Business & Economics

Still living with your parents? Inequality hits home

Claude Fischer

In recent days, President Obama has returned to speaking on the theme of rising economic inequality in America since the 1970s (e.g., here and here), addressing the insecurity that it has caused the middle class, which now needs more hands on deck working harder to keep up, and speaking about how it has demorilized young people unlucky enough not to be born into advantage. To be sure, some claim that inequality has not been widening and that, even if it has, the middle class has nonetheless done just fine (e.g., here). The dueling calculations in this debate can get pretty complex, though most serious scholars agree with the President’s summary (see these earlier posts: herehereherehere). A new study reveals what has been going on from yet another viewpoint: that of parents and grown-up children who are living together.

(source)Demographers Joan Kahn, Frances Goldscheider, and Javier García-Manglano have just published an important paper [1] tracking Americans’ living arrangements over 50 years. Their results send two strong messages: One, the economic struggles of young adults today, particularly of men and of the less-educated, have led many more of them to live with their parents than before. And, two, young people living with parents increasingly depend on their parents’ income. Both findings reinforce the President’s concerns about our economic stagnation.

Being Home

The first analysis Kahn and her co-authors present, drawing on massive census data, shows how many and which adults – adults here meaning those 25 and older – were living with their parents at six points in time: 1960, 1970, and so on to 2010. The percentage of Americans aged 25 to 44 who shared a home with their parents dropped from about 12% in 1960 to a low of 9% in 1980 and then nearly doubled to 17% by 2010. For those 45 to 64, the low was 4% in 1990 and rose back to 6% in 2010. Coresidence was definitely on the rise over the last generation.

As to which people were likelier to be under the same roof as their parents, some of the factors you would expect mattered: Many things (including immigrant status) being equal, those who were unmarried, those who had not been to college, and those who earned little were likelier to live with parents. Critically, however, Kahn et al find that some factors became increasingly important over the years, centrally those reflecting the economic circumstances of the young person. In 1960, young people with jobs were more likely than those who were unemployed to live with their parents; in 2010, it was the reverse, the unemployed were likelier. Similarly, whether the young person had graduated college and how much he or she made marked those who lived with parents much more in 2010 than in 1960. Another detail is that this development has been notably stronger for adult sons than daughters.

What these and other results mean is that in 1960 parent-child cohabiting tended to be about whether the parent needed, for financial reasons, to live with the adult child. By 2010, the decision to cohabit more often depended on the child’s financial situation. Plainly put, a generation ago, cohabiting was typically children taking care of needy parents and now it is increasingly parents taking care of needy children – particularly sons.

Paying the Bills

Kahn and her coauthors go on to look more closely at those households in which adults lived with their parents. They ask the question, In these families, who depends financially on whom? And how has that dependency changed? Their indicator of financial dependence is whether the total income of the adult child (and, if married, of the child’s spouse) comprised less than 40% of the income both generations brought home. That is, who was probably paying the lion’s share of the bills?

The change is startling. In 1960, only 19% of adult children living with their parents were dependent, that is, contributing less than two-fifths of the household income. By 2010, 48% were! The trend is displayed in the graph below. The red line refers to the numbers I just gave – the rate of dependency among the children. The blue line shows dependency from the other side – the percentage of parents who contributed under two-fifths of total income. Their dependency rates shrank.

Kahnet al Dependency

Although the authors do not raise the issue, these numbers actually understate the dependency of the children. They are only about income; they do not reflect the fact that the elderly usually have more wealth – specifically, owning a home – than their children. Neither do they reflect the fact that, since the 1960s, elderly parents have had their medical expenses covered by a government program (Medicare) and the children have not.

Kahn et al also look at what characteristics of the children and the parents increases their risks of being dependents – and how that has changed. The takeaway is that, all else being equal, dropping out of high school, being in one’s 20s or 30s, and being male have become “riskier” for young people over time.

Implications

Whatever the complicated debates over the minutia of income data that swirls around the issues of inequality and middle class struggles, the results Kahn and colleagues present show us clearly how the economic trends of the last few decades have played out in American homes. Changes in co-residence and changes in the income balance between generations reveal, as the authors say, “the general trends toward the greater economic security of older adults and the increasing financial strain experienced by younger adults.”

