Potential later life economic impacts associated with family caregiving
Carolyn L. Bird, Ph.D., AFC, RFG®
North Carolina State University
Ann A. Berry, Ph.D., RFG®
Associate Professor and Extension Specialist
The University of Tennessee Extension
The number of family caregivers is expected to continually rise as baby boomers provide care for aging parents. Boomers, often in their peak wage-earning years, struggle to balance work, family, and caregiving responsibilities. This article incorporates studies detailing the effect of the economics of caregiving on the physical and financial well-being of the caregiver. Article analysis sharpens the focus of economic impacts manifested in a variety of forms: apparent and immediate, hidden, and delayed and compounded. Family caregiving’s social and economic benefits are examined in concert with current and needed social, legislative, and employer supports for family caregivers.
caregiving, economic, finances
With the current economic climate, being able to pay for the expenses of daily living has proven to be a challenge for an increasing number of families, even for those who are not considered low-income. While many families have found creative ways to stretch the dollar — clipping coupons, shopping at thrift stores, growing a garden, using a smaller, fuel-efficient vehicle — some family caregivers don’t have the time necessary or the ability to implement these money-saving strategies. When a family adds the cost of caring for a family member, making ends meet during the month can become even more of a burden on the resources of time, money, and the caregiver’s health.
While family caregiving may include caring for any family member, regardless of age, much of the current literature focuses on care of aging parents. Women have been and are continuing to be the primary providers of unpaid caregiving. Studies reveal several entrenched societal patterns that place women at a greater economic disadvantage for retirement security, and there is nothing in the data to suggest that positive change is on the horizon. Women’s employment patterns continue to disadvantage them in accomplishing retirement and later-life security. Continuance of these patterns suggests an urgent need for educational sessions to heighten awareness among caregivers, specifically women, about the financial and economic costs of caregiving and to promote tools for preparation for caregiving. In this paper we outline individual, family, and societal costs related to family caregiving and close with an analysis of policies and recommendations to better support family caregivers.
Caregivers in the United States
The percentage of adult children providing care, financial assistance, or both to a parent has more than tripled over the past 15 years. The lost wages, pension, and Social Security benefits for these caregivers come to an estimated $3 trillion (MetLife Mature Market Institute 2011). Women, in general, provide a majority of the unpaid care for family members in the United States. While the number of unpaid family caregivers is 65 million people, or 29 percent of the US population, 66 percent of those providing care are female (WISER 2008; National Alliance for Caregiving in collaboration with AARP 2009). Many of these women are employed outside the home, juggling work demands as well as those of other family members in addition to caring for an aging parent. More than 37 percent have children or grandchildren under the age of 18 living with them (National Alliance for Caregiving in collaboration with AARP 2009).
The National Alliance for Caregiving 2009 study revealed that 68 percent of caregivers made reductions or modifications to their work schedules as a result of their caregiving responsibilities. Cutting back in hours and sometimes leaving the workplace for extended periods can seriously impact an individual’s ability to prepare financially for retirement. One-third of caregivers reduced their working hours or exited the work force completely to care for a family member. According to a June 2011 MetLife study, the average total cost of caregiving on the female caregiver in terms of lost wages, foregone pension benefits, and reduced Social Security benefits is $324,044 in funds available for a caregiver’s retirement (MetLife Mature Market Institute 2011). Donato and Wakabayashi’s (2005) research showed that single women who care for aging parents are 2.5 times more likely to live in poverty in old age than non-caregivers. This fact is significant, given that the percentage of married women declined between 1970 and 2009 from 72 to 62 percent. In addition, 18 percent of women aged 40 to 44 (latter part of peak child-bearing years) have never had a child; that number is nearly double the 1976 rate of 10 percent (U.S. Department of Commerce, Economics and Statistics Administration 2011).
Current care providers’ experiences
The typical family caregiver is a 49-year-old female who cares for her widowed 69-year-old mother, who does not live with her. She is also married and employed outside the home. The average length of time she cares for her mother is five years (National Alliance for Caregiving in collaboration with AARP 2009). While this description is found in the literature from 2009, the picture is changing. A new trend is emerging with one in five family caregivers (21 percent) moving into the same home as the person for whom they were caring in order to reduce expenses during the economic downturn in 2009 (Evercare 2009).
The average number of hours family caregivers spend caring for a family member is 20 hours per week. However, 13 percent of family caregivers are providing 40 or more hours of care each week (National Alliance for Caregiving in collaboration with AARP 2009). Care can include taking the family member to doctors’ appointments, running errands, paying bills, assisting with daily living needs, preparing meals, cleaning, and so on.
