Family Economics Review [1990, Volume 3, Number 3]

              Editor
Joan C. Courtless
Editorial Assistant
Jane W. Fleming
Family Economics Review is written and
published each quarter by the Family
Economics Research Group, Beltsville
Human Nutrition Research Center,
Agricultural Research Service, United
States Department of Agriculture,
Washington, DC.
The Secretary of Agriculture has deter­mined
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is necessary in the transaction of
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1990 Vo/.3 No.3
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Economics
Review ,j_ F _o_r_B_u-ild-i-ng-U-se_O_n_l~-~ I
Vol. 3 No.3
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Contents
Features
Expenditures on a Child by Husband-Wife Families
MarkLino
A Comparison of Households Headed by Persons
55 to 65 Years of Age: Retired and Employed
Frankie N. Schwenk
Research Summaries
Changes in Family Spending Since 1901
Supplementing Retirement Income Until Social Security Begins
Public Attitudes Toward Social Security
Regular Items
Recent Legislation Affecting Families
New USDA Charts
Current Regional Research Project
Cost of Food at Home
Consumer Prices
U.S. DEPOSITORY
PROPERTY OF THE LIBRARY
September 1990
OCT 0 21990
University of North Carolina
at Greensboro 1
Expenditures on a Child
by Husband-Wife Families
ByMarkLino
Consumer Economist
Family Economics Research Group
Child-rearing expenses consume a
large proportion of a family's income.
Using data from the 1987 Consumer Ex­penditure
SuNey, this study examines
expenditures on a child in a husband­wife
household with two children. Es­timates
are provided for major
components of the budget by age of
child, family income level, and region of
residence. Overall expenses on a child
increase with the age of the child and
family income. Housing comprises the
largest share of total expenditures on a
child regardless of the child's age or
household income. Families in the
urban West generally have the highest
child-rearing expenses, and families in
rural areas incur the lowest. Economies
of scale are achieved with three or more
children.
The Family Economics Research
Group of the U.S. Department of
Agriculture (USDA) has provided
estimates of child-rearing expenses
for the past two decades (3). The
estimates reflect expenditures by
husband-wife families1 on a child
from birth through age 17. Lawyers
and judges use them in determining
child support awards in divorce
cases and cases involving the wrong­ful
death of a parent. Policymakers
use the estimates in determining
payments for the support of children
in foster families. Financial planners
and consumer educators use them
to help people assess their life
insurance needs as well as provide
estimates of expenses to people
who are considering parenthood.
1For this study the terms consumer
units, families, and households are used
interchangeably.
2
Although estimates were updated
semiannually using the Consumer
Price Index ( CPI) to reflect price
changes, the expenditure patterns of
families with children have changed
since the original estimates were
produced. For example, the rise in
the number of working mothers has
resulted in families purchasing a
different bundle of goods and ser­vices,
such as food away from home
and child care, than they did in the
past.
This article presents new es­timates
on child-rearing expenses
using a more recent expenditure
base, the 1987 Consumer Expendi­ture
Survey. Family expenditures on
a child (updated to 1989 dollars) are
estimated for three income groups
of households. To partially adjust for
price differentials and varying pat­terns
of expenditures, estimates are
provided for urban areas2 in four
regions (West, Northeast, South,
and Midwest) and rural areas as
well as for the United States overall.
Expenditures on a child are es­timated
for the major budgetary
components: housing; food; trans­portation;
clothing; health care; and
education, child care, and other mis­cellaneous
goods and services (see
box on p. 3 for description of each
component).
2 Urban areas were defined as Metropol-itan
Statistical Areas (MSA's) and other
places of 2,500 or more persons outside an
MSA; rural areas were places of less than
2,500 persons outside an MSA.
Methodology
Source of Data
Data used to estimate expendi­tures
on a child are from the 1987
Consumer Expenditure Survey
(CEX). This survey is the most com­prehensive
source of household ex­penditure
information available at
the national level. Administered by
the Bureau of Labor Statistics, U.S.
Department of Labor, the CEX has
been ongoing since 1980 and collects
information on consumer unit char­acteristics
and income as well as ex­penditures.
About 5,000 consumer
units are interviewed each quarter
over a 1- year period. Each quarter
is deemed an independent sample by
the Bureau of Labor Statistics, bring­ing
the total number of households
in the 1987 survey to approximately
20,000 consumer units.
From these households, husband
and wife families with one or more
children age 17 or under but no
other persons present, and who were
complete income reporters, were
selected for the study. This sample
was weighted using Bureau of Labor
Statistics weighting methods to
reflect the U.S. population. Quarter­ly
expenditures were multiplied by
four to provide annual estimates.
Estimating Expenditures
To estimate husband-wife
household expenditures on a child,
this study essentially followed the
methodology used by the Family
Economics Research Group in
determining previous estimates. This
approach estimates child-related
and household expenditures for the
various budgetary components and
then assigns these expenditures to a
child for child-specific expenditures
or, for overall household expendi­tures,
allocates a share to a child
based on previous research or on a
per capita basis.
The CEX collects overall house­hold
expenditure data for some
budgetary components (housing,
food, transportation, health care,
and other miscellaneous goods and
services) and child-related expendi­ture
data for other components
Family Economics Review
(clothing, education, and child care).
Multivariate analysis was used to es­timate
household and child-related
expenditures, controlling for income
level, family size, and age of the
younger child so estimates could be
made for families with these varying
characteristics. The three income
groups of households (1987 before­tax
income under $26,000, between
$26,000 and $42,000, and over
$42,000) were determined by divid­ing
the sample into equal thirds.
For each income level, the es­timates
were for husband and wife
families with two children with the
younger child in one of six age
categories (0-2, 3-5, 6-8, 9-11, 12-14,
and 15-17). Households with four
members (two children) were
selected as the base since this was
the average size of a family with
children in 1987. The focus was on
the younger child in a household
since the older child was often over
age 17. If the older child had been
selected as the household member
of interest, expenditures for some
items would be higher or lower. (To
adjust expenditures for the older
child, see discussion on p. 9.) In
addition, if a household with other
than two children was selected as
the base, expenditures would be
different because of economies or
diseconomies of scale. (To adjust
expenditures for number of children,
see discussion on p.10.) Each
expense was estimated separately,
thereby assuming that each expendi­ture
was made independently of the
others. The specific function and
how each budgetary expenditure was
estimated in dollars is described in
the box on p. 4.
