Caregiving, Work, and Family

Kathleen McGarry
Department of Economics
University of California, Los Angeles
and NBER
LONG-TERM
CARE
 Health care costs
• Health care costs have risen rapidly
▫ Expenditures nearly 18 percent of GDP
• Expenditures higher for the elderly
▫ $9,700 for 65+ vs. $3,500 for < 65 in 2015
• Largest near end of life
• Rise with age
▫ Doubles between age 70 and 90
▫ Spending shifts to long term care
Out-of-Pocket spending last 5 years of life
 Cost of Long Term Care (2015)

200 $157 Billion

150
$89 Billion
$billion

100

50

0
Home care Nursing home care
SOURCE: Health USA 2016
 Background on LTC
• Median price of nursing home:
▫ $97,000/yr, $267 a day in 2017
• Median price for home health aide:
▫ $21 /hr or approx $61,000/yr at 8hrs a day
• CRR estimates
▫ 44% men, 58% women need nursing home care
• Small fraction of elderly have LTC insurance
▫ 10-15 percent
 Background on LTC
• Majority of care is provided informally
• Typically by spouse if alive then by children
• Women provide majority of care
 70% of child caregivers are daughters
 85% of child-in-law caregivers are daughters-in-
law
Importance of Informal Care
Distribution of Adults Receiving Long-Term
Care at Home, by Type of Care
Both Formal Formal Only
and Informal 8%
14%

Informal Only
78%
 Comparative Cost of Care 2015
$362 Billion*
400

300
$billion

$157 Billion
200
$89 Billion

100

0
Home care Nursing Value of
home care informal care

SOURCE: Health United States 2016;

* Arno, Levine and Memmott, Health Affairs, 2002 (adjusted by
CPI).
 “Cost” of Informal Care
• Depends on who caregivers are
▫ Drawn from those with full-time career jobs /
higher opportunity cost of time?
▫ Drawn from those with weaker attachment to
the labor force?
• Depends on long-term effects
▫ Can caregivers return to employment?
▫ Do they suffer permanent decline in earnings?
▫ Are there long-term financial consequences?
 Loss of pension / decline in pension value?
 Loss of insurance coverage
 Outcomes for Caregivers
• Concerns about own health
▫ Increase in stress and depression
▫ Increase in incidence of high blood pressure
▫ Worse self-reported health
▫ Little change in doctor diagnosed conditions
Data: Health and Retirement Study
• Original HRS cohort:
▫ Individuals born 1931-1941 and spouses
▫ 12,652 respondents
• Interviewed in 1992, biennially thereafter
• Older and younger cohorts added in 1998
▫ Sample approximately nationally
representative of the population 50+
• Refresher cohorts added in 2004, 2010, ….
▫ Maintain population representativeness
Data: Health and Retirement Study
• Detailed questions on income, assets, health,
family relationships…
• Biomarkers
• Administrative records (SS, Medicare…)
• Data on all children, parents / in-laws
including information on transfers
▫ Cash transfers
▫ Bequests
▫ Co-residence
▫ Time help
 Data: Selection
• Sample restrictions:
▫ Original HRS cohort from 1992 - 2010
▫ Focus on women
▫ Living parents or parents-in-law in wave 1
▫ Not providing care in wave 1
• 1,557 women or 15,570 person years of data
 Question
• Did you (or your husband / wife / partner)
spend a total of 100 or more hours (since the
previous wave / in the last two years)
helping your (parents / mother / father)
with basic personal activities like dressing,
eating, and bathing?”