The cost of care-family financial contribution
Caring for a loved one can be rewarding. It can also be costly financially. The average family caregiver caring for an aging family member spent $5,531 ($461 per month) in 2007 on direct out-of-pocket caregiving expenses (AARP 2008). This figure was more than 10 percent of the median income for a family caregiver that same year. Paying for prescription medications, installing a ramp or grab bars, or purchasing other necessities either not covered at all or only partially by insurance, can be expensive. A 1998 study found that 48 percent of female baby boomer caregivers suffered financial hardship as a result of caregiving (National Alliance for Caregiving). Beyond the out-of-pocket costs, other caregiving costs include the absence of or constrained contributions to retirement or other savings, compromised work schedules, demands on time, breaks in work history, emotional and physical consequences, and impact on health insurance coverage.
Impact of the economy
While nearly half of the female caregivers in 1998 were financially distressed, the economy of 2011 has only exacerbated the situation. “Sandwich generation” families, those caring for young children as well as an elderly parent, have found themselves struggling as never before. Many are postponing saving for children’s college education as well as putting off vacations or major purchases. The recent economic situation has caused some major decision-making changes for many caregivers. In 2009, 27 percent of caregivers of adults reported a moderate to high degree of financial hardship due to caregiving. Twenty-four percent of caregivers reported having to cut back on care-related spending because of the economy. Sixty percent shared concern about the impact that providing care has had on their personal savings and over half said that their stress level has increased (Feinberg et al. 2011).
Due to the current recession, more women are now the primary income earners for families. They actually have lower levels of unemployment than males. Because women are also the primary caregivers, this is causing an even greater burden on families providing care (Volunteers of America 2011).
The Evercare study (2009) found that the economic downturn has had the following significant effects on family caregivers:
- Change in work situation
- Use of savings or acquiring additional debt to cover caregiving costs
- Living situation with care recipient
- Increased stress and other health effects on the caregiver.
The study also found that 50 percent of caregivers are more reluctant to take time off from work for caregiving. Thirty-three percent of caregivers admitted to taking on additional work, either in increased hours or a second job, to help pay for caregiving expenses. Sadly, 43 percent of caregivers had their pay or work hours reduced. Fifteen percent lost their jobs.
The current economic situation has also caused strain on the family caregiver’s budget, with 13 percent spending more on caregiving expenses and 60 percent struggling to make ends meet for the basic necessities. They are risking their own financial futures. Almost half of those surveyed admitted to using all or most of their savings, with 43 percent having to borrow money or increase credit card debt.
Hidden costs of providing care
Family caregiving has been shown to entail a variety of costs to the care provider. The costs can be interrelated and some may not be easily identified, particularly by the caregiver who may be engulfed and struggling to find a way to incorporate the new responsibilities with existing work and family needs and routines. Many who enter the foray of caregiving are and remain unaware of the full extent of financial and other impacts on their personal economic well-being. Economic well-being is broader than personal finance in that it includes broader aspects of well-being such as health (Magrabi et al. 1991) and leisure time (Rettig 2000). Readily identifiable impacts include the effect on the caregiver’s employment situation, the family’s overall financial situation, the caregiver’s retirement preparedness, and the overall later-life financial security of the caregiver.
It is well known that adult daughters constitute the largest category of caregivers. With the majority of women in the labor force it means that women are now juggling caregiving and work. In fact, according to the National Family Caregivers Association Web site (August 24, 2011), 73 percent of family caregivers who care for someone over the age of 18 are employed or have been employed while providing care. Frequently caregiving responsibilities shaped the caregiver’s ability to maintain satisfactory work routines with 66 percent making adjustments to their work life. While some workers reported late to the workplace, others found it necessary to take a leave of absence or exit the workforce entirely (Feinberg et al. 2011).
Women are particularly vulnerable to an insecure retirement given the predominance of employment in hourly positions, low earnings, and the inability to participate in tax-protected employer-sponsored retirement plans such as 401(k)s (Volunteers of America 2011). If there is a silver lining, it is that during the past four recessions, the rate of women’s unemployment rose less than the rate for men. This is primarily the result of occupational differences with one-fifth of all women employed in five occupations: secretaries, registered nurses, elementary school teachers, cashiers, and nurse aides. Even so, women aged 20 and older continue to have significantly lower labor force participation rates, and women at every education level and at every age are spending fewer weeks in the labor force (U.S. Department of Commerce, Economics and Statistics Administration 2011).
Low earnings and lower labor force participation rates are significant to women’s ability to bear the costs of operating a household and engage in caregiving, and these factors have serious implications for later-life financial stability. The personal impact of these costs may be exacerbated in the context of the economic downturn with its broad effects impacting most Americans, such as the inability to keep up with the rising costs of basic necessities like food and fuel.