Ordinary least squares analysis
was used to estimate expenditures
for housing, food, transportation,
and other miscellaneous goods and
services. Tobit analysis was used to
estimate expenditures for health,
children's clothing, and children's
education and child care since over
10 percent of the sample reported
zero expenses for these budgetary
components. Because of these zero
expenditures, tobit analysis yields
more efficient estimates than
1990 Vol.3 No.3
Housing expenses include shelter (mortgage interest; property taxes;
rent· and maintenance, repairs, and insurance), utilities (gas,
elec~ricity, fuel, telephone, and water), and housefurnishings and
equipment (furniture, floor coverings, major appliances, and small
appliances).
Food expenses include food and nonalcoholic ~everages pur~~ased at
grocery stores, convenience stores, and specialty stores; dining out
at restaurants; and school meals.
Transportation expenses include the net outlay on p_urchase of new .
and used vehicles vehicle fmance charges, gasoline and motor oil, ' . maintenance and repairs, insurance, and public transport~t10n.
Clothing expenses include children's apparel ite~ sue~ as shirts,
pants, dresses, and suits; footwear; and clothing servtces such as
dry cleaning, alteration and repair, and storage.
Health care expenses include medical and dental services not covered
by insurance, prescription drugs and medical suppli:s not covered
by insurance, and health insurance premiums not patd by employer
or other organization.
Education, child care, and other miscellaneous expenses include
elementary and high school tuition, books and supp~es; day care
tuition and supplies; babysitting; and personal care Items,
entertainment, and reading.
ordinary least squares analysis. The
procedure outlined by McDonald
and Moffitt (B) was used to trans­form
the tobit analysis estimates into
dollars.
Allocating Expenditures Among
Household Members
After the various overall house­hold
and child-related expenditures
were estimated, these total amounts
were allocated among the four fami­ly
members (husband, wife, older
child, and younger child). Since
the estimated expenditures for
children's clothing, education, and
child care were only for children,
this allocation was made by dividing
these estimated expenditures by two
(the number of children in the
household).
CEX data on children's clothing
expenditures were for children age
15 and under. For the estimates,
therefore, it was assumed that the
clothing expenditures of a 16- or 17-
year-old were similar to those of a
15-year-old, and these older teen­agers
were assigned the expendi­tures
of a 15-year-old. Also, expendi­tures
for other clothing services,
such as dry cleaning, were estimated
for the overall household and allo­cated
on a per capita basis among
household members.
Because the CEX did not collect
expenditures on food and health
care by family member, data from
other Federal studies were used to
apportion these budgetary com­ponents
to a child by age. The
1977-78 National Food Consump­tion
Survey conducted by the
Human Nutrition Information
Service (HNIS), USDA, collected
data on food consumption by in­dividual
family members and the
money value of food used at home
by the household. Four food plans
(11) were then developed from this
information (thrifty, low-cost,
moderate-cost, and liberal) and are
updated in terms of prices every
month using the CPl. Following es­tablished
dietary standards, these
plans estimate food expenditures for
family members by age, sex, house­hold
size, and income level of the
household.
Based on the 1987 plans, food
budget shares, as a percentage
of total food expenditures, were
calculated for the younger child in
a four-member household under
3
4
Using dummy independent variables, the specific function was:
Ei =a+ b1Y2 + b2Y3 + c1HS1 + c2HS3 + d1CA2 + d2CA3 + d3CA4 + d4CA5 + d5CA6
where:
Ei household expenditures on a particular budgetary component (housing, food, transportation,
health care, children's clothing, children's education and child care, or other miscellaneous goods
and services)
Y2 1 if household had a before-tax income between $26,000 and $42,000, 0 otherwise
Y3 1 if household had a before-tax income over $42,000, 0 otherwise (the omitted category being
household had a before-tax income under $26,000)
HS1 1 if husband-wife household with one child, 0 otherwise
HS3 1 if husband-wife household with three or more children, 0 otherwise (the omitted category being a
husband-wife household with two children)
CA2 1 if age of the younger child was 3-5, 0 otherwise
CA3 1 if age of the younger child was 6-8, 0 otherwise
CA4 1 if age of the younger child was 9-11, 0 otherwise
CAS 1 if age of the younger child was 12-14, 0 otherwise
CA6 1 if age of the younger child was 15-17, 0 otherwise (the omitted category being age of the
younger child was 0-2)
For estimates that reflect the overall U.S., family expenditures on each budgetary component (Ei) were calcu­lated
by summing the coefficients for the appropriate income, household size, and age of the younger child. For
example, expenditures for a household with a before-tax income under $26,000, two children, and the younger
child age 3-5 were calculated as Ei = a + d1CA2, whereas expenditures for a household with a before-tax
income over $42,000, two children, and the younger child age 15-17 were calculated as Ei = a + b2Y3 +
d5CA6. For the regional estimates of family expenditures on children, multivariate analysis also was used. The
specific equation was:
Ei =a+ b1Y2 + b2Y3 + c1HS1 + c2HS3 + d1CA2 + d2CA3 + d3CA4 + d4CA5 + d5CA6 +
elNE + e2S + e3MW + e4W
where the variables Ei to CA6 are the same as before and the new variables:
NE 1 if household resides in the urban Northeast, 0 otherwise
S 1 if household resides in the urban South, 0 otherwise
MW 1 if household resides in the urban Midwest, 0 otherwise
W 1 if household resides in the urban West, 0 otherwise (the omitted category being a household
resides in a rural area)
Family expenditures on each budgetary component (Ei) for the various regions were calculated by summing
the coefficients for the appropriate income, household size, age of the younger child, and region. For example,
expenditures for a household in the urban Northeast with a before-tax income between $26,000 and $42,000,
four members, and the younger child age 6-8 were calculated as Ei = a + b1Y2 + d2CA3 + e1NE.
Family Economics Review
the low-cost, moderate-cost, and
liberal food plans for the lowest-,
middle-, and highest-income groups.
It was assumed both parents were
between 20 and 50 years old and the
age spread between the younger and
older child was 3 years. The food
plans do not contain expenditures
for a child under age 1, so these
infants were assigned the same ex­penditure
as a child age 1-2. Also,
separate recommended food expendi­tures
are given in the food plans for
female and male children over age
12; these were averaged to deter­mine
food budget shares for these
children.
