Family Finances

Overlooked and Undervalued: How Rising Dependent Care Costs Hinder Household Budgets

December 3, 2019  • Financial Security Program & Dyvonne Body

Key Points

  • Dependent Care Costs are Climbing – And Families Struggle to Cope
  • Women Bear A Disproportionate Burden, Especially Women of Color
  • Shifting work and family dynamics, without the proper public policies to match, will worsen the financial security of millions of household

From infants to elders, every family is likely to need care support at some point in their lifetime. However, the costs associated with care for children, for elders, and for people with disabilities are beyond the means of many families – and growing. The Aspen Institute’s Financial Security Program (FSP) is pleased to announce the launch of a research project to illuminate these dependent care challenges, their impact on household finances across the nation, and systemic solutions being championed by leaders in a variety of sectors.

Family/dependent care intersects with a number of important issues that shape family financial security, including jobs, wages, changing demographics, social assistance, and broader social welfare systems. – Survey Respondent, 2018

Last year, our work interviewing and surveying over 100 financial security experts revealed that rapidly growing costs in three major areas pose a significant threat to the financial well-being of US households: housing, out-of-pocket medical expenses, and dependent care. We seek to improve the present and future financial security of American households by shedding light on the challenges in each of these areas.

Dependent Care Costs are Climbing – And Families Struggle to Cope

The costs borne by a caregiver, whether they be a family member or a professional care provider, are frequently overlooked. The workday extends well past 5 PM for those caring for children, elders, or adults with disabilities. The proportion of adults providing personal care or financial assistance to a parent has more than tripled in 15 years to over 20%. Furthermore, costs for facility and in-home care services have risen on average by 1.5% – 3.8% per year, with families having to pay more out-of-pocket. Unreliable or expensive childcare is also a large obstacle for many families. Childcare costs rose more than 70% between 1985 and 2011 and have continued to increase for working families. When taken together, each of these factors contributes greatly to unplanned absenteeism and disruptions to workforce productivity, in addition to impacting household budgets.

Millions of people, including children, adults, and elders, require long-term services and supports (LTSS) for disabling conditions and chronic illnesses. While LTSS is often associated with older adults, around 40% of those needing it today are under the age of 65. Services are extensive and can include assistance with activities of daily living, programs for the specific needs of children, nursing facilities or adult daycares, and even supported employment for working adults with disabilities. However, LTSS expenses are growing, with some costs exceeding $90,000 annually. Few families and individuals can afford to pay out-of-pocket and often rely on government programs like Medicare or Medicaid to help cover costs. For working people, the high cost of LTSS can impact the ability to earn income, accumulate assets, and save for the future.

The caregiving workforce also faces challenges that are unique to their job. Professional caregivers are among the lowest-paid workers in the country. Positions in direct care and childcare often require minimal training and no college degree. Despite being granted minimum wage and overtime protections in 2013, these rights have proven difficult to enforce and lack additional protections for benefits, unionization, and occupational health and safety. Demand for the direct care workforce, which provides daily assistance to millions of elderly and disabled individuals, is expected to grow more than any single occupation in the nation. Without competitive pay and labor protections to attract and retain professional caregivers, family members will have to increasingly take time away from their jobs to fill these roles. A study by MetLife estimates that the US foregoes a total of $3 trillion in lost wages, pensions, and Social Security benefits when adults leave the labor force to provide care for relatives.

Women Bear A Disproportionate Burden, Especially Women of Color

Economic costs related to caregiving tend to be greater for women. It is estimated that 6 in 10 informal caregivers and 9 in 10 professional caregivers are women. A study by AARP finds that women spend twice as much time providing care than men and are more likely to leave the labor force early due to caregiving responsibilities. The total amount of lost wages for women who leave the workforce is 60% greater than that of men, with individual losses equaling $142,693 for women and $89,107 for men.  Women greatly outnumber men in caregiving occupations, such as health care and care support (87.7% female) and early childhood care and education (93.5% female).

Women of color are increasingly overrepresented in these low-wage occupations and are disproportionally exposed to the financial insecurity associated with the profession. Further, Latina (21.0%) and African American (20.3%) women provide informal caregiving at higher rates than white women (16.9%). In addition to having fewer financial resources to pay for rising caregiving costs, many people of color face the challenges of finding services that are culturally and linguistically appropriate. Few studies have examined how factors like race and ethnicity, sexual orientation, and socioeconomic or disability status affect caregiving.

A Look Forward: The Future of Dependent Care

Shifting work and family dynamics, without the proper public policies to match, will worsen the financial security of millions of households. Medical advances are allowing adults to live longer, including those living with a disability or a chronic disease. The average birth rate is declining annually and women’s labor force participation and earnings play a greater role in family incomes than ever before. The share of families of color is expected to double, emphasizing the importance of income and wealth equality for future household stability. Due to these trends, there is evidence that dependent care costs will pose increasingly hefty financial burdens on families and individuals with care needs.

Caregiving has been historically overlooked and undervalued in the formal economy, partially due to its deep roots in gender and racial biases. Without greater attention, the impact on household financial security will be profound. The Financial Security Program’s research project on dependent care will explore the challenges surrounding the rising costs of dependent care and highlight promising solutions for families. We will interview a diverse set of experts, synthesize existing research, and develop an evidence-based understanding of the ways that our current system of dependent care provisions harm household financial security and what can be done about it. Dependent care intersects with many important issues that shape family financial security, which is why FSP is dedicated to the issue.

Aspen FSP’s work on dependent care is made possible with support from Citi Community Development.