Transportation costs are incurred in the process of providing care. Family and friends provide 1.4 billion trips per year for older relatives (age 70+) who do not drive; adult children provide 33 percent of these trips (Feinberg et al. 2011). Other impacts may be more difficult to quantify yet remain of high importance. In the Volunteers of America (2011) study of employed caregivers aged 45 to 65, respondents reported reducing or skipping vacations and other social activities (50 percent), missing work (40 percent), using personal savings to provide care (~30 percent), taking unpaid time off from work (~28 percent), and using family and medical leave (FMLA) (~20 percent). A few moved closer to the care recipient (~12 percent), missed out on a raise (~10 percent), and experienced a pay cut (10 percent). The loss of income is particularly worrisome for family caregivers in the current recession which saw many women become the primary income earner for the household (Volunteers of America 2011). These family caregivers are pressed by the economic demands of being the primary income earner while meeting the demands of serving as “the primary hands-on” caregiver for a parent (Volunteers of America 2011).
The health of the caregiver frequently suffers while managing multiple demands on time and energy. The discussion of caregiving frequently centers on the health needs of the care recipient and the logistics of meeting a myriad of health care demands, such as transportation, serving as an advocate for the care recipient, and coordinating care across physicians.
Daughters are more likely to provide basic care (dressing, feeding, bathing) while sons are more likely to provide financial assistance. Adult children aged 50 and over who work and provide care to a parent are more likely to have poor health than those who do not provide care to their parents (MetLife Mature Market Institute 2011). Certainly it is more taxing on one’s health to provide physical care than to write a check.
A national caregiver survey indicated that self-reported health of adult caregivers age 18 and older declines the longer they provide care. Health and quality of life concerns experienced include stress, anxiety, or depression (31 percent), lost time with friends and family (53 percent), and making work accommodations due to caregiving (70 percent). Working and providing basic care has a greater negative impact on health than does providing financial assistance only. Workers who also provide basic care evaluated their health as fair or poor (14 percent to 17 percent). Workers not providing basic care were less inclined to rate their health as fair or poor (11 percent to 14 percent).
Women increasingly do not have health insurance, with 18 percent lacking coverage in 2009 as compared to 13 percent in 1984. The rate is even higher for unmarried women under the age of 65, with 25 percent uncovered compared to 14 percent for nonelderly married women (U.S. Department of Commerce, Economics and Statistics Administration 2011). Thus, single women who are also caregivers have fewer resources with which to meet their own health care needs.
Societal considerations and impacts
Providing unpaid caregiving has economic implications for the individual and America as a society. Caregivers frequently neglect or place a lower priority on providing for their own later-life security. An examination of the aging boomer population indicates that many boomers are in danger of lacking sufficient resources to address their own later-life care needs.
Among the broader implications are the societal impacts arising out of caregiving performed by individuals and families. Feinberg et al. (2011) recently reported that in 2009, 42.1 million family caregivers provided assistance to an adult with limitations in daily activities. The number of family caregivers increases to about 61.6 million when those family members who provide some type of care at some time during the year are included. In 2009, the economic benefit of these contributions was approximately $450 billion, a significant increase from 2007, when this benefit was estimated at $375 billion. This means that family caregiver contributions exceed what the nation spent on Medicaid and long term support services in 2009 ($361 billion) and exceed the total sales of Walmart ($408 billion in 2009, the most of any company). Notably, family caregiving’s economic contribution of $450 billion represents almost 3.2 percent of 2009’s gross domestic product of $14 trillion (Feinberg et al. 2011).
Provisions for providing care
The American economy, legislation, and employers provide incongruous and limited accommodations for workers with caregiving responsibilities. The Family Medical Leave Act’s (FMLA) provisions include the ability to take 12 job-protected unpaid workweeks in a 12-month period to care for a spouse, child, or parent who has a serious health condition (United States Department of Labor 1993). Only a few states provide paid family and medical leave (MetLife Mature Market Institute 2011). The legislation is a good first step but falls short for those families whose financial situation cannot withstand the income drought of unpaid leave.
Another government program designed to provide assistance to family caregivers is part of the new Affordable Care Act, which includes a voluntary long-term care insurance program called Community Living Assistance Services and Supports (CLASS). This will provide benefits of a minimum of $50 per day for assistance with personal care tasks, which can be paid to the family caregiver providing this assistance (MetLife Mature Market Institute 2011). Caregivers of veterans may access cash assistance, counseling, and other assistance as provided for in the Caregivers and Veterans Omnibus Health Services Act of 2010 (P.L. 111-63) (Feinberg et al. 2011).