Appropriate (for age ofthe child
and income level of the household)
food budget shares were then ap­plied
to the estimated household
food expenditures to determine
child-related food expenses. The
calculated food budget shares as a
percentage of total food expendi­tures
for the younger child in a four­member
household, by age of the
child and income group, were:
Income group
Age of
child Lowest Middle Highest
Percent share
0-2 18 17 16
3-5 18 18 18
6-8 22 22 21
9- 11 24 24 23
12- 14 24 24 24
15- 17 25 25 24
It should be noted that the income
groups suggested by HNIS for the
low-cost, moderate-cost, and liberal
food plans correspond only in
broadest terms to the three income
groups used in this study. Table 1 on
p. 10 shows the income ranges of the
four food plans and those used in
this study, updated to 1989 dollars
using the CPl.
The 1980 National Medical Care
Utilization and Expenditure Survey
conducted by the Public Health Ser­vice,
U.S. Department of Health and
Human Services (HHS) (5), con­tains
data on health care expenses
by age of individual household
members. From these figures, the
1990 Vo/.3 No.3
proportion of health care expenses
attributable to the younger child
in a four-member household was
derived. These individual member
shares for health care expenses then
were applied to estimated household
health care expenditures to deter­mine
child-related expenses. It was
assumed that the ages of the parents
were between 19 and 54, and the age
spread between the younger and
older child was 1-6 years. Applying
these derived health care expense
shares to total household health care
expenditures for the three income
groups in 1987 assumes these shares
have not changed since 1980 and do
not vary by income. Health care
budget shares by age of the younger
child in a family of four were 18 per­cent
for a child age 0-5 and 19 per­cent
for a child age 6-17.
Unlike food and health care, no
authoritative base exists for allocat­ing
estimated household expendi­tures
on housing, transportation,
and other miscellaneous goods and
services among individual household
members. Previous estimates on
child-rearing expenses by the Family
Economics Research Group allo­cated
these expenditures on a per
capita basis. For a family with four
members, each member was as­sumed
to incur 25 percent of the
expense for housing, transportation,
and the category of other miscel­laneous
goods and services.
Other studies have used alterna­tive
methods for allocating house­hold
expenditures to a child
(4,7,9,10). One approach is the
marginal cost method that measures
child-rearing expenditures as the
difference in expenses between a
couple with children and an
equivalent childless couple.3 The
marginal cost approach does not
consider substitution effects. In addi­tion,
couples without children often
buy homes and automobiles larger
than their present needs in anticipa­tion
of children. Comparing the
3.rbere are various methods to determine
the equivalency between couples with
children and those without children; each
method yields different results.
expenditures of these couples to
similar couples with a child could
lead to underestimates of expendi­tures
on a child.
The per capita approach used in
this study does not allow for possible
diseconomies or economies of scale
from having one child or three or
more children. Therefore, a dis­economies
or economies of scale
formula was devised for use when
estimating child-rearing expendi­tures
for households of different
sizes (seep. 10).
Transportation expenses resulting
from work activities are not related
to child-rearing expenses, so these
costs were excluded from the es­timated
household transportation
expenses. Data from a 198~4 study
by the U.S. Department of Transpor­tation
( 6) were used to calculate the
percentage of transportation expendi­tures
that may be attributed to work­related
activities for households with
children of different ages. Applying
these percentages to 1987 Consumer
Expenditure Survey data assumes
these patterns have not changed
since 198~4 and do not vary by
income level. Work-related transpor­tation
activities accounted for ap­proximately
40 percent of travel for
households with a child under age 6,
and 35 percent for households with a
child age 6-17.
Differences from Previous
Estimates by the Family
Economics Research Group
The methodology used in this
study to estimate husband-wife
household expenditures on a child
was modified slightly from that used
previously by the Family Economics
Research Group in estimating these
expenditures. Some modifications
were made in the belief they woJJld
enable the child-rearing figures to
be more user-compatible. New es­timates
are provided by household
income level. The older study
estimated expenses for households
whose food expenditures cor­responded
to the four food plans
issued by the USDA. These food
plans essentially acted as proxies for
household income level. By using
5
income level directly, the need to
translate each food plan into an
income level is eliminated.
The previous estimates used the
food plans to determine at-home
food expenditures on a child,
whereas present estimates use actual ·
food expenditures reported by
households, and may provide a more
accurate portrayal of costs. In the
earlier estimates, adult work-related
transportation expenditures were
not excluded from child-rearing
transportation expenditures. Also,
the new estimates combine expendi­tures
on education, child care, and
other miscellaneous goods and
services, whereas in the previous
estimates, education was a separate
category and child care was included
in the housing component.
Another difference results from a
change in data classification proce­dures.
The CEX no longer classifies
rural areas by region. Earlier
Figure 1
estimates were provided for urban
and rural areas in each of four
regions (West, Northeast, South,
and Midwest); the new estimates,
however, present child-rearing costs
for overall rural areas.
Estimated Expenditures
on a Child
Estimates of family expenditures
on the younger child in a husband­wife
household with two children for
the overall U.S., urban region of the
country (West, Northeast, South,
and Midwest), and overall rural
areas are presented in tables A-F on
pp. 1~ 18. Although the estimates
are based on 1987 data, income
levels of households were updated
to 1989 dollars using the all-items
category of the CPI-U, and expendi­tures
were updated using the CPI
for the corresponding item (i.e., the
CPI's for housing, food, etc.).
Regional estimates were updated
to 1989 dollars using the regional
CPI's.
Given the large amount of infor­mation
contained in the tables, the
following subsections highlight
selected child-rearing expenses by
income level, budgetary component,
and age of the child for the overall
U.S.; and by these same factors for
the various regions.
Income Level
For the overall U.S., annual expendi­tures
on a child varied widely by in­come
level of the household (see
figure 1). Depending on the age of a
child, costs ranged from $4,100 to
$5,220 for households in the lowest­income
group (before-tax income
less than $28,300), from $5,850 to
$7,120 for households in the middle­income
group (before-tax income
between $28,300 and $46,900), and
from $8,330 to $9,770 for households
Estimated Annual Family Expenditures on a Child,
by income level and age of child
6
1989 Dollars
10,000
8,000 -
6,000 -
4,000 -
2,000 -
0
0-2
Income Level
3-5
• Under $28,300
6-8 9-11 12-14 15- 17
Age of child
~ $28,300- $46,900 D Over $46,900
Family Economics Review
in the highest-income group (before­tax
income more than $46,900).
Although households in the
highest-income group spent ap­proximately
double that spent by
households in the lowest-income
group on a child in each age
category, this difference varied by
budgetary component. In general,
expenses on a child for budgetary
components considered to be neces­sities
did not vary as much as those
considered to be discretionary
among households in the three
income groups. For example, the
annual food expenditure on a child
age 15-17 in the highest-income
group was $1,790, compared to
$1,250 for the same age child in the
lowest-income group. On the other
hand, the annual expense in the
education, child care, and other mis­cellaneous
expenditure category for
a child age 15-17 in the highest­income
group was nearly triple that
for a child of the same age in the
lowest-income group.
