Over the past century, the United States has had an aging population. Recent statistics show that nearly 1 out of every 6 Americans are over the age of 60. Furthermore, one fourth of the population is in or approaching retirement. With this, there has been a shift in the structure of dependency. Now more than ever, there is a large dependence on the working-age population to support their elders. This shift has had many implications on the structure of American society, as well as the degree of burden on various age groups within the population. Increasingly, families, government, and society are trying to come up with the best way to support and care for an aging population. The ability of the government to provide old-age support is limited. As a result, it often varies on a state and local level. The main sources of aid include the Social Security system, national health programs including Medicare and Medicaid, as well as an important amount of financial and care-giving assistance from within the family. This paper explores the ways the United States is supporting its aging population.
The likely continuation of growth in population will put pressure on an already strained system for supporting the elderly. Starting at the end of the Second World War, the baby boom saw 75 million births between 1946-1964. This will have huge effects in the year 2030, when all of the baby boomers are retired. At which point the elderly will make up 18 percent of the United States population. Large numbers of retirees lead many to doubt whether the existing system will be able to provide for the unprecedented number of elderly dependents. A large problem is that many still do not recognize the United States as having an aged population. As a result, there has been little cultural change to deal with the shifting population demographics. William Ogburn calls this discrepancy a "cultural lag" which shows up repeatedly in social history: "that cultures-institutionalized patterns of behaviors- change less quickly than do population characteristics." It is thought that this is the very reason that many of the support systems in the United States seem so inadequate. This had lead to concerns over the rate of elderly people living in poverty.
Historically, government support for the elderly has varied. During the 1960s, aid was fairly generous. However, the past three decades have seen a shift away from funding social support programs. In the 1970s, concerns surrounding costs of these programs were raised. There was also an increase in the use of means-tested benefits, fixed resources, and the introduction of no new ‘big government’ programs. The 1980s saw the installment of additional cost control programs, as well as additional limits on Medicare. The emphasis shifted "from extending lives to the costs of extending lives." The general movement since the 1980s has been a continuation of cost controls. It is predicted that though it will continue to be a highly debated topic for legislators, the shift away from federal spending to more state and local responsibility will continue into the next century. With less federal money going to support state and local programs, there have been calls to privatize the system.
It is feared that the loss of federal support for the elderly could cause many to move into poverty. Recent trends could be misleading. Over the last couple decades, the large-scale trend has been a shift away from elderly poverty; the number of elderly people living in poverty has fallen since 1969, whereas the number of children living in poverty has risen for the same time period. In 1991, the median income for a household with a head aged 65 or older was $16,975, representing a gain of more than 40 percent in purchasing power from 1971. This median was twice the poverty threshold for an elderly couple of $8,241.
Indications are that the generation now approaching retirement will be better off than the generation before them. Dubbed the "good times" generation, the net worth of those born from 1919-1928 is 84 percent above that of the national average. This is the result of economic luck seemingly following them throughout their lifetime. The prime of their working years was the rapid earnings growth of the 1960s. During the 1970s and 80s, the value of their homes soared from rapid inflation. They were able to benefit form high real interest rates and the stock market boom of the 1980s. Furthermore, this is the first generation to really benefit from the increased income of two-worker families. This not only translates into higher levels of savings, but also this generation has higher amounts of private pensions and larger Social Security benefits from any proceeding one. While greater amounts of income seem promising, these numbers can be a misleading indicator of the true status of elderly poverty.
One reason these numbers are misleading is that the category of ‘elderly’ describes a very large and diverse group of people. Promising poverty statistics fail to capture variations within the subgroups of those considered elderly. One example is that poverty rates tend to increase with age. This observation is supported by the life-cycle hypothesis, introduced by Franco Modigliani. This theory suggests that people will draw on their assets as they get older, therefore, while disposable income may be relatively high in the early stages of retirement, it is often significantly lower as retirees begin to reach old age. Cross sectional data from 1988 showed this to be true; when the mean wealth of those aged 65-69 is indexed to 100, the mean wealth of those 70-74 is 66, and for people over 80, the number falls to 41.
Sex and race are two other subgroups for which there is variation from the overall trend. Poverty for elderly, married males is far below the average at only 5.3 percent. On the other hand, widowed females aged 65 and older had the highest poverty rates at 21.4 percent. Race too is a factor in the rate of elderly poverty. Poverty rates for elderly blacks and Hispanics coming in at two to three time higher than the rate for non-Hispanic whites.
The measure of how well off elderly Americans are is misleading because among the very old, wealth seems to play an equal or larger role in determining economic status than income does. One study shows that for people aged 65 and older home equity represents nearly 40 percent of total net worth. Interest earned from assets make up 29 percent, and rental property, stocks, bonds, mutual funds, and real estate make up another 17 percent. Indeed, the amount of financial wealth seems to play a crucial role in determining elderly poverty. For the non-poor aged, 28.4 percent of income was made up of interest and dividends; this number was only 4.3 percent for the poor aged.
