Bryan Caplan  

The Extra Burden of Childless Elders

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Contrary to popular opinion, it has always been rare for people to financially support their aged parents.  In earlier times, people died too soon to "collect their pension" from their kids.  Nowadays the elderly live long enough to collect, but they're still far more likely to give money to their kids and grandkids rather than receive it.  Money flows from old to young, just like Darwin would predict.

You might be tempted to conclude that government spending on seniors has nothing to do with how many kids seniors have.  If kids don't give money to their parents, why should taxpayers care if seniors have kids?  But you should resist temptation.  Despite the lack of cash gifts from young to old, in-kind transfers are common.  And if you don't have kids to provide in-kind transfers, the government picks up much of the tab with tax dollars.  As Wolf et al explain:
[I]nformal care provided by family, friends, and neighbors is widely acknowledged to comprise the majority of long-term care and support in the U.S. (Wolff & Kasper 2006). Most disabled elders are not institutionalized, and within that group most receive care either exclusively from informal providers or from a mixture of formal and informal providers. Unmarried individuals without living children are more likely than those with children to be in nursing homes, in cross-section (McNally & Wolf 1996), while childless elders have significantly higher levels of publicly-funded nursing home costs (through Medicare and Medicaid combined) than do parents (Wolf 1999). Other research has shown that having children serves both to delay entry into, and hasten exit from, nursing homes (Garber & MaCurdy 1990; Freedman 1993; Aykan 2003; Gaugler et al. 2007).
Of course, people with kids capture some of these benefits themselves.  Who wants to end up in a nursing home?  The point is that seniors capture only a fraction of the total benefit.  Future taxpayers collect the rest.  And from what I hear, they're going to need all the help they can get.


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COMMENTS (7 to date)
Evan writes:
Contrary to popular opinion, it has always been rare for people to financially support their aged parents. In earlier times, people died too soon to "collect their pension" from their kids. Nowadays the elderly live long enough to collect, but they're still far more likely to give money to their kids and grandkids rather than receive it.
I think that the "kids as an investment" analogy works much better if you think of kids as a catastrophic insurance policy rather as a retirement fund. Yeah, my parents give me far more time and money than I give them. But if their house burns down or the bank loses their savings or some other catastrophe like that, they know that I'm always there for them.
Brandon Berg writes:

Taxpayers should care whether seniors have kids because childless seniors haven't produced any children to help share the current generation's tax burden. Even if people never gave their parents anything, taxpayers would still have a legitimate reason to want their peers to have children.

Also, more workers means lower capital-to-labor ratio, which means higher returns to capital and higher private retirement income.

Tom West writes:

Other research has shown that having children serves both to delay entry into, and hasten exit from, nursing homes

Did that sound faintly sinister to anyone else?

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Ashton writes:

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Floccina writes:

So could say that this shows that in kind transfers are more efficient? I would think so. Should we therefore push to minimize or eliminate the forced cash transfers from our children to us through the Gov?

DougT writes:

Medicare policy is the elephant in the room when it comes to future health care spending. State support for long-term care is the default option, with trust structures and asset donations explicitly designed to evade State confiscation.

But this has never been debated in the public sphere, unlike the ad-naseum debates over Medicare procedural restrictions vs. individual choice with voucher support. I don't know how much of the 30 year health care cost curve is occupied by Medicare, but it's a lot.

In any case, elder care by middle-aged children is a big part of the picture now and will be a big part of any future picture. It deserves state support of some kind.

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