Ludovico Carrino and colleagues¹ look at the effect on caring of an increase in women’s working hours as a result of a rise in the State Pension age. The effect appears to be a lowering of support for the elderly.²

Competing challenges for policy

Ageing societies face an important policy trade-off: Increasing demand and costs for long-term care (LTC) require governments to tighten access to formal-care services, transferring the responsibility for care to family and friends (2,5).3 Concurrently, in response to concerns about the sustainability of pension systems, governments have also raised the State Pension age (SPA) to increase the labour supply of older workers approaching retirement, particularly women (6). This policy increases their labour market supply but may reduce their informal care supply, reducing their ability to compensate for tightening rules for formal care eligibility.

How women’s supply of informal care changes in response to an increase in the State Pension age is a question critical to both pension and long-term care policy. This question has wide economic relevance, as informal care represents the majority of care provided to older people in OECD countries, and generates substantial economic value, estimated at £132 billion a year for the UK in 2015, i.e., close to the total public health expenditure (7). In the UK, more than 30 per cent of informal caregivers are aged 55 to 65 and are predominantly female, the group most strongly targeted by state pension age reforms.

From a theoretical perspective, the impact of increased labour supply on caregiving is not clear: on the one hand, informal care supply may decline in response to reduced time allocation decisions imposed by a demanding job (8). On the other hand, if caregiving is inelastic to employment (e.g., due to moral obligations), time allocation for leisure time may decline, keeping informal care provision constant (9).

Crucially, a decline in the supply of informal care may lead to a reduction in the well-being of older people in need of care.  Unless the shortage in caregiving is compensated by an increase in either the supply of formal care or the support received from other informal providers, it will lead to a net loss of care availability for older people, resulting in a reduction in overall welfare. This will also have cost implications: an increase in older people’s unmet needs will likely reduce their physical, mental and cognitive functioning, in turn increasing their demand and costs for formal health and long-term services later in life (2,4).

In this study, we examine how increased labour supply due to increases in the State Pension age affects the amount of care provided by women to dependent family members and friends in the UK. Between 2010 and 2018, the average State Pension age increased from 60 to 65 years for women born after 1949, increasing their labour supply by an average of 10 percentage points (10).

Key findings:

An increase in women’s working hours — as a result of a rising State Pension age — significantly reduces the amount of care supplied to dependent older parents living outside the household. This effect is particularly strong for women working in physically and psychologically demanding jobs. We show that this reduction in women’s caregiving is not compensated by an increase in the care supplied by other informal or formal providers. Therefore, it results in lower total support received by older parents, reducing their overall welfare.

Higher labour supply and female caregiving

Some economic models predict that, after retirement, caregiving increases as the opportunity costs of caring decline (2, 11). Therefore, increasing the state pension age is predicted to  reduce informal care provision, as the opportunity costs of caring increases for those that postpone retirement. However, if the caregiver is altruistic, she may not reduce care supply as doing so might decrease overall utility (e.g., by triggering feelings of ‘guilt’), potentially offsetting any benefits from working longer (12, 13).

Establishing the causal effect of employment on caregiving is empirically challenging, as the choices of care and work influence each other, and may depend on unobservable individual and family characteristics. Only a few recent studies have looked at this relationship. Whilst they found some evidence for a negative trade-off between work and care (9, 14, 15), these studies do not focus on older caregivers, and rely on strong assumptions about the exogeneity of employment decisions.

In this paper, we exploit the fact that becoming eligible to receive the State Pension is a strong exogenous incentive to retire (16). We use State Pension eligibility status as an instrumental variable for working hours, in models where the dependent variable is either the probability to provide care (extensive margin), or the number of care-hours provided (intensive margin). We exploit a recent reform that increased the State Pension age for women born after March 1950 in the UK, based on date of birth, which significantly raised female employment rates by around 10 percentage points (10). The reform generated variation in pension eligibility for women of the same age, e.g., a woman aged 61 in 2011 is eligible to claim the SPA, while a woman of the same age interviewed in 2013 is not. State pension eligibility is as-good-as randomly assigned, as it is legally based on birthdate. Crucially, our instrument should affect caregiving only through its effect on employment. As individuals who are above the SPA (eligible) are older than those below SPA (non-eligible), which could influence the propensity to provide care directly, we add fixed effects for both age and year. Conditioning on age, being above the SPA is unlikely to directly affect caregiving other than through employment. As a sensitivity check, we include controls for caregiver’s health and income, which might change at retirement and affect caregiving.

We use data from the Understanding Society survey collected between 2009 and 2018 for women aged 55 to 65, who engaged in paid work at some point in life. The dataset includes information on respondent’s (and partner’s) work and caregiving hours (measured in hours/week), alongside other socio-demographic information. We derive pension eligibility status by comparing respondents’ age and date of interview, based on official legislation (17).

Following the relevant literature, we estimate the model's intensive margin on a subsample of women who are providing a positive amount of care, while the extensive margin is estimated on the whole sample (18). As the opportunity costs of caring may depend on whether the help is provided inside or outside the household, we consider the two care-settings separately (14).

