Cost of Children Study - Enalysis January 1995

SECTION 1 - DETAILS OF THE STUDY

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Preamble

This report has been prepared to make available data which was collected in a "family law" scenario study. Although the study was not commissioned at the time for any generic research purposes, the methods used and the resultant data could be considered as complying with the intent of and also fortifying data on the "Cost of Children" (or, as pointed out by the Nov 1994 Joint Select Committee Report, more correctly "Expenditure on Children") as referenced in s 66D(2) of the Family Law Act pertaining to "Matters to be taken into account in considering financial support necessary for maintenance of child".

Available information

Although the results of some past studies into the Cost of Children were apparently only partially considered by the consultative bodies in the formulation of the formulae used by the Child Support Agency in assessing Child Support, the studies themselves have been granted an authoritative status in any proceedings relating to Child Maintenance in the Family Court of Australia. Studies by Lovering and Lee are specifically mentioned as representing two different approaches which may be considered in relevant proceedings of the Court. This study is provided to augment the Lovering and Lee studies as well as any other studies which have been or may be published.

Categorisation of the study

The study could be considered as being completely different from previous studies in regards accuracy and application. It could be considered that, within the context of this study only being conducted on one family, the methods and hence results are far more accurate than any previous study. Conversely it could be argued that while such information would be eminently suitable for the use of the court in matters relating to the particular family, it may not be as applicable to other families and circumstances as more generalised studies which, by nature of being general and seeking the "average condition", are not particularly accurate.

Accepting this distinction it follows that, as the method of collecting the study data simply involves computer data entry by the participants, it could easily be repeated by other specific families for specific cases or for a representative cross section of socio economic groups - all with the same accuracy in the result, in order to provide a reliable and accurate database of the cost of children for all family circumstances.

An extension of this study would fall under the category of recommendation 116 of the Joint Select Committee that : "the Minister for Social Security commissions an independent study into the costs of children to enable a critical evaluation of the current child support formula percentages." In making this statement it is recognised that there is a important difference between the "cost of children" which can be determined to any required degree of accuracy and "child support" which, by administrative necessity, is based on ability to pay - albeit loosely extrapolated from a generic middle of the road determination of cost of children.

Circumstances of the study

This study was conducted for a specific reason although the reason was only suspected at the time of the study. It is worth explaining the circumstances in order to understand the reason for the high degree of accuracy which was "built into" the methodology.

The study was conducted by a non custodial parent (husband) who had temporary custody of the three children of the marriage for almost two months ("the period") whilst the custodial parent (wife) travelled overseas on holidays following a "favourable" property settlement, allegedly for the benefit of the children - a situation which will hopefully not be possible after the present (1995) "responsibility rather than rights" changes to the law.

The fact that the wife's actions were apparently "legal" under the law as it stands at present and the husband did not have any "first option" of temporary custody but had to tender for the custody along with total strangers to the children can surely only represent a situation where the wife's actions were completely outside the perceived "normal" expectations of the legislators in relation to the natural consideration of children's rights by their parents, such is the excellent attention to detail in the Family Law Act in covering all (seemingly) possible scenarios. The fact that the research suggests the Act is largely ignored by practitioners in no way diminishes the excellence of the Act.

The custodial parent had conducted what could be called a "custodial tender" to maximise her profit from the exercise in which she sought prices for the care of the children for the period. The husband simply tendered to pay for all the "costs" of the children and reimburse any difference between that amount and $250 per week (the periodic child maintenance specified in the orders) on the return of the wife. The husband's tender was not initially accepted by the wife who was seeking the payment of the full maintenance in advance ($2,166) with the offer of an $800 ($100 per week) refund to the husband on her return. The husband's tender was ultimately accepted by default one week before the wife's departure when other tenders proved to be less attractive to the wife.

