…these are serious structural changes to the economy that will necessarily flow into so many other facets of our lives – food and cooking, housing, education, medicine, child-rearing.
– PracticalDad, The Great Reversion June 27, 2013
The Great Reversion, which kicked into overdrive with the Financial Crisis of 2007, has now run headfirst into the social institution that the Conservative movement exalts: the American Family. Change is constant although most is ebb and flow. But now, multiple separate data-points about the American family support the concept that its structure is changing in response to its long-term financial circumstances.
Let’s be clear. There is no longer a true monolithic model for the contemporary American family and no one can lay claim to it, despite what the Religious Right likes to think. But the separate data-points indicate that the great mass of families – religious or not – is looking at their respective long-term circumstances and making rational family-unit level decisions to best situate themselves for what they perceive to be their future. We all know the mass of economic data-points showing what’s amiss:
- The gap in wealth in the United States such that the top 1% now controls more assets than the entire American Middle Class;
- The paucity of savings such that 78% of our fellow citizens are now living paycheck to paycheck;
- Likewise, the paucity of savings such that almost 40% of American families can’t cover a $400 emergency bill without turning to credit.
These kinds of circumstances have an impact however, and that impact is now reflected in the long-term decisions of the family adults. How so?
First, America’s Total Fertility Rate – known informally as our replacement fertility rate – declined in 2018 to 1.73, the lowest point since the Oil Crisis/Inflation period of the mid 1970s. That was a bleak period two generations ago and I recall a conversation with a gentleman who commented that he and his wife were nervous about bringing new life into a world that was, in the moment, intimidating. Circumstances improved however: The Berlin Wall had fallen and the Soviet Union collapsed; even with 9/11, we entered a period in which homes were larger than ever and housing prices would only ever go up. Money was cheap and anybody who could fog a mirror was able to borrow large amounts for increasingly unpopular McMansions. And with that increase went the Total Fertility Rate.
Until approximately 2007 however, when the wheels came off. Since then, the TFR has dropped and it’s low point is confirmed by a second fertility statistic, the General Fertility Rate, which measures the rate at which women are currently having children.
The typical family is looking at it’s prospect and saying Nah Bruh, I think that I’m good for now… And this is playing out in the second data-point.
Next, more younger couples are only having one child. This is now the fastest growing cohort of families and has doubled in the four decades from 1976 to 2015, from 11% to 22% and if the article is correct, then it’s not going to slow appreciably in the near future. It hasn’t necessarily been a financial decision since part of the interplay is the aspect of delayed motherhood from a greater participation in the workforce and the opening of previously closed career pathways for women. But my suspicion, gut at best, is that people are looking at the cost, excluding higher education, and holding put at one child.
Third, the American family itself is quietly morphing from its historic nuclear family structure to a multi-generational model. What we consider the traditional nuclear has been rooted for generations in the two-generation unit, parents and biological children together. It has shifted itself as the racial, cultural and gender lines have blurred so that a modern nuclear family can be parents of two separate races or the same sex, and the children can be adopted instead of related via birth. Studies have shown that this particular unit structure can be found in records back as far as the 13th century in England but the sociologists’ research of the 20th century has linked the economic development since the Industrial Revolution of the 19th Century, as well as our own domestic economic growth, to the widespread availability of the nuclear family; it was this foundational unit that was able to move to where the opportunities for economic advancement were then available.
One particular economic issue today pertains to this very concept of labor mobility. Economists have noted in the past several years that the percentage of Americans willing to move for employment has dropped by half, from the 1980s to today, from 20% to about 10%. It’s notable that from 2012 to 2017, this number declined from one in eight Americans in 2012 to one in ten in 2017. Labor mobility matters because it allows for the best match of labor demand and supply so that productivity is maximized at the greatest benefit to labor. Consider Detroit’s auto industry in the early to mid 20th century. American automakers were able to turn out autos at such a rate because they were able to obtain a healthy supply of labor, much of it from the Black communities of the American South. For all of the social issues that were engendered, the pay for black workers in Detroit was still higher than what they were able to earn in the Jim Crow South and significant numbers of Blacks moved northwards to take advantage of it. But when labor mobility declines, as it has, then there is a mismatch between the demand and supply of labor and each aspect suffers. Middle had a college classmate who graduated with a degree in video sound editing and his goal was to move to Silicon Valley; but with the cost of housing so wildly out of reach for the average person, this youngster would have joined others living in vehicles as they worked in their chosen field. The result? He stayed on the east coast.
If the nuclear family is a two-generation unit, parent(s) and children, what then is the multi-generational model? The first thought of many Americans is that of The Waltons, the Depression-era family portrayed on the iconic television show of the 1970s. They were a nuclear family that became a multi-generational family by dint of having the grandparents live under their roof. But multi-generational is more than that. According to sociologists at Pew Research, the multi-generational family model is composed of parents and adult children past the age of 25 or grandparents and grandchildren or any other combination of greater than two generations. Right away, we recognize two circumstances that have come into focus from this definition. First, the number of young adults that are now living at home because of their student debt load. As of 2016, approximately one third of adults between 25 and 29 lived with their parents, triple the percentage who did so in the 1970s. The second situation is the rise in the number of grandparents caring for grandchildren because of the parents’ instability due to economic factors or more tragically, drug addiction. The raw numbers aren’t nominally huge, but the percentage of grandparent-headed households has increased in less than a decade.
