The Shifting World of Alimony
During my 40 years as a family lawyer, there were two shifts in the world of when and how alimony would be awarded. Alimony never got off to a good start in Pennsylvania. It has always been a “secondary remedy.” 23 Pa. C.S. 3701(a).
In the first 25 years of the Divorce Code (1980-2005), it was rarely granted. Some counties were reputed to consider the awards but most saw alimony as a device that would tie an unhappy couple together long after they were divorced. Then there is an issue that has never been adequately addressed: cohabitation. If an alimony recipient cohabits with an unrelated person of the opposite sex, the alimony is terminated.
Another factor in the alimony world that evolved over time was the effect of interest rates. In the early days (before 2010) the prevailing theory was that a disproportionate split of the assets ordinarily would produce an investment pool of generating income. If a dependent spouse got a $1 million award of cash and securities, courts would instantly dismiss alimony on the basis that (a) the recipient needed to get a job and (b) a million invested had the capapcity to spin off interest of $7,000 a month in pre-tax income. In the early days of the new law 10 year Treasuries could pull down 9-15% annual interest. Those rates plummeted in the mid-1980s and have been on a fairly steady downward trend ever since. But when the 2008 financial crisis hit, the Federal Reserve dropped interest to near -zero-, and suddenly $1 million invested was yielding under 2%. Moreover where 20th century job cuts typically targeted hourly wage earners, the new trend was to furlough middle and upper managers. Jobs at Fortune 500 companies which once seemed tickets to lifetime employment were now targets for reorganization campaigns in search of smaller staffing.
Yet, alimony made headway between 2010 and now. Parties and courts would make it modifiable so it could be adjusted or suspended if a job was lost. The problem of low interest persisted. Rates began to climb early in the first Trump administration but the pandemic saw Treasuries drop to 60 year lows of 0.6%. Now however, the change is steadiy positive unless you are a borrower. Ten year Treasuries are now offering 4.38% and investment grade private paper is garnering 7.5% yields. Cash and securities can be converted to paper that yields real interest and the bond market is signaling that rates will remain steady if not higher absent an immediate need for stimulus.
That’s probably a good thing because the future of a labor market is murky. During the pandemic we saw immense changes in where and how people worked. It brought about vast changes in what is called the “gig”economy. While employers are wrestling with employees about who will come back to work, the trend seems to be in the direction of a smaller permanent workforce, supplemented with outside contract services or gig workers. The Wall Street Journal wrote about this in its Saturday June 21 edition noting that exectuives and managers (in contrast to “staff”) have been cut 5-6% since early 2022. Moneywise reports a sympathetic trend in terms of 401K participation and suggests that these savings programs should not be tethered to employers in a world where gig employees are not eligible and salaried workers are changing jobs every 2-3 years. As the child of a father who went to work for a steel fabrication company in 1941 and left that job 40 years later, it seems clear that the forever job is gone forever.
Gig work and high employment turnover in both good times and bad signal challenges for awards of alimony even if the interest rate trends are favorable. Unemployment means unpaid alimony and all the litigation that produces is frustrating for the payors, the payees and the courts. The dream of lasting employment may be becoming just that; a dream more rooted in the past than the future.