The question of the difference between the wife's estimate of the "cost of the children" at $100 per week and the amount argued previously in the settlement agreement, and included in the orders, of $250 per week therefore dictated that the real cost needed to be established to a degree of accuracy rather than the wife's assessment of the $150 per week difference simply covering unspecified "other things", the (then) 4 year old orthodontic expenses paid by the wife (which were largely reimbursed under MBF - paid by the husband, and ATO refund) being once again trotted out as the prime example of "other things".

The terms of the tender therefore demonstrate that there was no incentive on the part of the husband to "fudge" the figures up or down as he still had to pay a total of $250 per week at the end of the period whether or not the money was all spent on the children.

Basis of the study

The aim of the study was to establish the amount that the wife would need to carry out her normal responsibilities to the children excluding a) the cost of school fees, which were shared between the parents under a separate order, and b) the housing cost of the children which had been catered for by a lump sum property transfer of 82% of the family home which resulted in the wife only needing to pay $50 per week mortgage for a property with a rental value of over $500 per week. As the husband still had to pay his own rent of $200 per week during the period, it was considered that the $50 per week (or the children's part thereof) should be disregarded. The contention by the wife that she would not have enough spending money for the trip was not seen as being an appropriate consideration in light of s 66B.

However the cost of school uniforms was included but as a separately computed figure, in consultation with the uniform suppliers, as the extrapolated figure based on the period alone would have been inaccurate. The marginal cost of fuel and electricity for the children's benefit was also separately computed. Medical benefits subscriptions were paid by the husband under a separate order (and Medicare levy was paid by both parties) and therefore no allowance for medical expenses needed to be made in the study.

Also there were several items on the full list of a spousal maintenance nature (materials for necessary home maintenance) which were not included in the Cost of Children results but were necessary for the overall exercise.

Methodology of the study

A purpose designed computer program (spreadsheet/database) was developed by the husband during the first week of the period. It was automated by the use of macros to produce instant shopping lists with the items sorted in the correct supermarket aisle numbers and including an estimate of the total cost of the particular shopping trip based on previous prices for each item. Items or services other than of supermarket origin were added manually.

There were many interesting side benefits of the system in budgeting, time efficiency, family involvement etc. For example the children were able to become actively involved in the selection and provision of meals. By going to the preselected meals section and clicking on (say) "hamburgers", the computer would list the items required, check existing stocks of these items (from previous purchase dates) and provide a suggested list of items to purchase with an estimated cost. If OKed, these items would be automatically added to the next shopping list.

Once at the supermarket, the husband and three children would each have a shopping list for 3 aisles and a separate trolley. The drudgery of shopping was transformed into a Le Mans race in which shopping for 3 days could be completed in 3 minutes 42 seconds (the best recorded time). One of the side benefits (to the budget) was that the child with the lolly aisle list did not linger as long as might normally be expected, such was the competition to be first to the check-out. A sample shopping list is provided.

Once back at home, the actual prices paid were simply entered into the computer from the itemised supermarket docket and the system was ready for the next shopping list. At the end of the period it was a simple matter to sort the database of all purchases and determine the totals. The results are provided in the Appendix. It will be noted that in most cases where items were purchased for the whole family, a percentage of 35% to the husband and 65% to the children was used. Items used 100% by the husband have not been included in the results.

Other observations

The husband was in full time employment at the time of the exercise and although the formulation of the computer program proved to be an exhausting task as it was conducted between the only available hours of 10 PM and 2 AM during the first week of the period, the husband found the remainder of the custodial period to be a completely pleasurable and relaxing experience which still allowed him to participate in his own social and sporting activities. It is very difficult to understand how a parent armed with motor cars, supermarkets, microwave ovens, washing machines, dishwashers, central vacuum units etc could possibly claim that housekeeping in 1995 is still a full time occupation or indeed that it has any status at all in family law matters. In this case the husband was left with such time on his hands after employment, housekeeping and family/private leisure time that he attended to several items of home maintenance (the labour being gratis to the wife).