Federal and state recognition of caregiving is increasing. The White House Task Force on the Middle Class was created to address economic challenges of the middle class that have arisen from the economic downturn. It has initiatives to assist family caregivers in balancing work and caregiving responsibilities as well as support services for family caregivers (Feinberg et al. 2011). The National Family Caregiver Support Program was established in 2000 and provides grants to states to fund services and supports to those who provide at-home care for family and friends (Feinberg et al. 2011). California and Texas have state-specific programs to support family caregiving (Feinberg et al. 2011).
Employers with extensive Employee Assistance Programs might go the extra step beyond information to maintain a list of employer-screened resources including local assisted living facilities and in-home care providers.
Policy recommendations for healthcare givers
As more working caregivers approach their own retirement while caring for an aging parent, flexibility in the workplace will be a key factor in supporting the caregiver’s ability to sustain employment. As noted earlier, remaining employed is important for a number of reasons beyond current income. Broadly implemented flex-time and paid family medical leave policies would support a caregiver’s ability to remain employed (Feinberg et al. 2011) and an esteemed contributor to the workplace.
Employers are called upon to be more proactive in encouraging participation in employer-sponsored retirement programs. For example, workers should automatically be enrolled in the retirement plan. Legislation to create more widely accessible and more flexible savings and retirement arrangements include a universal 401(k) account to be available for accumulating savings regardless of work status. Proposed features include tax breaks for contributions and that it be “a single, portable account that benefits families by continuing to provide strong savings incentives for parents who take time off to raise children or who are between jobs” (Cramer et al. 2010). This same universal 401(k) would benefit caregivers who may reduce hours, temporarily depart from the workforce, or leave the workforce altogether. An important feature, as noted earlier, is that the proposed account is not tied to a specific employer and is available regardless of work status. Employers can be important sources of information and referral, directing employees to and encouraging family caregivers to make use of caregiving support programs and resources, such as the on-line or toll-free Eldercare Locator (Feinberg et al. 2011) or local branch of the National Association of Area Agencies on Aging (link to http://www.n4a.org ).
Other recommendations include a tax credit to offset caregiving expenses, fully funding the Lifespan Respite Care Act (2006 P.L. 109-442), and allowing publically funded programs, such as Medicaid, to make payments to family caregivers to support choice in caregiving services (Gibson and Houser 2007). The Family Caregiver Alliance (2007) recommends a more comprehensive model to coordinate support for family caregivers by “(1) coordinating caregiving across settings, formal and informal; (2) integrating medical and social needs; (3) blending formal caregiving as needed with informal caregiving; (4) offering care management frameworks that meet the needs of care recipients and caregivers; and (5) valuing and supporting both paid and unpaid caregiving so that all caregivers can be respected and self-sufficient in their working years and in retirement.” In 2005, a bi-partisan committee of 1,200 delegates to the White House Conference on Aging selected the top 50 resolutions from a list of 73 candidate solutions. The resolutions reflect a vision of the future that is cognizant of changing age-based and age-neutral demographics, and the fact that not only are we aging but we are becoming more diverse. Select resolutions, with their resolution number in parentheses, include the following: coordinated long-term care strategy (#2), transportation options (#3), prepared healthcare workforce (#6), coordination of aging in place (#10), designs for livable communities (#20), increased retirement savings (#24), national strategy for volunteering (#25), awareness of disparities (#34), and many more.
The report summary was careful to note that all sectors of our society have a role to play and that solutions to virtually every challenge before our nation must involve a collaboration of federal, state, tribal, and local governments as well as individuals, communities, business and industry, and not-for-profit partners (White House Conference on Aging 2005).
Improving the family caregiver experience: Suggestions and strategies
Women in particular need to be better informed about potential impacts of caregiving and strategies to mitigate negative consequences. In particular, it is important to fully consider the impact of leaving a job, dropping back to part-time, or taking a lower-paying job to accomplish greater flexibility for caregiving (MetLife Mature Market Institute 2011).
The MetLife Mature Market Institute (2011) study notes “if these caregivers understand the financial implications of caregiving described in this study, they may be better able to plan for their own retirement as well as fulfilling their caregiving role.” There is a need for programming to help caregivers identify in advance the potential costs of caregiving and to inform them of a set of strategies to mitigate at least some of these costs. Targeted programming is also an effective way to keep family caregivers abreast of new or expanded supports that are available or on the horizon. Education will be increasingly important as government (federal, state, and local) and non-profit organizations begin to act on policy recommendations increasing the number of support programs. At present, the authors found a wealth of information on the economic impacts of caregiving but little integrated programming designed to assist caregivers in navigating these responsibilities for improved personal later life financial stability outcomes.
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