• Follow up questions allow us to identify who

helped, who was helped, and the number of
hours.
 Causality

• If those who are providing care are less likely

to be working:
▫ Are they not employed because of the need to
provide care?
▫ Are they providing care because they were not
working?
▫ In effect, are caregivers drawn from those with
weaker attachment to the labor force?
 Labor Force Attachment
Three approaches
1. Use reported tenure and experience at first
interview, before need to provide care
2. Use Social Security earnings records
 Quarters of coverage ages 25-44
 Average quarterly earnings ages 25-44
 Expected PIA
3. Statistical Methods, i.e. fixed effect models
 Probability of Providing Care by Wave
.15

0.13
0.12
0.11
0.11
.1

0.09
0.08

0.07
0.06
0.05
.05

0.00
0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
 Probability of Ever Providing Care by Wave
.5

0.46
0.44
0.42
.4

0.39

0.34

0.29
.3

0.23
.2

0.15
.1

0.05

0.00
0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
 Hours of Care: Unconditional and Conditional

1086
1,000

1003
945
891
869
817 824
800

650
600
400

377
200

105 98 97 100 84
62 52
34 42
0
0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Hours Hours | Caregiving
 Cumulative Hours: Unconditional and Conditional
1,500

1456
1404
1346
1244

1131
1,000

968

795

650 672
620
559
525
500

476
376
278
180
76
34
0
0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Hours Hours | Ever Caregiving
 Distribution of Hours of Care to Parent / Parent-in-law
2500

75th percentile
2000

Mean
1500

1000

Median
500

25th percentile

0
Care to Parents
 Means of Selected Variables
Ever Care No Care
(N=723) (N=834)
Age 51.9 52.4
Non-white 0.18 0.14
Schooling 12.8 12.5
Working full time 0.51 0.47
Earnings if >0 33,370 30,025
Experience 23.5 21.6
Tenure on longest job 12.8 11.9
Covered quarters 25-44 38 34
Avg quarterly earnings 5,110 4,800
Expected PIA 1,620 1,510
 Means of Selected Variables
Ever Care No Care
(N=723) (N=834)
Risk:
Number of living parents 1.32 1.23
Number of living in-laws 0.69 0.52
Number of siblings 2.80 3.08
Number of sisters 1.39 1.65

HH wealth 360,242 344,399

HH income 83,847 78,304
Husband’s earnings 59,673 57,548
 Regression Analysis of Caregiving
• Examine Prob(caregiving) as a function of:
▫ Demographic and economic variables + initial
experience and tenure + SS variable (number of
covered quarters and average quarterly earnings)
• Significant explanatory factors include:
▫ Tenure on the longest job (+)
▫ Number of sisters (-), sisters-in-law (-)
▫ Parent age (+)
Regression Analysis of Caregiving
• No evidence of negative selection into
caregiving with respect to labor market
experience
▫ Positively related to tenure / experience

• Caregiving depends in large part on need

▫ Older parents
▫ Fewer substitute caregivers
 Changes with Onset of Caregiving
Working full- Working part-
Time T-1 / Time T Not working
time time
Working full-time Percent 72% 11% 17%
Change hours -1.87 -15.18 -41.09
Change earnings 3,522 1,438 -34,122
Working part-time Percent 15% 53% 32%
Change hours 9.17 -1.61 -20.87
Change earnings 2,072 1,106 -14,735
Not working Percent 3% 8% 89%
Change hours 46.88 16.84 0
Change earnings 4,919 6,853 0
 Comparison of Changes for Full-time
Working full- Working part-
Time T-1 / Time T Not working
time time
New Caregivers Percent 72% 11% 17%
Working full-time Change hours -1.87 -15.18 -41.09
Change earnings 3,522 1,438 -34,122
Non-caregivers Percent 74% 12% 14%
Working full-time Change hours -0.03 -15.42 -42.15
Change earnings 1,136 -5,807 -33,754
 Comparison of Changes for Part-time
Working full- Working part- Not
Time T-1 / Time T
time time working
New Caregivers Percent 15% 53% 32%
Working part-time Change hours 9.17 -1.61 -20.87
Change earnings 2,072 1,106 -14,735
Non-caregivers Percent 15% 61% 24%
Working part-time Change in hours 14.27 -0.64 -18.95
Change earnings 1,547 -1221 -11, 569
 Regression Analysis Care and Work
• Prob (Working) as function of:
▫ Age (-), Schooling (+), Experience / tenure (+),
▫ Married (-), Poor health (-), Social Security
measures not significant
▫ Caregiving (yes / no)
 Strong negative effects on employment (~10%
decline)
 Small negative effects on earnings
 Long term effects of Caregiving

