The Trade-Off between Hours of Paid Employment and Time Assistance to Elderly Parents at Midlife

Richard W. Johnson is a senior research associate at the Urban Institute and Anthony T. Lo Sasso is a research assistant professor at the Institute for Health Services Research and Policy Studies at Northwestern University. Financial support was provided by grant 7R03AG15525-02 from the National Institute on Aging and by the Retirement Project, a multiyear research effort at the Urban Institute funded by the Andrew W. Mellon Foundation. Earlier versions of this paper were presented at the annual meeting of the Population Association of America in New York in March 1999 and the annual meeting of the Gerontological Society of America in San Francisco in November 1999. We are grateful to Bob Schoeni for helpful comments.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Abstract

Although the family has traditionally been the primary caregiver for the frail elderly, the rising labor force participation rates of married women may interfere with their historical caregiving responsibilities. This paper explores time transfers to elderly parents and their impact on labor supply for persons at midlife. We estimate simultaneous panel data models of annual hours of paid work and the provision of time assistance to parents for a sample of men and women ages 53 to 65 in the Health and Retirement Study. Our results indicate that time help to parents substantially reduces labor supply for both women and men.

Introduction

The family has traditionally been an important provider of care to the frail elderly. For example, 57 percent of primary caregivers for impaired persons age 70 and older are either the spouses or adult children of the care recipients, and adult children account for 42 percent of all caregivers for unmarried elderly recipients (McGarry, 1998). However, ongoing demographic and socioeconomic trends threaten to weaken the family's role as primary caregiver to the elderly. Declining mortality rates have greatly increased the number of elderly in the population in recent years. Despite declining rates of disability among the aged over the past 15 years (Manton, Corder, and Stallard, 1993, 1997), the total number of persons in need of personal care assistance continues to rise.¹ At the same time, declining rates of fertility have reduced the number of children that will be available to provide care to their parents in the future. In addition, increasing numbers of women at midlife, who have historically been the primary caregivers for the frail elderly (Stone and Kemper, 1990; Dwyer and Coward, 1991), are participating in the labor force (Blau, 1998). Between 1982 and 1989, the proportion of primary caregivers working full-time increased from 15.8 percent to 19.3 percent (Boaz, 1996). Women's increased work responsibilities may be incompatible with their caregiving responsibilities. To assess the extent to which these trends may increase burdens on families, especially as retirement approaches, this paper examines the relationship between labor supply at midlife and time transfers to elderly parents.

Although there has been much recent concern about the growth in the cost of institutionalized long-term care, the costs to the family of caring for the frail elderly in the community may also be quite high, particularly if caregiving responsibilities lead to reduced work hours. In fact, Arno, Levine, and Memmott (1999) placed the value of time devoted to informal caregiving in 1997 at $196 billion. A number of public policy initiatives have recently been introduced or proposed to help families that provide care to their frail members. The Family and Medical Leave Act of 1993 requires employers to provide up to 12 weeks of unpaid leave to workers who need time off to care for family members. The Clinton administration proposed in its FY 2001 budget a $3,000 tax credit for persons with functional limitations who incur long-term care expenses or for the family members who care for them. In addition, the administration also proposed new programs to provide respite care and other support services for caregivers. The administration also proposed that states be permitted to provide Medicaid services to frail elderly persons who choose to live in the community instead of nursing homes. The Taxpayer Refund and Relief Act of 1999, which was passed by Congress but vetoed by President Clinton, would provide additional personal tax exemptions for taxpayers who live with their frail parents. The Omnibus Long-Term Care Act of 1999 (H.R. 2691), introduced in Congress in August, would also provide Medicare benefits and Social Security credits to workers who leave their jobs to care for frail relatives. Other recent proposals include plans that would subsidize the cost of formal home care.

To evaluate these initiatives, we need better information on the process by which families provide care to the elderly and how they allocate time between the provision of informal care and paid work. In this paper we used panel data from the Health and Retirement Study (HRS) to examine the relationship between labor supply and time transfers to parents. Employing full-information maximum likelihood techniques, we estimated simultaneous equation panel data models of annual hours of paid work and the provision of time assistance to parents for a sample of men and women ages 53 to 65. We found that after accounting for the endogeneity of time assistance, time help to parents substantially reduced labor supply for both women and men.

Notes

1. The prevalence of disability among the elderly in the U.S. declined from 24.9 percent in 1982 to 21.3 percent in 1994 (Manton, Corder, and Stallard, 1997). During the same period, the number of persons ages 65 and older increased from 26.8 million to 33.2 million (U.S. Bureau of the Census, 1999), implying that the number of elderly persons with disabilities increased from 6.7 million in 1982 to 7.1 million in 1994.

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