Budgetary Component
The largest proportion of child­related
expenditures was allocated
for housing. (Figure 2 illustrates
expenditure shares for middle­income
families.) Housing com­prised,
based on an average of the
six age groups, 34 percent of total
child-related expenses for a child in
the lowest-income group, 33 percent
in the middle-income group, and
36 percent in the highest-income
group. For households in the lowest­and
middle-income groups, food was
the second largest average annual
expense on a child, accounting for
21 percent and 19 percent of child­related
expenses, respectively.4
Education, child care, and other
miscellaneous expenditures
4 To assess the reasonableness of the child­related
food expense estimates for the three
income groups of households, the figures
were compared to average food expenditures
for a child as suggested in the four USDA
food plans for 1989. Food plan designated
food expenditures fell within this study's
range of estimated expenditures for a child in
each of the six age categories across the three
income groups.
1990 Vo/.3 No.3
comprised the second largest
average expense on a child for
households in the highest-income
group, 20 percent of child-related
expenses. These expenses may seem
low for a household in this highest­income
group. However, households
without the expense are included in
calculating the mean expenditure.
For households in the three in­come
groups, clothing, on average,
comprised 7 to 9 percent of total
child-related expenses. Estimates for
clothing do not include children's
clothing received in the form of gifts
or hand-me-downs. Child-related
health care expenditures averaged
4 to 5 percent of total expenses on
a child for households in all three
income groups.5 These estimates
5 To assess the reasonableness of the child­related
health care expense estimates for the
three income groups of households, the
figures were compared to those from the 1980
HHS study updated to 1989 using the CPI for
health care. The-average estimated health
care expenditure for a child age 6-17 (regard­less
of household income) from the HHS
study fell within this study's range of such es­timated
expenditures across the three income
groups. The average estimated health care ex­penditure
for a child below age 6 fell slightly
below (7 percent less) the minimum of this
study's range of such estimated expenditures
across the three income groups.
Figure 2
include only out-of-pocket expenses,
and not that proportion covered by
health insurance.
Age of Child
Family expenditures on a child
were generally lower for younger
children and higher for older
children regardless of household in­come.
(Figure 3, p. 8, shows this for
U.S. middle-income households.)
This held even though housing ex­penditures,
the highest average child­related
expense, tended to decline
over the age of the child. For those
households with a mortgage, housing
expenditures include interest pay­ments,
which decline over time, but
not the repayment of principal,
which is considered a form of
savings. Also, households with a
younger child likely purchased a
home more recently- at a higher
price- than households with older
children, thereby incurring higher
interest costs.
Child-related food, transporta­tion,
and clothing expenditures
generally increased over the age of
a child for households in all three
income groups. Transportation
expenditures were highest for a child
age 15-17, the age when a child
Estimated Family Expenditures on a Child
until age 17, by budgetary share 1
f2l Housing
!IJ Food
[] Transportation
• Clothing
0 Health
E:3 Education,
Child Care,
and Other
1U.S. average for middle-income families (income $28,300-$46,900).
7
would start driving and incur auto in­surance
costs. Clothing expenditures
for a child did decline slightly after
age 12-14. This is surprising because
clothing is thought to be very impor­tant
to older teenagers. Since this
study used the clothing expenditures
for a 15-year-old as a proxy for a 16-
and 17-year-old, clothing expendi­tures
may be underestimated for
these older teenagers. Also, many
children age 15 and over may pur­chase
their own clothing with an
allowance or earnings, but since the
parent provides the expenditure in­formation
in the CEX, such clothing
costs may have gone unreported.
Education, child care, and other
miscellaneous expenditures on a
child were highest for a preschool
child (under age 6) in all three
income groups. Many women with
preschool children are in the labor
force, so much of this expense can
be attributed to child care. As the
child gets older and attends school,
this cost would diminish. Although
Figure 3
the dollar costs may seem low ($720
to $920 for lowest-income house­holds,
$1,230 to $1,450 for middle­income
households, and $1,940 to
$2,190 for highest-income house­holds),
the averages include house­holds
with and without the expense.
Region
Child-rearing expenses in the
various regions of the country reflect
patterns similar to those for the U.S.
as a whole. In each region, expenses
on a child generally increased by in­come
level of the household and age
ofthe child. For all three household
income groups, overall child-rearing
expenses were highest in the urban
West, followed by the urban North­east,
urban South, and urban Mid­west.
(Figure 4 shows total child
expenses over the age of a child
by region for a middle-income
household.) Child-rearing costs
were lowest for households in rural
areas regardless of income. Much
ofthe variation in child-related
expenditures reflects the differences
in housing costs among the regions.
For households in the middle­income
group, annual child-related
housing expenses ranged from
$2,240 to $2,470 (depending on the
age of the child) for families in the
urban West and from $1,500 to
$1,730 for families in rural areas.
Child-related food expenses also
tended to be lower in rural areas,
compared with urban areas.
Annual transportation expendi­tures
on a child were generally
highest for households in rural areas
for all three income groups. For
households in the middle-income
group, annual transportation costs
were between $1,070 and $1,680 for
families in rural areas and between
$900 and $1,500 for families in the
urban West. The higher transporta­tion
expenses on a child in rural
areas likely reflect the longer dis­tances
that may be traveled and the
lack of public transportation in these
areas.
Estimated Annual Family Expenditures on a Child
by age and budgetary share 1
Percent
$5,850 $6,190 $6,170 $6,020 $6,700
100
80
60
40
20
0
0-2 3-5 6-8 9-11 12- 14
Family Expenditures
~ Housing ~Food ~ Transportation • Clothing D Health
1U.S. average for middle-income families (income $28,300-$46,900).
8
[IJ
$7,120
15- 17
Education,
Child Care,
and Other
Family Economics Review
Comparison to Previous
Estimates by the Family
Economics Research Group
Because household expenditure
patterns have changed over time, the
estimated child-rearing expenses of
this study are intended to replace
earlier estimates published by the
Family Economics Research Group.
The new and previous estimates of
child-rearing expenses in 1989 dol­lars
for a child below age 17 in the
various regions of the country are
presented in table 1, p. 10. Only a
general comparison of the two sets
of estimates is possible because the
income categories do not match.
