is divorce a good thing? Is it a bad thing? Economically speaking, it depends on who you ask. But it seems difficult to argue with the ethics for divorce. Women experience suicide at a far lower rate ever since Reagan’s policy of “no-fault” divorce spread from California to other states.

Knowing you want a divorce is one thing — but following through with it is another. Many people find saying the words “I want a divorce” to a partner to be one of the hardest things they have ever had to do. But hiding it can cause even more friction in a deteriorating relationship. What’s healthiest for each individual involved in the crossfire? Interestingly, it’s usually the same thing that is best for the economy. 

That means that divorce is often the best possible outcome for all parties — both foreign and domestic, if you will. Humans are notorious for retaining more energy and proving more productive when they are healthy and happy. Add stress, remove certain components of a healthy relationship, or strip away the ability of a person to remain content in life, and you almost always ensure that they slow down. That means that one person’s bad relationship can extend outward to affect many other aspects of society — including the overall economy.

Part of the reason couples actually stay in marriage is a bad economy. Those who are having trouble financially are much less likely to add to their woes by even considering divorce, much less following through with one. When the economy bounces back, though, couples tend to split apart. This was readily apparent after the economic recession of 2008. By 2012, couples were divorcing at a much higher rate. Economists rejoiced! 

Other economists actually propose that divorces might create the conditions necessary for an economic recovery! This is in part due to the fact that more singles means more real estate being scooped up. Add to that the fact that divorced singles are much more likely to hold jobs, and you can see why economists might believe remaining apart is the best thing for our economy.

Of course, not everyone agrees. According to a convenient — and we’re sure not biased — study published by the Marriage and Religion Research Institute, marriage is important not just to a society’s ability to remain, well, a society, but also to its ability to maintain a healthy economy. Interestingly, the study determined that the reason that divorce adversely affects the economy is the increase in the number of households because that means a greater need for housing, power, and resources. 

Of course, that doesn’t seem to make sense. The economy is driven by our output, or how much we produce. Before that matters, though, you have to add consumption to the equation. Using more power means a company is making more money. Buying another home means someone is making more money. The more money we spend, the more money other people make, and then they spend more too. That’s how the economy actually works.