Who Holds the Family Purse-Strings?

Statscan have released an interesting paper, “The Income Management Strategies of Older Couples in Canada.” It looks at who controls the family finances in couples with one partner aged 45 and over. (They used the age cut off because a special question was added to the General Social Survey which is restricted to that age group.)

This is important because most economists (famously, Becker) and policy-makers often assume that income is shared equitably among all members of the household, within which power relations do not exist. Sociologists, historians and feminist economists, by contrast, have long-known that the neo classical assumption that families approximate individuals in their economic behaviour is bunk. (Canadian women economists Shelley Phipps and Frances Woolley have contibuted to our understanding of the complex reality of families considered as economic units.)  

The authors and the literature identify three models: the allocative in which one partner manages the family finances; the  pooled income model; and the separate income model. 

The allocative model was used by 20% of couples. Slightly surprisingly to me, women were more likely to hold the purse strings than men, (the 20% is made up of 12% women led allocative couples and 8% male led allocative couples.)

This brings to mind the old division in British working-class culture in which there were two models of sharing breadwinner male income. Methodism was famous for promoting the model in which the weekly pay packet was turned over to the wife, who gave her husband a small amount of spending money. At the other end of the spectrum, some men handed over for housekeeping whatever funds were left over from the pub. (In middle and upper class households, of course, the man managed the money.)

But I digress.

The Statscan study finds that 57% of couples pooled their income and allowed each other to draw on funds at their own discretion. This is clearly the dominant model. That does not mean that both  partners have equal control over how money is spent but, relatedly, it has been found that household consumption decisions are increasingly joint decisions.

The study finds that 23% of family partners manage their finances independently, either partially (8%) or completely (15%.) Separate finances are, not surprisingly, more common among common law couples and the recently divorced, as well as among those with higher education. The incidence of separate finances also rises significantly in line with the earnings level of the female partner, but in absolute not relative terms. It seems probable that the independence model would be more prevalent among younger couples.

For me, the study is a salutary reminder that one cannot just assume pooling of family income. Yet low income lines and family income tested programs such as the Guaranteed Income Supplement and child tax benefits do assume couples share income with each other.

Moreover, it is a reminder of the importance of income support programs like OAS, CPP and EI which make payments to individuals.

There have been advocates of family income testing  OAS benefits from Caledon and others, such that higher income couples would get a reduced or no benefit. The miselading assumption is that income is shared more or less equally in elderly families.

Similarly, there have been proposals (eg from the Macdonald Commission and from Lloyd Axworthy in the mid 1990s) to severely limit  UI/EI in order to help finance a family income tested Guaranteed Annnual Income, again on the sassumption that EI is paid to individuals who do not need it as demonstrated by their level of family income.

It is tricky to find the right balance between individual and family income tested benefits. But, in seeking that balance, we should be aware that we cannot assume that all family income is shared, or that both partners are equal when it comes to allocating that income between them.


  • Two typos: It’s Shelley, and Woolley. 😉

  • If memory serves me correct M. Cohen has done some very good work on our historical understanding of women’s relation to family finances and economic production.

  • Fixed Nick, thanks. Two is definitely unforgiveable.

  • Listening to the debate on back to work legislation on CPAC, I heard Peter Stoffer talk about his Dad, a letter carrier, and how his Post Office medical benefits were important to him since Peter was one of nine children. In discussions about family income, or any income, it is crucial to know how many people are trying to live on the income.

  • Frances Woolley

    Andrew, great post. I figure that any couple that splits income for tax purposes should be required to actually split that income – whether by putting it in a joint bank account, transferring control over the appropriate assets, etc.

    People organize their lives in all sorts of fascinating and complicated ways – sharing is only one of many possibilities.

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