Also income categories of the pre­vious
estimates, as derived from the
food plans, often overlap. However,
it appears the new estimates suggest
husband-wife households are spend­ing
more on a child due to changes
in their expenditure base than would
be indicated from the previous es­timates.
Housing and transportation
Figure 4
were the budgetary components that
accounted for most of this change.
Families are purchasing larger
homes with more amenities than in
the past. In 1970 the average size of
a new one-family home was 1,500
square feet, compared with 1,825
square feet in 1986. Also, the per­centage
of new one-family homes
with two or more bathrooms in­creased
from 48 percent in 1970 to
80 percent in 1986. Regarding
transportation, in 1960 households
owned, on average, one automobile.
Two is the average today (12).
Adjustments in
Expenditures and
Estimating Future Costs
Adjustments for Older Children
The estimates presented thus far
represent expenditures on the
younger child in a husband-wife
household with two children.
Expenses for the older child may
be different. To determine the ex­tent
of this difference and how the
expenditures may be adjusted to es­timate
expenses on an older child,
the previous procedure was essen­tially
repeated. Multivariate analysis
was used to estimate expenditures
for each budgetary component,
controlling for household size (a
family with two children was used as
the standard) and, for this analysis,
age of the older child (the same age
categories as used with the younger
child). Household income and
region of residence were not con­trolled
for, so fmdings are applicable
to all families. The sample was
smaller than that for the principal
analysis as only households with an
older child age 17 or under were
selected. The sample was weighted
to reflect the U.S. population.
Children's clothing, education,
and child care expenditures were
divided between the two children in
a household. For food and health
Estimated Annual Family Expenditures on a Child,
by region and age1 -
i989 Dollars
'1,500 r---------------------------~
7,000
6,500
6,000
5,500
.. ~
....... ../.. . .. .. .
..................• .,.;,~-~-·--;·~--~--- --~--­..
/,.~ .-. ·:. ··. ...... ....... /,. .........
.. ... ...... ... . ... /, .. ~:.: ..: .:/...
. ....... ;. : ::-.::::::-.:..: ::-.:.. -=:-.:..- .. - /;, . . . /
.,. ;,· _....,.. ..,..:· .,,1- •••••••••- . - -. ~· .__ •• , •• / .__ --- ......... , ..
~~:;;;. . , ..... ............ . .. . - ~ - - ~·. /...
5,000 L......L.. ____ J..._ ____ __~._ ___ ___l _____ J_ ____ _L..j
0-2 3-5 6-8 9-11 12-14 15-17
Age of child
Urban Urban Urban Urban
Rural Midwest South Northeast West
1U.S. average for middle-income families (income $28,300-$46,900).
1990 Vo/.3 No.3 9
care, household member shares
were calculated for a four-person
household (husband, wife, and two
children with the older child in one
of the six age categories) using the
USDA and HHS studies. These
shares for the older child were then
applied to estimated food and health
care expenditures to determine ex­penses
on the older child in each age
category. Housing, transportation,
and other miscellaneous expendi­tures
were allocated among house­hold
members on a per capita basis
(transportation expenses were ad­justed
to account for non-work
related activities).
It was found that, on average,
husband-wife households with two
children spent 3 percent more on
the older child than the younger
child. So, to adjust the figures in
tables A-F to reflect expenditures
on an older child, 3 percent should
be added to the total annual expen­ses
for that child's age. For example,
annual child-rearing expenses for
the older child age 15-17 in a two­child,
middle-income family for the
overall U.S. would be $7,330 ($7,120
x 1.03). For specific budgetary com­ponents,
annual expenses on an
older child (compared to a younger
child) varied differently. Households
spent more on an older child for
clothing, and the category of educa­tion,
child care, and other miscel­laneous
goods and services, but less
on transportation; households spent
approximately the same on an older
and younger child for housing, food,
and health care.
Therefore, annual child-related
expenditures in a two-child family
may be estimated by summing the
expenses for the younger child and
older child after adjusting for the
higher expenses of the older child.
Adjustments for Household Size
In addition to adjusting for an
older child, the estimates should be
adjusted for diseconomies or
economies of scale if a household
has only one child or more than two
children. To derive these adjust­ments,
multivariate analysis was
used to estimate expenditures for
each budgetary component control­ling
for household size and age of
the younger child, but not household
income level and region of the
country, so the results are applicable
to all families.
Compared with expenditures
for each child in a husband-wife,
two-child family, husband-wife
households with one child spent
approximately 21 percent more on
the single child, and those with three
or more children spent approxi­mately
22 percent less on each child.
Table 1. Comparison of new and past estimates of annual child-rearing expenses by the Family Economics
Research Group, 1989 dollars
New estimates Past estimates
Child-rearing Child-rearing
Income range expenses Income range1 expenses
Region
Urban:
West <$28,300 $4,360-5,510 $3,800-15,000 $3,140-4,150
28,300 - 46,900 6,020 - 7,330 15,000 - 45,200 4,320-5,710
>46,900 8,430 - 9,880 22,600 - 75,200 6,075- 8,700
>45,200 7,900-11,310
Northeast <28,800 4,250-5,410 3,800- 15,000 2,610-3,610
28,800- 47,700 5,950 - 7,280 15,000-45,200 3,530-4,740
>47,700 8,410 - 9,860 22,600 - 75,200 5,610-8,250
>45,200 7,290 -10,720
South <28,100 4,220 - 5,370 3,800- 15,000 2,950-3,780
28,100 - 46,500 5,950 - 7,230 15,000 - 45,200 4,150-5,150
>46,500 8,400 - 9,860 22,600-75,200 6,160-8,420
>45,200 8,010- 10,950
Midwest <28,200 4,060-5,180 3,800- 15,000 3,120-4,020
28,200-46,700 5,790- 7,040 15,000-45,200 4,310- 5,510
>46,700 8,230 - 9,670 22,600 - 75,200 5,650-7,790
>45,200 7,350- 10,130
<28,100 3,640- 4,730 3,800- 15,000 2,720- 3,630
28,100 - 46,500 5,350-6,610 15,000-45,200 4,170 - 5,380
>46,500 7,770- 9,180 22,600 - 75,200 6,140- 8,400
>45,200 7,990 - 10,920
11ncome ranges for past estimates correspond to the thrifty, low-cost, moderate-cost, and liberal food plans for 4-person households
updated to 1989 dollars using the CPI (3).
2For the rural area, past estimates are the average for rural areas in the four regions.
10 Family Economics Review
Therefore, to adjust the figures in
tables A-F to estimate annual over­all
expenditures on an only child,
21 percent should be added to the
total expense for each age category.
