Expenditure Patterns of the Elderly: Workers and Nonworkers
Moehrle, Thomas, Monthly Labor Review
Spending patterns of older households differ not only by income, but according to work status; older workers allocate more to retirement, pension, and Social Security funds, while the nonworking elderly spend more on food prepared at home and health care
The Nation's population continues to grow older. Recent information from the U.S. Bureau of the Census estimates that people aged 65 and over will make up more than 23 percent of the population in 2030, up from 12 percent in 1985.' Like other cohorts, the elderly have different spending patterns depending upon level of income and status as employed or retired. According to data from the 1986-87 Bureau of Labor Statistics Consumer Expenditure Survey, in terms of share of expenditure and separated into three income levels (low income = less than 15,000; medium income = $15,000 to $29,999; high income = $30,000 and over):
Nonworking elderly households spend more on food prepared at home than do working elderly households, regardless of income level. High-income nonworking elderly households spend more on housing-particularly for utilities, fuels, and public services and for housefurnishings and equipment-than do their low-income counterparts.
Low-income working elderly households spend more on transportation than do low-income nonworking elderly households.
Regardless of income level, nonworking elderly households spend more on health care than do working elderly households.
Working elderly households spend more on retirement, pension, and Social Security contributions than do nonworking elderly households, across all income levels.
Coupled with the well-known fall in the U.S. birth rate, the aging population will cause a decline in the growth, as well as the age distribution, of the labor force. An examination of the demographic characteristics of the labor force reveals, for example, that the century-long decline in the participation rate of older people has been moderating. In fact, new labor force projections to the year 2000 show that the participation rate of women in the 55-to-74 age group will increase. Also, although participation by men in the 55-and-over age group is likely to continue to decline, the labor force separation of these men will not be as significant as it has been in years past.(1)
Along with the aging of the population and the changes in labor force participation rates of older people, changes are expected in the spending habits of the U.S. population. This article examines the differences in expenditures between the working and nonworking elderly households.
Consumer Expenditure Survey data were used to calculate mean annual expenditures, income, and demographic characteristics for selected elderly U.S. consumer units.1 The survey is a household survey in which family expenditures are collected. The analysis presented here is of participants from the 1986 - 87 survey years.
An earlier study by Beth Harrison (4) examined the spending patterns of consumer units with reference persons aged 65 and over.5 Breaking these up into two age groups, 65 to 74 and 75 and over, Harrison found that, although persons aged 65 and over are commonly viewed as a single homogeneous group, there are identifiable differences in expenditures, incomes, and characteristics between the two age groups. Nonetheless, in the study presented in this article, consumer units with reference persons over age 74 are not included, because 93 percent of these reference persons are retired and because their spending patterns are greatly different from those of the 74-and-under group. Of course, the older group could be separated into working and nonworking subgroups, but then the working subgroup would have too few observations to be of sound statistical use.
Information from the Social Security Administration shows that the average age of retired persons awarded Social Security from 1967 to 1987 has been declining. …