In the last several decades, we have passed through a period of rapid demographic change. Fertility rates are down, which means that adults are having fewer children, and people are living longer. Most demographers would anticipate that a change like this would be beneficial for the children and detrimental to the elderly. Theoretically what should happen is that children should have to compete less for resources in the home as well as for social services geared towards children such as public schooling. Basically, supply should be larger than demand for children’s resources and thus easily accessible. On the other hand, there should be pressure on resources that are intended for the elderly such as medical care facilities, nursing homes and social security funds because there is more demand for them. But, this is not what has happened. Currently, the opposite has happened. The conditions have improved for the elderly and deteriorated for the children (Preston 1984, p. 435- 436).
In the articles by Samuel Preston, “Children and the Elderly: Divergent Paths for America’s Dependents”, and Richard Easterlin, “The New Age Structure of Poverty in America: Permanent or Transient?”, one is given some reasons as to why children are now poorer than the elderly. Specifically, Preston affirms that the elderly are having a negative impact on the children through three different avenues: the family, politics, and industry. In the article by Easterlin, he furthers Preston’s argument by contending that due to deteriorating labor market conditions of adults of family-forming ages children are now poorer than before (Easterlin 1987, p. 206). Once one understands why children have become poorer than the elderly, the article by Diane Macunovich and Richard Easterlin, “How Parents Have Coped: The Effect of Life Cycle Demographic Decisions on the Economic Status of Pre-School Age Children, 1964-87”, highlights how parents have compensated in the face of adverse economic conditions in order to provide for their children (Macunovich 1990, p. 302).
So, why have the children become so poor? According to Preston, societies support dependents in two ways: through direct public transfers and transfers within the family. Preston asserts that transfers within the family are the most important means in all societies (Preston 1984, p. 441). Families have begun to support the elderly less by relying more on the state, but they cannot do that with children. The family has to be a child’s principle source of support. But, since 1960, families have begun to make decisions that divest themselves of child support. Families are choosing more and more to not have children at all. Also, there are incentives to break up a union. In today’s society, in many cases, it is more attractive to get divorced than to stay married. One such example of this would be parents from low-income groups. For people who are in this income bracket, it is more attractive for them to get divorced and live off of government programs, like Aid to Families with Dependent Children, than to remain married. Their income goes up if they divorce. But, disruptions like this in the family have great effects on children (Preston 1984, p. 443-5). Because of economic pressures on the family, children are suffering due to disruptions in the family whether it is in monetary or emotional terms.
Another area that Preston focuses on when considering the rise in children’s poverty rates is politics. Preston states that, “Besides the family, the state is the other major vehicle for transferring resources to dependents (Preston 1984, p. 445). In a democracy like the one that we have here in America, special interest groups influence public decisions. There are three groups that vote for the elderly, the elderly themselves, the working-age population who would have to support the elderly if they didn’t get the programs that they need, and the working-age population that is concerned about their future. Also, if parents even vote at all, there are fewer parents who represent their children at the polls. This implies that with an increasing elderly population, they have more political power than children (Preston 1984, p. 445-7).
What does more political power gain the elderly? This means that programs geared toward the elderly are expanded at the expense of children’s programs. Since 1979, many public programs benefiting children have been reduced while programs targeted towards the elderly have been maintained or expanded (Preston 1984, p. 437). The most important public expenditure directed towards children is public schooling. Statistics show that “the quality of our education products has eroded (Preston 1984, p. 440). Specifically, SAT scores have gone down and school performance in general has been declining (Preston 1984, p. 440). Conversely, the most important public expenditure to the elderly is health care. Due to increasing mortality rates among the elderly, it is abundantly clear that expanded health care programs have been beneficial (Preston 1984, p. 441).
The last area that Preston looks at to emphasize rising poverty rates among children is industry. In particular, Preston focuses on the education and health care industries. When looking at the education industry, Preston states that the main factor that contributes to children learning more in school is higher quality, that is so to say smarter, teachers. Even though school expenditures have risen, teacher’s salaries have been declining. This in turn means that qualified teachers are leaving the profession and that prospective teachers are deterred from entering the market. In fact, when one looks at the data, SAT scores for teachers are declining faster than the national average and in fact, teachers SAT scores are below those in the cohort who never taught. This means that children are gaining less and less from teachers in the classroom. The best explanation that Preston can offer as to why this is happening is that as the number of children in school decreased, due to parents having fewer children, the demand for teachers shifted down. Due to this shift, teachers received lower wages and that is where the problem lies. With increasing job opportunities for women in particular, teachers who could get jobs elsewhere did, and those who had less skills to offer could not bargain for higher wages out of fear of losing their jobs (Preston 1984, p. 448-450). This implies that as parents have fewer children, the quality of education that each child receives is declining.