For three or more children, 22 per­cent
should be subtracted (after ad­justing
for older children) from the
total expense for each child's age
category and these totals should be
summed. For a particular budgetary
component, the percentages may be
more or less. Costs per child for
food decrease less than for housing
and transportation as family size
increases. Much housing space is
used in common, and car trips can
serve more than one child.
As an example of adjustments
for older children and number of
children, total child-rearing ex­penses
in families with one, two,
and three children are presented in
table 2 for a middle-income house­hold
in the overall U.S. In the ex­ample,
the age of the older child is
16 in the two-child household and
the ages of the older children are 13
and 16 in the three-child household.
As can be seen, greater economies
of scale are observed between a two­and
three-child household than a
one- and two-child household. The
estimated annual expense on a child
age 0-2 with no siblings is $7,080; for
two children age 0-2 and 16, $13,180;
and for three children age 0-2, 13,
and 16, $15,670.
Estimating future costs
As previously stated, the estimates
presented here represent husband­wife
household expenditures on a
child of a certain age in 1989. To
Table 2. Estimated annual expenditures on children by middle-income
families with one, two, and three children
One-child household
Age of
child
0-2
3-5
6-8
9- 11
12- 14
15- 17
Two-child household
Age of Age of
younger older
child child
0-2 16
3-5 16
6-8 16
9- 11 16
12-14 16
15 16
Three-child household
Age of Age of
youngest older
child children
0-2 13, 16
3-5 13, 16
6-8 13, 16
9-11 13,16
12 13, 16
1990 Vo/.3 No.3
Annual expenditure
$7,080 (5,850 X 1.21)
7,490 (6, 190 X 1.21)
7,470 (6,170x1.21)
7,280 (6,020x1.21)
8,110 (6,700x 1.21)
8,620 (7, 120 X 1.21)
Annual expenditure
$13,180 [5,850 + (7,120x 1.03)]
13,520 [6, 190 + (7, 120 X 1.03)]
13,500 [6, 170 + (7, 120 X 1.03)]
13,350 [6,020+(7,120x1.03)]
14,030 [6,700+ (7,120x1.03)]
14,450 [7,120 + (7,120x 1.03)]
Annual expenditure
$15,670 {[5,850 + ((6,700 + 7,120) x 1.03)] x0.78}
15,930 {[6,190 + ((6,700 + 7,120) x 1.03)] x0.78}
15,920 {[6,170 + ((6,700 + 7,120) x 1.03)] x0.78}
15,800 {[6,020 + ((6,700 + 7,120) x 1.03)] x0.78}
16,330 {[6,700 + ((6,700 + 7,120) x 1.03)] x0.78}
estimate these expenses over the life
of a child, future price changes need
to be incorporated in the figures. To
do this, a future cost formula is used
such that:
CRCt = CRCp (1 + i)"
where:
CRCt = projected future annual
dollar expenditure on a child
of a particular age
CRCp= present (1989) annual dollar
expenditure on a child of a
particular age
= projected annual inflation
(or deflation rate)
n = number of years from
present until child will reach
a particular age
An example of estimated future
household expenditures on a child
for each of the three income groups
for the overall U.S. is presented in
table 3, p. 12. The example assumes
a child is born in 1989, reaching age
17 in the year 2006, and the average
annual inflation rate over this time is
6 percent (the average annual infla­tion
rate over the past 20 years (12)).
As can be seen, total family expenses
on a child through age 17 would be
$143,690,$199,560, and $278,780 for
households in the lowest-, middle-,
and highest-income groups, respec­tively.
In 1989 dollar values, these
would be $81,810,$114,150, and
$160,080.
Inflation rates other than 6 per­cent
could be substituted into the
formula if projections of these rates
vary in the future. Also, it is some­what
unrealistic to assume that
households remain in one income
category as a child grows older. For
most families, income rises over
time. Hence, in estimating future
expenses on a child, it may be more
accurate to use the expenditures
associated with various income
levels, such as the lowest level when
a child is born and the middle level
when the child is a teenager.
11
Other Expenditures on
Children
Expenditures on a child estimated
in this study were composed of
direct expenses for six major
budgetary components. There are
other expenses, both direct and in­direct,
involved in rearing a child.
Because the estimates were made
for a child through age 17, the cost
of a college education was not in­cluded
in the estimates. The College
Board (2) estimates that in 1989-90
annual average tuition and fees was
$1,635 at a 4-year public college and
$7,348 at a 4-year private college;
annual room and board was $2,962
at a public college and $3,430 at a
private college. For 2-year colleges
in 1989-90, annual average tuition
and fees was $852 at a public college
and $4,946 at a private college;
annual room and board was $3,140
at a private college (no estimates
were given for a public 2-year
college).
Indirect costs involved in the rear­ing
of children can be substantial. In
order to care for children, current
earnings and future career oppor­tunities
may be diminished due to
less time in the labor force for one
or both parents. Parental leisure
time also is curtailed. These costs,
however, are much more difficult to
measure than direct expenditures.
Studies that have attempted to calcu­late
these indirect costs (J) have
found that they often can exceed the
direct expenses on a child.
The estimates presented in this
study are for husband-wife house­holds;
single-parent households
frequently have lower incomes and
different expenditures than husband­wife
households. Also, some families
may have unique circumstances that
make the estimated child-rearing
expenses greater or lesser for them,
i.e., the child may have expensive
medical care. It should be empha­sized
that the expenses estimated in
this study represent direct expendi­tures
on a child by husband-wife
households. They do not represent
what a family should spend on a
child to guarantee some acceptable
standard of living.
References
1. Calhoun, C.A. and T.J. Espen­shade.
1985. The Opportunity Cost of
RearingAmerican Children. The
Urban Institute, Washington, DC.
Table 3. Future cost of rearing a child in three income groups,
assuming inflation rate of 6 percent
Year Age Lowest income Middle income Highest income
1989 <1 $4,100 $5,850 $8,330
1990 1 4,350 6,200 8,830
1991 2 4,610 6,570 9,360
1992 3 5,240 7,370 10,480
1993 4 5,550 7,810 11,110
1994 5 5,890 8,280 11,780
1995 6 6,240 8,750 12,310
1996 7 6,620 9,280 13,050
1997 8 7,010 9,830 13,830
1998 9 7,200 10,170 14,360
1999 10 7,630 10,780 15,220
2000 11 8,090 11,430 16,140
2001 12 9,840 13,480 18,670
2002 13 10,430 14,290 19,790
2003 14 11,060 15,150 20,980
2004 15 12,510 17,060 23,410
2005 16 13,260 18,090 24,820
2006 17 14,060 19,170 26,310
Total $143,690 $199,560 $278,780
12
2. The College Board. 1989. News
from the College Board. August 10
issue.
