Who will care, and who will work? Population ageing, informal caregiving and labor supply losses in the United States

As the American population ages, the demand for long-term care is growing at a rapid pace. A great share of this rapidly growing demand is met by adult children providing informal care to their elderly parents. However, providing informal care has shown to negatively impact their labor market participation and income. Uncertainty about future care needs, supply if informal care and labor market participation, challenges decision making at both the individual and societal level. Therefore, this study aims to project long-term care needs, informal care provision and reduced labor market participation in response to informal caregiving in 2035. Using data from the Health and Retirement Study (HRS), we build a dynamic microsimulation model that estimates future trends based on a conditional probability transition model. Our model is weighted to be representative of the 65+ US population and adjusted using UN population mortality statistics. Preliminary results show that the number of individuals aged 65+ experiencing moderate or severe care needs is expected to increase by almost 20 percentage points between 2026 and 2035, while the number of individuals who receive care from at least one of their children is expected to remain stable. For these adult children, the negative impact of caregiving on employment and income is expected to further increase in future years. Our findings show that an increasing number of older adults in the US will see their long-term care needs unmet and the over-reliance on adult children to provide this care is not sustainable. Simulations of different policy scenarios highlight the potential of healthy ageing (i.e. increasing healthy life expectancy primarily through lifestyle improvements), formal long-term care expansion and incentivizing spreading out the burden of informal care across multiple individuals.