In the last 50 years, this country has done a great job – by maintaining Social Security benefits, expanding Medicare, underwriting home-ownership, securing pensions, and the like – of improving the economic circumstances of the generation that rode the post-war boom years to wealth and comfortable senior citizenship. This country has done an increasingly poor job – by letting the minimum wage stagnate, dis-investing in schools, public colleges, and infrastructure, undercutting workers’ leverage, and the like – of supporting the economic aspirations of that generation’s children and grandchildren.

What will happen when the young Americans who now depend so much on their elderly parents themselves become elderly parents?

Cross-posted from the Made in America blog.

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Comments to "Still living with your parents? Inequality hits home":
    • abdez

      We should definitely think about family planning efforts through this lens. If adult children are still dependent on their parents, should we, as a society, discourage them from having children of their own? Perhaps it’s time to re-think the earned-income credit for children (or flip it so it’s now an earned-income credit for dependent adults…

      [Report abuse]

    • Alain

      Italians and most Continental Europeans have been doing this for the longest time. Don’t know about the UK.

      Italians dismiss US criticism by saying their kids are making the most of their higher education by staying home while they wait to get “sistemato” (another way to say waiting for marriage and a job in their chosen profession.) Couple that with the fact that Italians don’t see their kids living at home as burdens once they hit eighteen as we do here in the States.

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    • Rachel

      Very well and plainly stated.

      I disagree with the commenter who asserts that the older generation “have voted themselves benefits at the expense of the next generations.”

      As Professor Fischer points out in the next-to-last paragraph, the actual problems we have are because “this country has done an increasingly poor job” of creating sustainable economic conditions “by letting the minimum wage stagnate, dis-investing in schools, public colleges, and infrastructure, undercutting workers’ leverage, and the like.”

      Hence even without “benefits” for older people, we would still face the same issues of poverty and debt–in fact things would only be worse across the board.

      After all, elderly Americans were not responsible for crashing Wall Street and the banks–let’s remember who was.

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    • Anthony St. John

      Prof. Fischer, you do a great job documenting the failures of our society.

      In fact perpetual wars, destruction, pollution, poverty, starvation, greed, hate, propaganda, immorality, etc. are inexorable threats to our long-term success as a species.

      Can Berkeley be dedicated to providing world leadership for finding and implementing solutions to the problems that are destroying our society and civilization before we run out of time?

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    • JJJ

      We can hardly talk “long term” about our species at all, since we are just a fleeting moment on geologic time scales!:-) And the present economic/political system will assuredly keep our presence short here.

      Expanding on the theme of “American Middle Class” to the world population of 7 billion+ … by conservative estimates there should be around 5 million genius level people out there, who will never have a chance to find out (neither will us) – because of missing opportunity of education.

      If we take a billion off as too old, and a billion and a half as too young, could the rest of the 4.5 billion or so people produce everything humanity needs? In maybe 10-12 hours of work/week? Just add up all the people who make a living by ‘handling’ money (and some of them make the best living possible); add all the government workers, military, etc., who also don’t contribute a ‘red cent’ to the need of humanity: food, clothing and shelter, if becomes obvious, the more educated one becomes, the less they will care for the rest of humanity. Therein lies the problem …

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    • Stevethebear

      The next to last paragraph says it all – the older generations have voted themselves benefits at the expense of the next generations. They have burdened the young with massive debt and a stagnate economy with dwindling opportunities. Only fitting that the young continue to live off their parents for some time.

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    • Anthony St. John

      Well stated Stevethebear, the question becomes:

      Can we evolve beyond satisfying short-term lusts in order to achieve long-term survival with an acceptable quality of life for all future generations?

      [Report abuse]

    • tim g

      We should definitely think about family planning efforts through this lens. If adult children are still dependent on their parents, should we, as a society, discourage them from having children of their own? Perhaps it’s time to re-think the earned-income credit for children (or flip it so it’s now an earned-income credit for dependent adults…).

      [Report abuse]

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