Child Maintenance and Social Security Interactions: The Poverty Reduction Effects in Model Lone Parent Families across Four Countries

Abstract

In most developed countries, children in lone parent families face a high risk of poverty. A partial solution commonly sought in English-speaking nations is to increase the amounts of private child maintenance paid by the other parent. However, where lone parent families are in receipt of social assistance benefits, some countries hold back a portion of the child maintenance to reduce public expenditures. This partial 'pass-through' treats child maintenance as a substitute for cash benefits which conceivably neutralises its poverty reduction potential. Such neutralising effects are not well understood and can be obscured further when more subtle interactions between child maintenance systems and social security systems operate. This research makes a unique contribution to knowledge by exposing the hidden interaction effects operating in similar child maintenance systems across four countries: The United Kingdom, United States (Wisconsin), Australia and New Zealand. We found that when child maintenance is counted as income in calculating benefit entitlements, it can reduce the value of cash benefits. Using model lone parent families with ten different employment and income scenarios, we show how the poverty reduction potential of child maintenance is affected by whether it is treated as a substitute for, or a complement to, cash benefits.