Ben Russell

"Are America’s Children Being Cheated by the Elderly"

By Ben Russell

The two main dependency groups in this country are children and the elderly. It may not seem as if there is much connection between these cohorts (people over age sixty-five and those under ten) but they play a significant role in the well being of one another. The question is whether both groups can simultaneously increase their economic welfare or if it is such a case that one cohort can only increase their welfare at the expense of the other. In order to determine the elderly’s effect on the economic well being of children, one must look closely at the two cohorts and the changes that have been made with respect to them over the years. In the end, it can be determined that advancements that have been made over the years to increase the financial well being of the elderly have negatively effected the economic status of children in this country to a surprising extent. In Samuel Preston’s article, "Children and the Elderly: Divergent Paths for America’s Dependents", he lays out how and why this phenomenon has occurred.

In the year 1957, there was an unprecedented fertility rate in the U.S. of 3.68 children per woman. The two decades that followed, the fertility rate fell to half of that value, stabilizing at around 1.8 children per woman. By 1982 the proportion of children under the age of 15 in this country had dropped 28 percent from its 1960 level. At the other end of the spectrum, things were drastically different. The number of people age 65 and over increased by 54 percent between 1960 and 1980. In 1971, the U.S. Census Bureau projected that the population aged 65 and over would grow by 17 percent over the next ten years. In fact, the elderly population grew 28.4 percent from 1971 to 1981. This unanticipated growth spurt was caused by a rapid decline in old age mortality increasing the life expectancy in this country. One would think that such a rapid change in age structure would have favorable consequences for children and disturbing ones for the elderly. However, conditions have deteriorated for children and have improved dramatically for the elderly and demographic change has been at the heart of these developments.

The best way to determine the relative well being of children versus the elderly is the percentage of the cohort who live in poverty. Living in poverty, as defined by the Census Bureau, is a family with money incomes less than three times the cost of the Economy Food Plan (determined by the Department of Agriculture). In 1982, the proportion of elderly living in poverty was below the national average. Only ten years earlier the proportion of elderly in poverty was twice the national incidence of poverty. The main factor in this reduction of poverty has been the expansion of social security benefits. Conversely, in 1982, the prevalence of poverty among children under 14 was 56 percent greater than that among the elderly, whereas in 1970 it was 37 percent less. Public spending on the elderly since 1960 has remained about three times greater per member of the recipient group than the expenditure per child. Starting in 1979 however, public programs benefiting children have been rolled back while programs targeted towards the elderly have remained consistent or have even expanded. The total federal expenditure on all major child-oreinted programs was about $36 billion in 1984. This works out to about one sixth of the $217 million the government spent on the elderly.

One of the programs directed towards children that has had to endure some of the largest cutbacks has been government money to public education. The National Institute of Education’s (NIE) budget in the year 1981 was $65.6 million, relatively close to the $75.6 million budget of the National Institute of Aging (NIA). By 1984 the NIE’s budget was down to $48.2 million while the NIA’s budget reached a staggering $112.3 million. Not surprisingly, after these reductions reports from commission after commission have concluded that the quality of educational products has eroded. This is most aptly seen with the decline in SAT scores. The high school graduation rate has even dropped from 76.3 percent in 1965 to 73.6 percent in 1980. Older children are more often contributing to their own support by working. The elderly on the other hand are contributing less.

Our society uses two main sources for transferring resources to dependents: public transfers and family transfers. Family transfers have proven to be the more vital transfer as roughly one-third of GNP in the U.S. is in the form of transfers from income earners to non-income earners within the same family. Families over time have relinquished more and more responsibility for support of elderly dependents to the state. Although parents cannot as easily relinquish the responsibility of their dependent children, many families are just having fewer kids. While conjugal families are divesting themselves from care of their elderly and children, there is also less stability within the family. One argument for the lack of stability growing amongst families is based on the idea of uprising individualism. Married couples are more likely to break apart with the awareness of themselves as unique and the recognition of the right of that self to pursue selfish goals.(Preston p. 445) This means that people feel less constrained by others welfare to remain in what they consider to be a marginal marriage. Whatever the increase in divorce is caused by, it certainly has a negative effect on the well being of children. The elderly however are not affected at all by the increase in family instability because of their prior disengagement from the conjugal family.

Besides the family, the state is the other major channel for transferring resources to dependents. Public decisions for how and how much money is transferred in a democracy such as ours are influenced by the power of special interest groups. There is no special interest group like the elderly; they have size, wealth and respect. Children are another special interest group, yet they have none of these advantageous qualities. The other major advantage for the elderly is that every young voter can confidently believe that they will one day belong to this special interest group. Adults vote on behalf of the elderly, because they will one day be one. They do not vote on behalf of their own childhood. Therefore, public decisions are often beneficial to the elderly instead of being geared toward the younger generation. It is also helpful that the elderly are the cohort with the largest percentage voting. It’s clear that the elderly are in frequent touch with their children and grandchildren, but it’s also clear that they don’t automatically assimilate their offspring’s perceptions and concerns.(Preston, p. 447) One item the elderly certainly don’t worry about is whether increased benefits for them would undermine their children’s willingness to care for them when they do leave the labor force and become dependent.

