When governments provide free formal care, families of the elderly reduce their informal care hours, and become more likely to work and work longer. These are the findings of a study by Asako Ohinata and colleagues, to be presented at the Royal Economic Society''s annual conference at the University of Bristol in April 2017.
The authors used a 2002 change in Scottish low that guaranteed free formal care to the elderly to assess the change in behaviour of informal carers, and also to compare it with care-giving in England and Wales.
In Scotland, free domiciliary formal care reduced the probability that an individual informally takes care of another adult living in the same household by approximately 11%. Among care-givers aged 65 and above, care hours fell by about 10.8 hours per week, labour force participation rate rose by 5% and hours of work also rose.
These results suggest that families who have no access to free formal care are working less than they would prefer. The authors conclude: ''Our results imply that as care costs rise in England, there will be greater demand for informal care – and this will conflict with paid work by informal carers.''
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Governments around the world are struggling with how to provide for the care of the elderly. Policy-makers need to consider how financial support affects how people use care. For example, less generous financial support to pay for formal personal care may induce the elderly to rely less on formal paid care and more on informal care provided by family members.
Understanding the magnitude of such changes in the demand for formal care is important for designing care arrangements. This is important because the living wage is likely to raise formal care costs in the short run, and the forthcoming changes in the Care Act is likely to have more complex effects on costs in the longer run. It seems likely that rising costs will make the elderly rely more heavily on informal care from family members.
In this paper, we present evidence of how caring arrangements responded to one of the largest natural experiments ever conducted. This occurred in UK as a result of the greater powers devolved to Scotland that led to the 2002 Community Care and Health (Scotland) Act (CCHA), which offered free formal personal care to those residing in Scotland, without means testing.
Because the policy only applied to those in Scotland, observations in England and Wales can be used as a control group in order to identify the policy effect. Using the 1998-2007 UK Family Resources Survey, we investigate how the CCHA changed the informal personal care-giving behaviour both in terms of the number of hours of care provided, and on whether informal care is used.
We find that the Scottish policy of free domiciliary formal care reduced the probability that an individual informally takes care of another adult living in the same household by approximately 11%. For example, those who cared for a spouse at home, the reduction in the number of hours of informal care amounted to 1.2 hours per week. And while we did not find any effect on the probability of working, we did find that the hours of work increased by approximately 0.4 hours after the introduction of the free care policy.
Since the vast majority of informal care is given by individuals aged 65 and above, we find stronger effects among this age group – we find that care hours fell by about 10.8 hours per week; the labour force participation rate rose by 5% and hours of work also rose.
The results would imply that as care costs rise in England, there will be greater demand for informal care, and this will conflict with paid work by informal carers.
The labour supply and care supply of informal carers: Impacts of the financial support for long-term elderly care –
Bruce Hollingsworth, Asako Ohinata, Matte Picchio and Ian Walker