While today’s elderly are far better off than they ever were historically, merely looking at poverty numbers can be misleading. There are large discrepancies within the population categorized as retired. The need for government support programs exists now as strongly as it ever has. The cost of living and of health care is on the rise. Many elderly heavily depend on government programs as well as cost-free support from family members. Of the government programs, the most significant are the Social Security System and the health care system, including Medicare and Medicaid. This paper will now consider each of these programs, as well as the role of family support in turn.
The Social Security program was established as part of New Deal legislation in 1935. The Act created a public insurance program in which people contribute a portion of their earned income to a trust fund while they are working. This then gets paid out upon retirement in an attempt to ensure a stable source of income. Importantly, Social Security is not a needs based program, rather, the amount of benefits one receives is dependent on the amount contributed during the working years. This is the main source of income support the elderly receive from the federal government. At one point over half of the working age population had pensions, the number has now fallen. One reason is that labor force dynamics have seen a change marked a shift to flexible jobs that lack the benefits of full time employment. This is the primary source of government support.
For the elderly who are severely economically disadvantaged, there is a Supplemental Social Security program. Unlike the primary Social Security system, this is support is need based. However, it is less stable and a greater variation exists between states. Despite this, the amount of Social Security Americans receive is relatively low in comparison to other developed countries. The sum of Social Security benefits, plus an additional 20 dollars monthly from OASI or other unearned income, plus the valued of food stamps comes to just 34 percent of the adjusted mean income for a single aged person, or 37 percent of a couples. The average benefit for other developed countries is 53 percent that of a single person and 59 percent of a married couple’s income.
Unlike Social Security, the health care system is slightly more need based. Divided into two separate programs, Medicare is contributed to while working while Medicaid is a means-tested program reserved for the poor, blind, and disabled. The health care system was conceived as an insurance program starting upon retirement because many people are covered by an employer’s plan while they are working, but loose coverage when they retire. Medicaid is also available for the extremely poor who cannot afford healthcare. The program is beginning to cover the costs of nursing homes. Health care is partially funded by the federal government as well as the state, which makes coverage vary between states. The long-term outlook for both these health care programs is a major source of concern. Medicare is projected to go into debt within the next seven years if spending and costs continue to follow the trends.
The benefits from both the Social Security system and the health care program are often not enough to support the needs of the elderly. Many rely on support from family members to stay out of poverty. The role of the family is another important reason the statistics on elderly poverty are misleading. Research on long-term care giving has found that families are the "primary and most effective source of support" with family members providing anywhere from 60 to 80 percent of long term care for dependent elders. The study found that institutional methods of care giving were utilized only when the demand for care exceeded the capabilities of the family.
Financial dependence is one way in which younger generations directly support the elderly. Studies imply that approximately 20 percent of the elderly population receive some financial transfers from their adult children. In addition, evidence suggests that younger generations help to pay for in-home personal care and the purchase costs of technologies for the elderly.
Co-residence is another important way elderly poverty is avoided. One study estimates that without co-residence, the elderly poverty rate would increase by as much as 42 percent from the current rate. The majority elderly being provided for by families are older, non-married elderly. This is the same group that had the higher occurrences of elderly poverty. For the unmarried elderly, a 1984 estimate showed that without co-residence and a relative’s financial support and ‘functional assistance’ an additional 1.3 million people would fall below the poverty line.
Some groups depend on family support more than others do. Black and Hispanic elderly were found to be more likely to live in a co-residence than non-Hispanic white elderly. The study also found that black elderly co-residing with others tended to be more vulnerable than other sub-groups are; they are more than twice as likely to evade poverty through co-residence as white elderly. Co-residence turns out to play a large role in the misleading nature of elderly poverty statistics. The method by which poverty is measured is problematic because it fails to pick up on the hidden aspects of dependence.
The United States has an aging population, which has large implications on the dependency structure of society. As a generation, the new retirees are financially better off than their predecessors are. However, looking at overall poverty rates do little to shed light on the situation faced by various sub-groups. There are many that cannot afford to support themselves into retirement. To help with this, there are various public programs in place to support the aging population. The most fundamental of these programs are Social Security and the health care systems. As more and more of the population reach retirement age, there will be increased demands on these programs to provide old age support. However, many people worry about weather these systems, especially the health care system, will be able to keep up with a changing population. The social security programs have a lot to face at the turn of the century. "Demographer’s beliefs that old-age security motives are not relevant in developed countries, however, are probably based as much or more on indirect evidence and assumptions about the nature of "modern society." Specifically, they assume that combinations of private and universal public pension and old age benefit programs have obviated the need for support from children in old age." The role families play in supporting the elderly population cannot be underestimated, especially for more vulnerable groups such as women and minorities. Younger generations play a crucial role in supporting the aging population.