Association for Public Policy Analysis & Management

Unpaid caregiving for the elderly is a growing phenomenon in aging societies. Survey data suggest that most unpaid caregivers in the United States work, but they often face adverse labor market consequences. They involuntarily work fewer hours, have lower earnings and face potentially more volatile incomes as they try to balance unexpected caregiving events and work.

These labor market outcomes can directly impact savings and potentially result in less wealth for elder caregivers, putting them in a financially precarious situation. Fewer hours at work can mean that caregivers are less likely to qualify for employer benefits. Lower earnings will make it harder for caregivers to pay their bills and continue to save. And, more volatile incomes due to unexpected demands from caregiving may lead caregivers to focus more on the short term and forego saving for their own future.

Using U.S. household survey panel data from the Health and Retirement Study, we find that unpaid caregiving indeed correlates with less savings. Unpaid caregivers are less likely to save in general, are less likely to participate in employer-sponsored retirement plans and contribute smaller amounts to their retirement accounts. Older caregivers also have fewer emergency savings and are less likely to expect an inheritance than is the case for non-caregivers. That is, there is no offsetting effect between fewer retirement savings and more other savings. Moreover, older caregivers are more likely to experience depression and physical problems such as back pain, which can further adversely impact their ability to save. Mental stresses make it more difficult to make financial decisions and more physical ailments add to the obstacles to working longer while caring for somebody else.

Our results suggest that older caregivers could face more financial insecurity in old age than is the case for non-caregivers. The results indicate that caregivers’ wealth is directly impacted due to higher costs, adverse labor market outcomes and added stresses. Our findings then are broadly supportive of public policies such as caregiver credits in retirement savings programs as well as of private employer-sponsored efforts such as adult caregiver leave.