Inequality Hits Home

July 31, 2013

In recent days, President Obama has returned to speaking on the theme of rising economic inequality in America since the 1970s (e.g., here and here), addressing the insecurity that it has caused the middle class, which now needs more hands on deck working harder to keep up, and speaking about how it has demorilized young people unlucky enough not to be born into advantage. To be sure, some claim that inequality has not been widening and that, even if it has, the middle class has nonetheless done just fine (e.g., here). The dueling calculations in this debate can get pretty complex, though most serious scholars agree with the President’s summary (see these earlier posts: herehereherehere). A new study reveals what has been going on from yet another viewpoint: that of parents and grown-up children who are living together.

Demographers Joan Kahn, Frances Goldscheider, and Javier García-Manglano have just published an important paper [1] tracking Americans’ living arrangements over 50 years. Their results send two strong messages: One, the economic struggles of young adults today, particularly of men and of the less-educated, have led many more of them to live with their parents than before. And, two, young people living with parents increasingly depend on their parents’ income. Both findings reinforce the President’s concerns about our economic stagnation.

Being Home

The first analysis Kahn and her co-authors present, drawing on massive census data, shows how many and which adults— adults here meaning those 25 and older— were living with their parents at six points in time: 1960, 1970, and so on to 2010. The percentage of Americans aged 25 to 44 who shared a home with their parents dropped from about 12% in 1960 to a low of 9% in 1980 and then nearly doubled to 17% by 2010. For those 45 to 64, the low was 4% in 1990 and rose back to 6% in 2010. Coresidence was definitely on the rise over the last generation.

As to which people were likelier to be under the same roof as their parents, some of the factors you would expect mattered: Many things (including immigrant status) being equal, those who were unmarried, those who had not been to college, and those who earned little were likelier to live with parents. Critically, however, Kahn et al find that some factors became increasingly important over the years, centrally those reflecting the economic circumstances of the young person. In 1960, young people with jobs were more likely than those who were unemployed to live with their parents; in 2010, it was the reverse, the unemployed were likelier. Similarly, whether the young person had graduated college and how much he or she made marked those who lived with parents much more in 2010 than in 1960. Another detail is that this development has been notably stronger for adult sons than daughters.

What these and other results mean is that in 1960 parent-child cohabiting tended to be about whether the parent needed, for financial reasons, to live with the adult child. By 2010, the decision to cohabit more often depended on the child’s financial situation. Plainly put, a generation ago, cohabiting was typically children taking care of needy parents and now it is increasingly parents taking care of needy children— particularly sons.

Paying the Bills

Kahn and her coauthors go on to look more closely at those households in which adults lived with their parents. They ask the question, in these families, who depends financially on whom? And how has that dependency changed? Their indicator of financial dependence is whether the total income of the adult child (and, if married, of the child’s spouse) comprised less than 40% of the income both generations brought home. That is, who was probably paying the lion’s share of the bills?

The change is startling. In 1960, only 19% of adult children living with their parents were dependent, that is, contributing less than two-fifths of the household income. By 2010, 48% were! The trend is displayed in the graph below. The red line refers to the numbers I just gave— the rate of dependency among the children. The blue line shows dependency from the other side— the percentage of parents who contributed under two-fifths of total income. Their dependency rates shrank.

Kahnet al Dependency

Although the authors do not raise the issue, these numbers actually understate the dependency of the children. They are only about income; they do not reflect the fact that the elderly usually have more wealth— specifically, owning a home— than their children. Neither do they reflect the fact that, since the 1960s, elderly parents have had their medical expenses covered by a government program (Medicare) and the children have not.

Kahn et al also look at what characteristics of the children and the parents increases their risks of being dependents— and how that has changed. The takeaway is that, all else being equal, dropping out of high school, being in one’s 20s or 30s, and being male have become “riskier” for young people over time.

Implications

Whatever the complicated debates over the minutiae of income data that swirls around the issues of inequality and middle class struggles, the results Kahn and colleagues present show us clearly how the economic trends of the last few decades have played out in American homes. Changes in co-residence and changes in the income balance between generations reveal, as the authors say, “the general trends toward the greater economic security of older adults and the increasing financial strain experienced by younger adults.”

In the last 50 years, this country has done a great job— by maintaining Social Security benefits, expanding Medicare, underwriting home-ownership, securing pensions, and the like— of improving the economic circumstances of the generation that rode the postwar boom years to wealth and comfortable senior citizenship. This country has done an increasingly poor job— by letting the minimum wage stagnate, dis-investing in schools, public colleges, and infrastructure, undercutting workers’ leverage, and the like— of supporting the economic aspirations of that generation’s children and grandchildren.

What will happen when the young Americans who now depend so much on their elderly parents themselves become elderly parents?

Photograph: Scott Jones/flickr

——

[1] Kahn et al., “Growing Parental Economic Power in Parent–Adult Child Households: Coresidence and Financial Dependency in the United States, 1960–2010,” Demography, August 2013, 50:4, 1449-1475. (gated)

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