3. Edwards, C.S. 1981. USDA Es­timates
of the Cost of Raising a Child:
A Guide to Their Use and Interpreta­tion.
U.S. Department of Agricul­ture.
Miscellaneous Publication No.
1411.
4. Espenshade, T.J. 1984. Investing
in Children: New Estimates of
Parental Expenditures. The Urban
Institute, Washington, DC.
5. Kasper, J.D. 1986. Perspectives
on Health Care: United States, 1980.
National Medical Care Utilization
an Expenditure Survey. Series B,
Descriptive Report No. 14. Office
of Research and Demonstrations,
Health Care Financing
Administration.
6. Klinger, D. and J.R. Kuzmyak.
1986. Personal Travel in the United
States, Vol. I, 1983-1984 Nationwide
Personal Transportation Study. U.S.
Department of Transportation.
7. Lazear, E.P. and R.T. Michael.
1988.Allocation of Income Within
the Household. University of
Chicago Press, Chicago, IL.
8. McDonald, J.F. and R.A.
Moffitt. 1980. The uses of Tobit
analysis. The Review of Economics
and Statistics 62(2):318-321.
9. Olson, L.1983. Costs of
Children. Lexington Books,
D.C. Heath and Company,
Lexington, MA.
10. Turchi, B.A. 1983. Estimating
the Cost of Children in the United
States. Final Report to the National
Institute of Child Health and Human
Development. [Unpublished.]
11. U.S. Department of Agricul­ture,
Human Nutrition Information
Service. 1984. Your Money's Worth in
Foods. Home and Garden Bulletin
No.183.
12. U.S. Department of Com­merce,
Bureau of the Census. 1989.
Statistical Abstract of the United
States, 1989. [109th ed.]
Family Economics Review
Table A. Estimated Annual Family Expenditures on a Child, Overall U.S.
Education,
Transpor- Child Care,
Age of Child Total Housing Food tation Clothing Health and Other
Income: Less than $28,300
0-2 ........ 4,100 1,680 630 560 300 210 720
3-5 .. .... .. 4,400 1,630 710 610 330 200 920
6-8 . .... ... 4,400 1,630 910 660 360 210 630
9- 11 0 0 0 •• 0 0 4,260 1,510 1,030 590 370 220 540
12- 14 .... .. . 4,890 1,450 1,100 890 610 220 620
15- 17 ....... 5,220 1,430 1,250 1,130 570 230 610
Total ......... 81,810 27,990 16,890 13,320 7,620 3,870 12,120
Income: $28,300-$46,900
0-2 ........ 5,850 2,230 790 940 390 270 1,230
3-5 . . ...... 6,190 2,170 910 990 420 250 1,450
6-8 ........ 6,170 2,180 1,150 1,070 450 270 1,050
9- 11 ....... 6,020 2,060 1,300 1,000 460 280 920
12- 14 ....... 6,700 2,000 1,370 1,300 760 280 990
15-17 ....... 7,120 1,980 1,530 1,540 720 300 1,050
Total ......... 114,150 37,860 21 '150 20,520 9,600 4,950 20,070
Income: More than $46,900
0-2 . . . ..... 8,330 3,340 950 1,290 480 330 1,940
3-5 ........ 8,800 3,280 1,150 1,340 520 320 2,190
6-8 ........ 8,680 3,290 1,380 1,450 550 330 1,680
9- 11 • • 0. 0. 0 8,500 3,170 1,550 1,380 560 350 1,490
12-14 ....... 9,280 3,110 1,690 1,680 900 350 1,550
15-17 ....... 9,770 3,090 1,790 1,920 860 370 1,740
Total ......... 160,080 57,840 25,530 27,180 11,610 6,150 31,770
1990 Vo/.3 No.3 13
Table B. Estimated Annual Family Expenditures on a Child, Urban West
Education,
Transpor- Child Care,
Age of Child Total Housing Food tat ion Clothing Health and Other
Income: Less than $28,300
0-2 ........ 4,360 1,960 690 510 290 190 720
3-5 ........ 4,650 1,930 770 550 320 170 910
6-8 ........ 4,690 1,930 980 590 350 180 660
9-11 ....... 4,570 1,810 1,110 520 360 190 580
12-14 ....... 5,200 1,750 1,190 830 580 190 660
15-17 ....... 5,510 1,720 1,330 1,070 540 210 640
Total ......... 86,940 33,300 18,210 12,210 7,320 3,390 12,510
Income: $28,300 to $46,900
0-2 ........ 6,020 2,470 830 900 370 250 1,200
3-5 ........ 6,400 2,450 970 940 400 230 1,410
6-8 ........ 6,420 2,450 1,220 1,020 430 240 1,060
9- 11 ....... 6,260 2,330 1,370 940 440 250 930
12- 14 ....... 6,960 2,270 1,450 1,250 730 250 1,010
15-17 ....... 7,330 2,240 1,600 1,500 680 270 1,040
Total ......... 118,170 42,630 22,320 19,650 9,150 4,470 19,950
Income: More than $46,900
0-2 ........ 8,430 3,530 990 1,270 450 310 1,880
3-5 ........ 8,910 3,510 1,200 1,300 490 290 2,120
6-8 ........ 8,820 3,510 1,430 1,410 520 300 1,650
9- 11 ....... 8,650 3,390 1,610 1,340 530 310 1,470
12- 14 ....... 9,460 3,330 1,760 1,650 860 320 1,540
15-17 ....... 9,880 3,300 1,850 1,890 820 340 1,680
Total ......... 162,450 61,710 26,520 26,580 11,010 5,610 31,020
14 Family Economics Review
Table C. Estimated Annual Family Expenditures on a Child, Urban Northeast
Education,
Transpor- Child Care,
Age of Child Total Housing Food tat ion Clothing Health and Other
Income: Less $28,800
0-2 ........ 4,250 1,920 740 470 290 190 640
3-5 ........ 4,550 1,890 830 500 320 180 830
6-8 ........ 4,590 1,890 1,040 540 350 190 580
9- 11 • 0. 0. 0 0 4,480 1,770 1,190 470 360 190 500
