Co-residential Informal Caregiving and Female Labor Market Decisions

While medical advances have led to unprecedented increases in longevity, many people continue to develop disabilities as they grow older, eventually requiring assistance with everyday tasks.  The vast majority of these frail adults do not reside in nursing facilities; they instead rely on informal assistance from family and friends. With 44.5 million working age adults currently providing unpaid care to an individual for an aging-related condition (BLS, 2012), the opportunity costs associated with eldercare responsibilities are - and will continue to be - a major concern.

Nearly all studies of eldercare in the U.S. are cross-sectional and do not control for unobserved individual heterogeneity.  The few exceptions focus exclusively on individuals toward the end of their work lives.  While eldercare responsibilities are most common among women in their fifties and sixties, one-third of female eldercare providers are in their thirties and forties (ATUS, 2012).  Studies based on the Health and Retirement Study (HRS) will necessarily ignore many caregiving periods that happen to correspond with individuals' prime working years.

This study examines the labor market outcomes of women who provide care to an aging parent or parent-in-law.  Throughout my analysis, I focus on a subpopulation of informal caregivers who co-reside, or share their household, with the care recipient.  This group of caregivers faces high demands associated with their caregiving responsibilities and, therefore, may be more vulnerable to labor market disruptions. 

To facilitate the study, I combine data from the core survey of the Panel Study of Income Dynamics (PSID) with its Parent Health Supplement (PHS), to construct a longitudinal dataset that documents both the co-residential eldercare and labor market experiences of sample women over much of their adult lives.  This long PSID panel (1979-2007) is unique. I am able to extend the literature's focus to include the experiences of working-age women between the ages of 25 and 70.  I am also able to explore potentially heterogeneous effects according the life-cycle timing of caregiving responsibilities.  To my knowledge, this is the first study to address how the relationship between informal care and labor market work may vary over the life course.

I find that, adjusting for individual fixed effects, eldercare providers are less likely to engage in labor market work and, conditional on being employed, work fewer hours.  Moreover, I find that these labor market effects vary over the life course, with female labor market behaviors most responsive to eldercare responsibilities early in the life-cycle. Eldercare provision prior to age 40 is associated with a 9 percentage point reduction in the likelihood of employment, an estimated effect size twice that found for women over 50 (the focus of previous longitudinal analyses).  These reductions in labor market activity may have implications for later financial well-being, particularly if shocks relatively early in the life-cycle have lasting impacts on earnings through employment and wage trajectories.