New research finds that single parent families across six rich countries have much lower wealth than their dual parent counterparts, and suggests five policies to help close this gap.

An unexpected bill, a redundancy, a health crisis – in these circumstances and more, the amount of wealth you have in reserve can determine whether you are able to ride out the storm. A savings safety net, or the lack of one, can mean the difference between keeping or losing your home, staying afloat or falling into poverty.

Yet new research by INET Oxford researchers Professor Brian Nolan and Dr Juan C. Palomino with Salvatore Morelli (Rome) and Philippe Van Kerm (Luxembourg) shows that single parent households hold far less wealth, on average, than dual parent households across all of the six countries they studied (the UK, France, Germany, the US, Italy and Spain).

What’s behind the single parent wealth penalty?

This ‘single parent wealth penalty’ is not due to differences in parents’ age nor the number of children they have. The lower average incomes of single parent households play an important role; after all, a single parent has to be both breadwinner and caregiver and lacks the prospect of a second income. The single parent disadvantage in terms of income in all six countries has serious implications. For example, about one in three single mother families in the US live in income poverty, and many of these families also face food and housing insecurity.

But the wealth penalty is also caused by differences in education levels, home ownership, and – importantly – how much wealth families tend to inherit. In all six countries, single parent households are less likely to inherit wealth. And when they do inherit they tend to inherit less than dual parent families in all countries apart from Italy and Spain. This is partly because, with more grandparents in the picture, a dual parent family will often have double the chances of inheriting.

Why it matters

These findings are an important reminder that who owns wealth (and who inherits it) has become an increasingly important determinant of economic inequality. Wealth serves as a vital buffer against what economists refer to as unexpected negative ‘shocks’. For example, in the current cost of living crisis almost one fifth of single parent households in the UK said that they had missed or defaulted on a vital payment in the last month, such as a mortgage, rent, credit card or bill payment.

Perhaps most worryingly, this wealth penalty has major implications for the children of single parents. Parental wealth has an important influence on children’s health, wellbeing, and educational attainment, as well as their ability to get on the housing ladder and start their own business later in life. This is not a niche issue: many children grow up in single parent families – they account for a quarter of all parental households in the UK, for example.

Differences between countries

Though other work has found a single parent wealth penalty in individual countries, this study is one of very few to look at their situation across a range of countries. Though single parent households in all the countries studied had much lower wealth than dual-parent ones, the size of this gap varies a lot. For example, in France, Italy and Spain, single parent households have just over half the average wealth of dual parent households, whereas in the UK they have only 37% and in the US just 17%.

A similar story holds for differences in average incomes: there is a single parent income penalty in all the six countries but, whereas they have half the average income of dual parent families in France, they have as little as one third of the average income in the US.

What would help remove the single parent wealth penalty?

Five policy areas warrant particular attention in any attempt to boost the financial security of single parent families:

  1. Adequate parental leave and childcare are of central importance. Parents who are the sole primary carer to young children cannot also be expected to work as family’s sole breadwinner.

  2. Policies to boost single parents’ incomes – for example, policies to improve the education and training single parents can access, and better help to enter the workforce for those that need it.

  3. ‘Inheritance for all’. A universal inheritance payable on reaching adulthood – an idea with a long history – could substantially help to unwind the single parent wealth deficit, giving these families much better financial security while also helping to build a fairer, more equal society.

  4. Remove asset tests for social security benefits. To access important parts of the social safety net people often have to prove that they don’t own assets, but these asset tests discourage wealth accumulation. This issue warrants far more attention than it gets.

  5. Affordable housing. Housing plays a key role in the wealth (or lack thereof) of single parent households, so policies to make housing more affordable and to help single parent families onto the housing ladder should also be part of the strategy.