Descriptive statistics

On average, among women in our sample, extra-household caregiving (mostly for parents) is more common but less intensive than in-household care (mostly for partners), see Figure 1-a. Moreover, there is a negative and graded descriptive association between the intensity of work and the intensity of informal care provided (Figure 1-b).

Main results

Overall, we find that an increase in working hours due to being below the State Pension age because of the reform, leads to a reduction in the intensity of extra-household caregiving (Table 1). Among women who provide care, a 10 per cent increase in average working hours (c. 1.5 hours/week) reduces hours of caregiving by around 4 per cent (c. 20 mins/week). An increase of 10 working hours per week results in a reduction of 2.1 care-hours per week. In a year, this amounts to just over 110 ‘foregone’ care-hours, valued around £2000 (£17.2/hour, see (7)). The effect is substantial, given that the average work-hours are 30 hours/week, and that roughly half of caregivers provide less than 5 hours of extra-household care.

Although we find no evidence that women stop giving care completely (column 1), we find evidence of significant reductions in the probability of providing both intensive (20+ hours/week) and meaningful care (5+ hours/week). Conversely, we find no effect for in-household care provision.

In further analyses, we find that this reduction in caregiving is not compensated by an increase in the partner’s provision of care, which is unaffected by the increase in women’s working hours.

The role of job-type

Women in more demanding occupations may find it harder to balance care duties while working (8, 19). We test this hypothesis using a validated index built by Kroll and Lampert (20), which classifies occupations (4-digit ISCO codes) based on their level of physical or psycho- social demand. High-demand jobs include, for example, craft, transport/travel and sales occupations, plant operators, social workers.

We find that the decrease in caregiving due to increased hours is driven by women in high-demand jobs. For example, for those in high-psychosocially demanding jobs, a 10 per cent increase in working hours leads to a decrease of 6.5 per cent in extra-household care (Table 1, column 5). We find no evidence that increased labour supply reduces caregiving supply among women in low-demanding jobs.

Effect of higher labour supply on support received by dependent parents

While we find that women ineligible for the State pension work more hours and therefore reduce the amount of care they provide outside of the household, this might not affect the total support available for their older parents in need-of-care, if ‘foregone’ care hours are compensated by an increase in care provided by other sources, either other informal helpers or paid carers.

We test this hypothesis using data from the English Longitudinal Study of Ageing (ELSA), focusing on older parents and their daughters aged 55 to 65 before and after the onset of the pension reform (2006-2017). We measure care use with a binary variable for any-care received, a continuous variable for the number of tasks that the older person receives help with (e.g., help with shopping, housework, mobility, dressing, eating), and a variable for care-hours received, from each caregiver. We build a binary variable capturing whether respondents have any daughter above the SPA (as opposed to having all daughters below the SPA). We estimate the effect of having all daughters below SPA on care use, in an individual fixed-effects model controlling for respondent's age, eldest daughter's age, and time controls. The model relies on the same identification strategy described above.

Our results indicate that having all daughters below-SPA due to the pension reform reduces care intensity (Table 2, column 2), as measured by the total number of tasks they get help with, from any caregiver, as well as the overall amount of care hours received (waves 6 to 8 only, not shown). We also find that daughters’ help-intensity decline when all daughters are below SPA, and that there is no simultaneous increase in the care provided by other informal or formal/paid helpers. Consistently with our previous analysis, we find no evidence that the respondent stops receiving help altogether, but instead show a reduction in the intensity of care received (Table 2, column 1).

Policy implications

Our study shows that women in the UK working more hours, as a result of being ineligible for the State pension, reduce the intensity of informal care they provide to older parents. Crucially, we find that the reduction in informal caregiving is not compensated by an increase in the provision of care from other family members, nor by an increase in the use of formal care. This may worsen the health and well-being of older adults in need of care, by increasing their unmet needs. This could, in turn, increase healthcare costs in older age (21-23). Our results suggest that the net welfare gain arising from raising the labour supply of older women may be smaller than anticipated given a reduction in their ability to provide care for older parents.

Policies that support vulnerable older people and their caregivers when care-work conflict emerge may be warranted. For example, expanding caregiver’s allowances coverage to women who face an increasing State Pension age might increase their ability to care for older relatives and improve long-term care outcomes.  It is also worth considering policies that increase the supply of formal care services, for example, by relaxing eligibility rules for less expensive formal care for older people whose primary caregiver was subject to an increase in their State Pension age.  Finally, workplace interventions could be implemented, by incentivising employers to offer flexible work arrangements for women in high-demand jobs who have caring responsibilities.

Notes:

1.Ludovico Carrinoa,b  Vahé Nafilyanc, Mauricio Avendaño Pabonb,d

aDepartment of Global Health & Social Medicine, King’s College London, London, UK

bDepartment of Economics, Ca' Foscari University Venezia, Italy

cKing’s Business School, King’s College London, London, UK

dDepartment of Social and Behavioural Sciences, Harvard University, Boston, USA

2. This piece is largely based on Carrino L, Nafilyan V, Avendano M. Should I Care or Should I Work? The Impact of Working in Older Age on Caregiving. HEDG, c/o Department of Economics, University of York, 2019. More information and material are available from the authors.

3. The numbers in paranetheses refer to the numbered references at the end.

References:

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