• Examine changes from 1992 to 2000

• Focus on changes in
▫ Wealth
▫ Income
▫ Earnings
▫ Employment
Long term effects of Caregiving
Means

Non-Caregivers Caregivers
Change Change
1992 2010 – 1992 1992 2010-1992
Net Wealth 344,399 163,450 360,242 133,276
HH Income 78,304 -21,721 83,847 -24,826
Earnings > 0 30,720 -18,499 34,030 -26,080*
Work 0/1 0.67 -0.44 0.71 -0.47
Work Full-time 0.47 -0.37 0.51 -0.44**
Hrs worked > 0 35.83 -10.67 37.27 -11.79
 Conclusions
• Caregivers are not drawn from those with
weak attachment to the labor force
▫ Greater experience, tenure, earnings
▫ More schooling
• Caregiving has a negative effect on work
▫ Negative on employment and hours
• Caregiving has long-term consequences
▫ Less likely to be working years later
▫ Lower earnings
 What the Future Holds
• Declines in fertility
▫ “Protective Effect” of Sisters
• More women working
▫ Greater opportunity cost
▫ Aggregate cost of lost wages could increase
• Changes in disease specific mortality
▫ Greater demand for care
• Increase in divorce and blended families
▫ No spouse, step children
TRANSFERS
TO ADULT
CHILDREN
 Transfers in the other direction
• Parents invest a great deal in their children
long after children are adults
▫ College transfers
▫ Cash transfers
▫ Bequests
▫ Care for grandchildren
 Transfers to Children
• Have you (and your husband / partner) given
(your child / any of your children) financial
assistance or gifts totaling $500 or more in the
past 12 months (or since the last interview)?

• Which of them was given such assistance?

• About how much did that assistance amount to

altogether in the past 12 months?
 Percent of Children Receiving a Transfer Over Time
25

20

15

10

0
92 94 96 98 00 02 04 06 08
 Average Amount Over Time Among Positive Transfers
8000
7000
6000
5000
4000
3000
2000
1000
0
92 94 96 98 00 02 04 06 08
 Average Amount by Year for Positive Transfers
8000
7000
6000
5000
4000
3000
2000
1000
0
92 96 98 00 02 04 06 08
 Variation over time in receipt
• Over 17 years (9 surveys),
▫ 47 percent of children get a transfer at least once
• Conditional on getting at least once:
▫ 38 percent get in only one survey year
▫ 21 percent get in two survey years
▫ 10 percent in three survey years
▫ Only 1 percent in all survey years.
• Even when children receive transfers in two
consecutive periods, correlation is just 0.14
Fraction receiving transfers in a given
number of survey years
40
35
30
25
20
15
10
5
0
1 2 3 4 5 6 7 8 9
Relationship between Transfers and Life Course Events

Experienced Event Did not Experience Event

Event % received % received
Mean>0 Mean>0
transfer transfer

Reached 16 yrs school 20.2 4,714 13.3 4,217

Married 16.8 4,247 12.8 4,231
Bought a home 16.5 4,692 13.7 3,995
Had a child 14.5 5,758 13.4 4,236
Relationship between Transfers and Life Course Events

Experienced Event Did not Experience Event

Event % received % received
Mean>0 Mean>0
transfer transfer

Attained 16 yrs 20.2 4,714 13.3 4,217

school
Married 16.8 4,247 12.8 4,231
Bought a home 16.5 4,692 13.7 3,995
Had a child 14.5 5,758 13.4 4,236