To what extent the involvement of the whole family unit in the shopping etc and the time saving aspects thereof actually contributed to the ease and enjoyment of the custody is hard to establish but the observations fly in the face of the many contrary reports on the drudgery of being a custodial parent and in particular the $20,000 per annum (plus) difference between the disregarded and exempted incomes in the CSA formulae, allegedly to compensate for the difficulty associated with participation in full time employment for a custodial parent as opposed to that of a non custodial parent. Admittedly the children in this study did not require child minding.

An interesting side issue was the observation of the behavioural aspects of the children during the period. The husband was sensitive to the fact that the computer shopping program may have been seen by the children as "checking up on the wife" and that other "rules" designed to complete all mundane household tasks with an efficient "team effort" may have been rejected by the children.

To the contrary there was a most pronounced effort on the part of the children to be part of the task. It would appear that the only explanation for this behaviour was that the children were able to see the overall picture of what makes up a day both from a time and financial point of view and, by virtue of feeling part of the "responsibility", were able to deduce that by complying with the efficiency rules (eg dirty dishes into the dishwasher - not the sink) there would be more leisure time for the family as a whole.

This effort could not be explained by any prior "training" of the children in such involvement as in the latter part of the marriage the family was living in Singapore under ex-pat conditions with a live-in maid to pamper the children.

The observation concerning the ease of being a custodial parent is even more fortified by the fact that the period involved 100% custody without the normal 18% of the children's time being spent with the (normal) non custodial parent. One of the terms specified by the wife was that no one was to assist the husband during the custody period - including the children's Godmother who the husband had arranged, in his tender, to live with the family for 2 weeks during the period. To compensate for this fact in the results, a factor of 0.82 has been used to allow for the normal financial relief to the custodial parent (except for school uniforms) during normal access periods.

From an examination of the individual items in the study, it is very difficult to give credence to anything but a linear reduction in child support/maintenance as each child reaches 18 (or complies with the termination requirements of s 66H generated orders for stage 1 parties) as opposed to the non linearity of the CSA formulae percentage reductions. Obviously this comment needs to be qualified by the fact that accommodation costs were not part of the exercise but once again begs the all important question of whether accommodation cost is supposedly part of the generic CSA formula and, if so, why substantial property share is still being awarded to custodial parents 6 years later for this same purpose without practitioners providing any relief via credit amounts or even specification of the amounts "calculated", as required under both the Family Law Act and the Child Support (Assessment) Act (and not forgetting the Social Security Act).

Results

The results of the study are provided in the Appendix. The cost of the three children aged 9, 12 and 15 was $167 per week, as of October 1992 making the 1993/94 figure $172. The standard of living could be described as average for the North Shore of Sydney which could be considered as appreciably above the general average. A glance at the items in the shopping database demonstrates the fact that the children did not "want for" anything during the period although the expedient of using fast food and take away food outlets was in the main avoided, with an obvious cost saving.

As a comparison to the ABS figures used in the CSA formulae for mixed custody situations (the Allowance for Children), the results of this study were some 40% higher than the ABS figures for children of the same ages. This comment is made purely as a comparison without any knowledge of the makeup of the ABS figures. However it is maintained that a far more reliable "cost of children index" could be determined by way of a + / - percentage factor based on the current ABS (or other suitable) figures from studies conducted using the same accurate methodology of this study on other families of different sizes and different socio economic circumstances. One can only assume that these ABS figures are updated with better (child cost related) precision than a general CPI rise.

The research (detailed in Section 2) has indicated that it is typical of the non professional "broad brush", "anything will do" approach of family law determinations that as late as 1994 a judge should be faced with the dilemma of deciding the relative merits of the twin evils of a) 1984 figures from Lovering, excluding some of the most important items and updated by a general CPI figure and b) the 1989 figures of Lee based on an intact family with one child and therefore resulting in the absurd conclusion that a child requires 46% of the family income including $48.03 per week transport cost and that the housing and utilities cost of a child goes from $12.99 per week at age 10 to $27.60 per week once the child reaches 11.

These comments are not made to discredit the quality of the research of these studies but simply to question the application of general research on the cost of children to "family law" situations in which the parameters are clearly defined and most obviously quite different to those of the two studies.

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