When you note the rise in the percentage of multi-generation families since 1970, also consider the arrival of the immigrant family; both Asian and Hispanic families tend to have more than two generations under the same roof, often because of financial reasons. Despite this, the percentage of multi-generational families has risen across all racial demographics.
But these factors account for what has happened thus far and don’t necessarily reflect the impact of what will come; expect the multi-generational model to make far greater inroads as we move ahead. Simply put, there are going to be far more elderly Americans with far less savings to support themselves through their remaining years and the existing social infrastructure for their care is seriously insufficient.
The first thing to understand is that there is no longer a single demographic cohort for the elderly and these cohorts aren’t growing at the same rate; there are seniors, the elderly and the Old AF. The demographic models are such that the number of elderly Americans, 65 and above, will outnumber young Americans by 2035. However, the number of those between 75 and 84 will increase by 100% while those above 85 will increase by 200% by 2050. The raw number of the elderly population is going to outpace the number of workers available to support them via government financed social programs.
The second factor to consider is the state of the seniors’ finances. According to the Transamerica Center for Retirement Studies, the median savings for people in their 50s and 60s is $117000 and $172000 respectively. Many in those age cohorts recognize that it isn’t enough and fully expect to continue working past the traditional retirement age of 65 and the percentage that do is now at now at 20%, double the level of 10% in 1985. Coincidentally, the percentage of older Americans still working was 29% in 1949, about the same time at which the percentage of multi-generational families was as high as it is now.
The paucity of savings is further complicated by the global experiment with artificially low interest rates. Our national monetary policy for longer than a decade has been to push interest rates to the lower ranges to both encourage consumption – I have to hold back a laugh when I consider the prevailing credit card rates – and assist in managing the interest costs of our national debt. This is good for the federal government and companies, who have persistently taken on large amounts of debt for the purpose of buying back their stock. But it is horrendous for middle-aged and elderly savers who, at one time, depended upon the interest income from their lifetime of accumulated savings to fund their nest egg. As rates have been consistently low for more than a decade, those in or approaching their senior years have been forced to shift their investment focus to riskier investments in the hope of obtaining a higher return. This is a sea-change from the traditional approach of shifting to safer and more stable portfolios as retirement is reached. If you are 56 and have $172000 in savings, you are going to run a greater risk of losing it before you hit your final years.
The last factor is that the infrastructure for elder care is simply inadequate for the numbers of older Americans coming down the pike. Elderly Americans are covered for many, if not all, medical expenses via the Medicare program; most importantly for very elderly Americans, this can include some, but not all, aspects of nursing home residency. Corollary expense, such as hands-on care for assistance in Activities of Daily Living (ADL) is not covered and is left to the individual or family to pay. In addition, there is a cap for the per diem fee that Medicare will pay nursing homes for Medicare patients so there is limited profitability for nursing homes in the Medicare program. The upshot? There might be a specific number of nursing beds available in a locality but there is only a subset of those that are available to elderly citizens whose primary coverage is via Medicare simply because of insufficient revenue; this isn’t referring to the rates of return on the business but actually even maintaining any profitability at all.
The other aspect to the infrastructure question is simply one of labor. The dispersion of the American elderly demographic isn’t uniform and some areas are more hard hit than others. Maine is now what the World Bank classifies as a super-aged entity, noted by a fifth of the population being older than 65 years of age; this is the first state to reach this milestone and by 2030 – 11 years from now – more than half of the states in the country will cross that threshold. If there are an insufficient number of nursing home beds available for the most infirm, then the next best step is to do everything possible to keep them in their own homes. It is less expensive and theoretically possible to make this work – except that there are vicinities in which there isn’t enough available trained labor to support that goal of in-home services. Maine is the first state to face the situation and service providers are simply declining to take on new clients because they just do not have the people to provide the services; the families who are in the area are then forced into situations, often intense, for which they have no minimal resources and training.
Let’s connect the dots.
- The elder generations will grow significantly and disproportionately, relative to younger generations.
- These generations lack the assets to support the care that is likely to be required in their much later years as debility and deteriorating medical conditions require greater spending.
- The infrastructure, both physical and labor, for elder care is insufficient at present in many locations for this growth.
- The present political conservative political sentiment will preclude significantly increased spending on elder care programs and much of the burden will continue to be shifted back to the family unit as has already happened with retirement, cost of higher education and health care costs. Even if there is a massive shift towards greater social spending, the conversation among the Democratic candidates relates to healthcare and higher education benefits with little mention of Eldercare.
There are simply too many soon-to-be elders and they don’t have the money. Any correction of the hollowing out of the American Middle Class will likely take decades which means that even the younger generations aren’t going to have the resources and they in turn will have to rely in some measure on their own adult children when they reach their own elder years. This is the upshot of living through the Great Reversion since our forebears often had to stand for some measure of responsibility for their own parents and grandparents and this is how it’s going to be moving forward.
Raising children can be difficult and teens even more so. But our grandparents could get through those years with a sigh of relief at the lifting of responsibility because their own parents had the assets to largely support themselves in their dotage. Many of us are only going to have a few years of respite before we are forced to re-assume that responsibility for our own elders as they navigate their final years.
Understand that your own children are watching you and you’ll want to set a decent example for them when they are, in turn, responsible for you.