When looking at the health care industry, one finds quite the opposite. The applicants that are applying to medical school are so many and of such a high quality, that schools are having a hard time picking whom to accept and do it simply based on lottery. Beyond highly qualified individuals entering the profession, there has been a tremendous flow of capital into the industry (Preston 1984, p. 450). According to Preston, “There can be little doubt that the bloom in the health care services, both in terms of numbers of persons in the ages of prime use and of entitlements that were negotiated from demographic strength, have helped to produce this bloom of health for the health care industry (Preston 1984, p. 450).” The success in the health care industry reflects the power of the elderly to vote, they have been able to achieve higher medical services and in return they are living longer.
Of the three areas that Preston described, probably the area that affects children the most is the changing family structure. Preston provides some examples of how and why the family has changed, but he does not go into detail about the forces causing this drastic change. In the article by Easterlin he provides an answer. He argues that, “Any explanation of the rise in children’s poverty needs to account for both poverty rate changes within specific family types, especially the rise of married couple families, and for the shift in family-type composition toward female headed families (Easterlin 1987, p. 198).” Easterlin says that whatever family type one analyzes, there is a common underlying factor causing increasing poverty rates: that factor is changing labor market conditions (Easterlin 1987, p. 198).
Since 1960, labor market conditions have changed dramatically. There has been a slackening in aggregate demand and a change in relative supply conditions. Specifically, a slackening in aggregate demand implies that there is a rising unemployment rate for younger males because they are less experienced and a change in relative supply conditions implies that there are more young workers than old workers and as a result they have higher unemployment rates and lower real wages (Easterlin 1987, p. 202-203). There is evidence in the data that suggest that these two trends have severely hurt younger workers.
In the period after 1979, when poverty rates increased the most, young males were the ones to suffer the most. The absolute level of their real wages fell up to 10 to 20 percent below that of the late 1960’s. Men’s wages were not the only ones affected, young females real wages declined compared to older females as well. Not only were the real wages of the young decreasing, so were their employment opportunities. Even though all groups show an upward drift in unemployment during this time, the rate of unemployment was higher for young males and females than for the older population. When one puts these two stories together, it becomes apparent that income-earning opportunities for men and women of family-forming ages have been dramatically decreased. This is significant because three fourths of children under the age of six are in families with parents in this age bracket, which suggest that young children have been affected most by rising poverty rates (Easterlin 1987, p. 199-200).
The economic pressure that young adults feel has many consequences on family decisions. “Economic pressures on younger families aggravate marital strains and raise the probability of divorce or separation. Similarly, among younger couples who are not married when they conceive, economic pressures reduce the likelihood of legitimation of such conceptions by marriage, and thus result in female-headed families (Easterlin 1987, p. 200).”
It appears that the elderly have caused many problems for the young and in turn for the children, but parents have been compensating for increased poverty rates. In the article by Macunovich and Easterlin, they argue that, “since 1969 the principle source of improvement in the average economic status of young children has been parents’ altered life cycle demographic decisions (Macunovich 1990, p. 321)”. Through a complicated regression analysis, Macunovich found that there are many ways that parents and single parents have coped with downward pressures on living standards, some of which include reducing the number of children per family, deferring child bearing until later in life, and adding extra workers to the household (Macunovich 1990, p. 321). Macunovich suggests that, “On balance, the combined effect of these decisions has outweighed the adverse impact on children’s average economic status of the break-up of marital or non-marital unions (Macunovich 1990, p. 321).”
In conclusion, it appears that the children have suffered at the hands of the elderly in many ways. But, there are many things that parents are doing to compensate for their loss. It is important to remember that this is not a permanent trend. Easterlin projects that in the future this trend will reverse itself. He foresees that the relative supply of younger workers will decrease by 2000 due to the baby bust period. Therefore, younger workers will be part of a smaller cohort and will have more opportunities to achieve economic gains. Also, he concludes that aggregate demand will increase due to a shift from relatively un-productive younger workers to older workers that are more productive (Easterlin 1987, p. 202-204).
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 the Economic Status of Pre-School Age Children, 1964-1987, in Population and Development Review, Volume 16, Number 2, June 1990, pp. 301-325.