Lost job 17.5 5,257 13.9 4,151

Marriage ended 21.0 5,136 13.1 4,180
Lost home 15.2 4,653 13.9 4,032

Any event 15.6 5,384 13.4 3,793

(n=32,299)
 What else determines transfers…

▪ Positively related to parental resources

▪ Income
▪ Wealth
▪ Good health
▪ Education
▪ Less likely for nonwhites
 What else determines transfers…
• Negatively related to a child’s:
▫ Income
▫ Being married
▫ Being the oldest
▫ “Ability”
• Positively related to a child’s:
▫ Enrollment in college
▫ Grandchildren
▫ Being the youngest
WITHIN
FAMILY
ALLOCATIONS

Or “Mom always
liked you best.”
Equality of transfers by the number of
Equality of transfers by the number of children
children
Number of Children in sample
Measure of parental transfer 2 3 4 5+
Number of observations 1000 714 488 254
% making at least one over time 74.7 78.2 70.1 65.1

Conditional on giving:
Single year transfers (stacking 9 reports)
Exactly equal 15.9 4.4 1.7 4.9
Within 10 percent of mean 17.0 6.0 5.4 4.9
Equality of transfers by the number of
Equality of transfers by the number of children
children
Number of Children in sample
Measure of parental transfer 2 3 4 5+
Number of observations 1000 714 488 254
% making at least one over time 74.7 78.2 70.1 65.1

Conditional on giving:
Single year transfers (stacking 9 reports)
Exactly equal 15.9 4.4 1.7 4.9
Within 10 percent of mean 17.0 6.0 5.4 4.9
Within 20 percent of mean 19.7 6.2 5.6 5.0
Equality of transfers by the number of
Equality of transfers by the number of children
children
Number of Children in sample
Measure of parental transfer 2 3 4 5+
Number of observations 1000 714 488 254
% making at least one over time 74.7 78.2 70.1 65.1

Conditional on giving:
Single year transfers (stacking 9 reports)
Exactly equal 15.9 4.4 1.7 4.9
Within 10 percent of mean 17.0 6.0 5.4 4.9
Within 20 percent of mean 19.7 6.2 5.6 5.0

Aggregated 1992-2008 real dollars:

Exactly equal 5.0 1.1 1.2 1.7
Within 10 percent of mean 14.2 2.3 1.5 1.7
Within 20 percent of mean 22.9 4.3 2.3 2.3
BEQUESTS
 Distribution of Bequests
• Bequests are divided equally:
▫ Probate records ~ 90% equal
▫ Estate tax returns ~ 88% equal
▫ Existing wills 83% equal, and 92% equal
• Recall inter vivos transfers are typically unequal
▫ 16 % to 5% depending on family size and
definition of equality
 Why do patterns differ?
1. Bequests are public. Parents may be
concerned that unequal bequests will make
children unhappy.
 Why do patterns differ?
1. Bequests are public. Parents may be
concerned that unequal bequests will make
children unhappy.
▫ Can “hide” distribution through the use of
trusts
▫ Anecdotal evidence that children redistribute
among themselves
 Why do patterns differ?
2. Future income of children is uncertain,
negative shocks may even out over time.
 Why do patterns differ?
2. Future income of children is uncertain,
negative shocks may even out over time.
▫ Do see unequal bequests when one child has
a disability.
 Why do patterns differ?
3. Social norms about behavior.
 Why do patterns differ?
3. Social norms about behavior.
▫ Financial planners / attorneys writing wills
suggest equality
▫ Default option is equal which may help set
norm
▫ Differences in opportunity vs. outcomes
 Why do patterns differ?
• Responses to direct questions support several
motives
• Altruism:
▫ “oldest son has more assets than youngest”
• Exchange
▫ “_____takes care of me”
▫ “leaving more to son who helped maintain property”
• Evolutionary
▫ “it will be divided between biological children”
 Conclusions
• Families provide important support
• Children (daughters) care for parents
▫ Impacts labor market behavior
▫ Important long-term effects on financial well-
being
▫ Potential emotional / health effects
• Parents provide cash support long after
children are grown
▫ Unequal inter vivos transfers
▫ Inequality grows over time
▫ Contrast with equal bequests