Negative Aspects of the Income Equivalence Method

Negative Aspects of the Income Equivalence Method

Nearly 50% of children in America will see their parents divorce. This can affect children in various ways. When the question of custody appears, it often results in the children having less interaction with one of the parents than the other. The battle for custody can be a brutal affair. Sometimes settlements can be made where both parents are satisfied with the agreement, but many parents leave displeased with the arrangement. A parent may fear their partial absence in the child’s life will lead to resentment. Or perhaps, they fear the child may lose interest in them. However, a common issue pertaining to custody is financial — child support. 

A study authored by Professor William Comanor, an economics professor at UC Santa Barbara, and his associates, discusses the issues with the current methods used in determining child support payments. Although there are multiple methods in use today, one of the dominant approaches is known as the “Income Equivalence Method.” The following explanation and discussion is an interpretation of the study from a non-expert, however, it may shed light on an otherwise enigmatic concept.

The Income Equivalence method (IE) is a somewhat convoluted approach to determining the cost of raising a child. It uses financial information collected from married couples without children and married couples with children. It assumes that parents will spend less money on adult food and clothing, for example, to make room in the budget for child-related expenses. It also assumes this same proportion of reduction in adult food and clothing expenditures occur across other expense categories.

For explanation purposes:

Suppose a family without children spends 20% of their budget on food and clothing. It is assumed that after the family has the child, now they only spend 10% on adult food and clothing to make room in the budget for the additional family member. Not only does this method assume a given percentage drop in the adult food and clothing category, but the same proportional change across many other expense categories. Now the parent responsible for child support is required to compensate for that change in lifestyle of the primary custodian. The additional 10% loss in expenditure on food and clothing is now calculated in addition to other expenses pertaining to the child in order for the primary caregiver to maintain their previous lifestyle. 

One of the main dilemmas with this calculation is the assumption that the primary caregiver will experience a reduction in lifestyle as a result of claiming custody. Estimates are made to assume for changes in meal expenditures for example. If a primary caregiver eats at restaurants on a regular basis before claiming custody, additional support is provided so they may continue to do so, even though many parents would prefer home-cooked meals now that they have children. This method provides compensation assuming the primary will remain constant, even though the nature of parenting may alter it. 

If you are in a child support battle with an ex, contact a lawyer, like a child support lawyer from Pioletti, Pioletti, & Nichols Attorneys at Law, who specializes in child support. Although they may not have the authority to modify the current models used for determining the cost of raising a child, they may be able to help you negotiate a child support payment you can afford.