Originally posted as a comment to this post on Glenn Sacks’ blog:
One basic argument for alimony is that a man develops his human capital because his wife frees him up to do so and in the process neglects the development of her own human capital. This “human capital” gained by the husband is community property and thus the wife is entitled to a share of it upon divorce. This gives rise to alimony, which is a share of future earnings of the community’s human capital (this is why a wife owes no services to the husband in exchange for alimony as some guys would expect).
There are a couple of problems with this theory.
1) What is the marginal contribution of my wife staying at home? Would I have achieved the same salary if she had worked full time or not been there at all? If not, how much less? In theory, the alimony should be calculated on the marginal contribution to human capital but in practice this is very difficult to determine. Naturally, the stay-at-home party would like to argue that ALL differences in income are attributable to their stay-at-home support. This completely ignores drive, prior education, and natural ability, therefore I have a hard time with alimony being set at 50% of the difference in net incomes.
2) Absence of consent. In my case, I earned a six figure salary but my wife refused to work despite having a Masters degree. She wanted to be a stay-at-home mother without my consent – in fact she even got pregnant without my consent. She refused to work despite constant demands on my part. What if the court, instead, placed the burden on the woman to prove that the couple agreed to the stay-at-home arrangement? At the moment there is no burden, just a presumption that the partnership agreed that one partner stayed at home.
3) Existing human capital. Why is a pre-nup required to protect human capital that is brought to the marriage? Shouldn’t there be a presumption that a wife in no way contributed to a salary-level attained before the marriage? For instance, why did Johhny Carson have to pay enormous alimony to five wives when presumably his income level was achieved before most of the marriages? The problem is that many women see alimony as a ‘right’ or ‘prize’ for capturing a rich husband (the gold-digger syndrome).
4) The human capital theory also assumes that the wife’s human capital would have developed at the same rate as the husband’s human capital so that if the husband was earning $120,000 and the wife $25,000 that the wife would be earning $120,000 if she had not stayed at home. Obviously this depends on the starting human capital of both partners. If they both went to law school then this might be true, however if the husband graduated from law school before the marriage and the wife was a high school dropout then this is highly unlikely. So the wife wasn’t giving up much foregone income or human capital by staying at home.
In my case, my ex had a master’s in education. The difference in income between being a teacher on the master’s scale for 20 years versus re-entering the system at the bottom was about $20,000 per year – $40K vs $60K. This difference is the cost of staying at home. Of course, this gap will close as she stays longer in the system. The judge, however, based alimony on my income of $120,000 because of a crazy notion of keeping her in her “accustomed” lifestyle.
In Australia, alimony is only paid to keep a wife from being a welfare charge not at some “accustomed” standard of living. Only 7% of cases attract alimony.
The US courts seem to support the insurance (or gold-digger) theory of alimony. If one argues that looks are a woman’s key asset and this asset depreciates over time then she needs insurance against a man kicking her to the curb when she loses her looks (the younger woman scenario). I sympathize with the insurance dilemma but I believe it creates the wrong incentives for women (which is catch a man when young then stay at home because you don’t need to develop human capital because you have insurance). At the end of the day, society needs to design a system with appropriate incentives for both parties to develop their human capital.
In my system, in the absence of an explicit written agreement to stay at home, the woman should take responsiblity for developing her own human capital – we are meant to be equal after all (according to the feminists). There would be no “alimony as insurance”. This would make expectations clear and people would adjust their behavior to the signals (i.e. there would be fewer stay-at-home moms and perhaps dads would spend more time parenting).