Along with family and politics, a third demographic mechanism helping to explain the trends lay out is the effect on the major industries serving the two age groups. Health and education are two of the largest industries in the U.S. Health services primarily serve the elderly while education is geared towards the young. The question is how have these two industries advanced in order to cater towards their respective cohorts which are demographically changing. It has already been shown that the quality of products in the educational system has deteriorated. Is this a direct cause of the declining numbers in school however? Numerous studies have shown that physical resources, expenditures and class size are immaterial in relation to student performance. What could explain the decline in the academic achievement is the 49 reduction in teachers’ salaries from 1973-1983. This occurred when the demand for teachers shifted downwards because of the declining school aged population. Teachers were earning lower wages and a disproportionate number of the better teachers opted to leave their positions. While numbers of teachers have been stagnant and salaries and quality declining, opposite trends have been occurring in the medical profession. Tremendous amounts of capital have flowed into the health care industry and American medical schools are overflowing with some of the brightest minds in the country. In short, the group with faster growth (elderly) has been far better served by their specialized industry than the group with declining numbers (children). (Preston, p 450)

Preston lays out a very in-depth and convincing argument in his paper placing much of the blame of the increasing poverty levels of children on the elderly. He does not accuse the elderly of being villains against children but instead shows how benefits and advantages given to the elderly have directly effected the youngest generation in a very negative way. A couple years after Preston’s article, Richard Easterlin came out with two articles arguing that there was more to this demographic phenomenon. In Easterlin’s first article, "The New Age Structure of Poverty in America: Permanent or Transient" he does not defy Preston’s argument that improved government programs for the elderly have resulted in declining relative poverty rates of children. Easterlin adds on to Preston’s argument with the idea that the rise in the poverty rate of children is a result of market forces and would have occurred even in the absence of programs improving the lives of the elderly.

Real wage rates of younger males, as measured by year-round full-time income, have declined noticeably relative to older males. Younger females show deterioration as well in real wage rates relative to older female workers, but the magnitude is less. From 1960 to 1980 these loses in real wage rates have dangerously lowered the income earning opportunities of adults in their family-forming ages. Unemployment has also been seen to be highest amongst the younger, less experienced workers. For female-headed families, which have proportionately risen from 10 to 25 percent since 1968, the situation is even worse. Children are more severely affected than adults by a rise in female-headed families, because the proportion of children to adults in female-headed families is greater than in married-couple families. (Easterlin, p. 201)

Divergent trends in the labor market conditions by age have produced divergent trends in poverty rates by age. The two factors that account for the diverging trends are the lulling in the growth of aggregate demand and the increase in the supply of younger relative to older adults. Both of these factors have caused deterioration in the wage and unemployment rates of younger compared to older workers. Before 1960 the relative number of younger males was fairly stable but starting in the 1960’s, the relative number of younger males began to noticeably rise. These younger workers are in their child bearing ages so when their per-capita income is down, it affects not only them but the children they are attempting to raise. Easterlin lays out this argument not alluding much to Preston’s beliefs that increased spending on the elderly is the cause for the economic difficulties of children. He does however admit that just because he believes market forces have played an important part in the increased poverty rate of children, that does not absolve government policy of all responsibility.

Easterlin writes a second article a few years later with Diane Macunovich. Their results once again do not contradict Preston’s findings on children’s economic status, but they do suggest somewhat of a revision. Easterlin and Macunovich do not use measures of earnings or family income to determine economic well-being, but instead use the measure of economic status to take as full account as possible of the demographic adjustments that parents make to influence their economic status and that of their children. A child’s economic status is defined as the total money income per adult equivalent in their household. The adult equivalents in a household is determined by giving the first adult a value of 1.0 and all subsequent adults a value of 0.8, the fist child a value of 0.4 and all others, 0.3. Children are factored in much less because their economic requirements are, on average, substantially less that those of adults.

Easterlin and Macunovich found that the average economic status of pre-school aged children has improved somewhat since 1969 but that the difference between those worse-off and better off has increased. Their analysis shows that the principle source of improvement in the economic well-being of children has been changes in parents’ life cycle demographic decisions. For both two-parent and single-parent families, children have benefited from a reduction in fertility and later age of childbearing. The fact that parents have added extra workers to the household, through the mother’s increased labor force participation or doubling up at home with grandparents, has also greatly benefited children. These two factors, reduced and delayed fertility as well as more income per household have been able to offset the adverse impact on children’s average economic status of the break-up or non-marital unions.

Preston set the standard for determining why the economic well being of children declined so severely from 1969 to 1984 while at the same time the previously poverty stricken elderly were having great economic success. Easterlin was a student of Preston’s and perhaps that is the reason why he never rebutted any of Preston’s arguments but solely added on to them. Easterlin definitely had his own ideas on the phenomenon but concurred with most of what Preston believed. Either way it can be determined that America’s children are most certainly being cheated by the elderly.

References

Samuel H. Preston, "Children and the Elderly: Divergent Paths for America's Dependents", Demography, Volume 21, No. 4, Nov. 1984, pp. 435-457
Richard A. Easterlin, "The New Age Structure of Poverty" in Population and Development Review, Volume 13, Number 2, June 1987, pp. 195-208.
Dianne J. Macunovich and Richard A. Easterlin, "How Parents Have Coped: The Effect of Life Cycle Demographic Decisions on theEconomic Status of Pre-School Age Children, 1964-1987, in Population and Development Review, Volume 16, Number 2, June 1990, pp. 301-325.