12- 14 ....... 5,110 1,700 1,260 780 590 200 580
15-17 ....... 5,410 1,670 1,400 1,020 550 210 560
Total ......... 85,170 32,520 19,380 11,340 7,380 3,480 11,070
Income: $28,800 to $47,700
0-2 ........ 5,950 2,460 890 850 370 250 1,130
3-5 ........ 6,330 2,430 1,020 890 410 230 1,350
6-8 ........ 6,350 2,430 1,280 960 440 250 990
9- 11 ....... 6,210 2,310 1,450 890 450 260 850
12-14 ....... 6,890 2,240 1,520 1,200 740 260 930
15 -17 ....... 7,280 2,210 1,680 1,440 700 280 970
Total . . ... .. .. 117,030 42,240 23,520 18,690 9,330 4,590 18,660
Income: More than $47,700
0-2 ........ 8,410 3,560 1,040 1,210 460 310 1,830
3-5 . .. ..... 8,910 3,540 1,260 1,250 500 290 2,070
6-8 ........ 8,810 3,530 1,500 1,350 530 310 1,590
9- 11 •• 0. 0 0 0 8,650 3,410 1,690 1,280 540 320 1,410
12- 14 ....... 9,450 3,350 1,840 1,580 870 330 1,480
15- 17 ....... 9,860 3,310 1,920 1,830 830 340 1,630
Total ......... 162,270 62,100 27,750 25,500 11,190 5,700 30,030
1990 Vo/.3 No.3 15
Table D. Estimated Annual Family Expenditures on a Child, Urban South
Education,
Transpor- Child Care,
Age of Child Total Housing Food tat ion Clothing Health and Other
Income: Less than $28,100
0-2 . . ...... 4,220 1,700 630 590 320 230 750
3-5 ........ 4,560 1,680 720 630 360 220 950
6-8 ........ 4,530 1,680 910 680 380 230 650
9- 11 ....... 4,390 1,560 1,040 610 400 240 540
12- 14 .... . .. 5,020 1,500 1,110 920 630 240 620
15-17 ....... 5,370 1,470 1,250 1,160 600 260 630
Total .. .. . .. .. 84,270 28,770 16,980 13,770 8,070 4,260 12,420
Income: $28,100 to $46,500
0-2 ........ 5,950 2,210 780 980 410 300 1,270
3-5 .... .. .. 6,350 2,190 910 1,020 450 280 1,500
6-8 .... .. .. 6,300 2,190 1,150 1,100 480 300 1,080
9- 11 .... . .. 6,110 2,070 1,300 1,030 490 300 920
12- 14 ... . ... 6,810 2,010 1,370 1,330 790 310 1,000
15-17 ....... 7,230 1,980 1,510 1,580 750 330 1,080
Total .... . .... 116,250 37,950 21,060 21,120 10,110 5,460 20,550
Income: More than $46,500
0-2 ........ 8,400 3,260 940 1,340 510 370 1,980
3-5 .... .. .. 8,890 3,240 1,140 1,380 550 350 2,230
6-8 .. .. .. .. 8,760 3,230 1,370 1,500 580 370 1,710
9- 11 ....... 8,550 3,120 1,540 1,420 590 380 1,500
12- 14 .. . ... . 9,340 3,060 1,680 1,720 930 380 1,570
15-17 ... .. .. 9,860 3,030 1,770 1,970 890 400 1,800
Total .... . .... 161,400 56,820 25,320 27,990 12,150 6,750 32,370
16 Family Economics Review
Table E. Estimated Annual Family Expenditures on a Child, Urban Midwest
Education,
Transpor- Child Care,
Age of Child Total Housing Food tat ion Clothing Health and Other
'>
Income: Less than $28,200
0-2 ........ 4,060 1,630 590 530 320 200 790
3-5 ........ 4,370 1,610 670 570 350 180 990
6-8 ........ 4,340 1,610 860 610 380 190 690
9- 11 ••• 0 0 •• 4,190 1,490 980 540 390 200 590
12- 14 ....... 4,840 1,430 1,050 840 650 200 670
15-17 ....... 5,180 1,400 1,190 1,090 610 220 670
Total ..... . ... 80,940 27,510 16,020 12,540 8,100 3,570 13,200
Income: $28,200 to $46,700
0-2 ........ 5,790 2,150 740 920 410 260 1,310
3-5 ........ 6,160 2,120 870 950 440 240 1,540
6-8 ........ 6,100 2,120 1,090 1,030 480 250 1,130
9- 11 ••• 0 ••• 5,930 2,010 1,240 960 490 260 970
12- 14 ....... 6,640 1,950 1,310 1,260 810 270 1,040
15- 17 ....... 7,040 1,910 1,450 1,510 760 280 1,130
Total ......... 112,980 36,780 20,100 19,890 10,170 4,680 21,360
Income: more than $46,700
0-2 ........ 8,230 3,200 900 1,280 500 320 2,030
3-5 ........ 8,710 3,180 1,100 1,310 540 300 2,280
6-8 ........ 8,560 3,180 1,310 1,420 570 320 1,760
9- 11 0 0 0 0 0 0. 8,350 3,060 1,480 1,350 580 330 1,550
12- 14 ....... 9,180 3,000 1,620 1,670 940 330 1,620
15-17 ....... 9,670 2,970 1,710 1,900 900 350 1,840
Total ......... 158,100 55,770 24,360 26,790 12,090 5,850 33,240
1990 Vo/.3 No.3 17
Table F. Estimated Annual Family Expenditures on a Child, Rural Areas
Education,
Transpor- Child Care,
Age of Child Total Housing Food tat ion Clothing Health and Other
Income: Less than $28,100
0-2 ........ 3,640 1,220 530 680 290 230 690
3-5 ........ 3,950 1,200 620 720 320 210 880
6-8 ........ 3,930 1,200 790 780 350 220 590
9-11 0 0 ••• 0. 3,770 1,080 910 700 360 230 490
12-14 ....... 4,390 1,020 980 1,010 580 230 570
15-17 ....... 4,730 990 1,110 1,260 550 250 570
Total ......... 73,230 20,130 14,820 15,450 7,350 4,110 11,370
Income: $28,100 to $46,500
0-2 ........ 5,350 1,730 690 1,070 370 290 1,200
3-5 ........ 5,720 1,710 810 1,110 400 270 1,420
6-8 ........ 5,670 1,700 1,030 1,200 430 290 1,020
9- 11 0 0 •• 0 •• 5,510 1,590 1,170 1,130 450 300 870
12- 14 ....... 6,170 1,530 1,240 1,430 740 300 930
15-17 ....... 6,610 1,500 1,390 1,680 700 320 1,020
Total ......... 105,090 29,280 18,990 22,860 9,270 5,310 19,380
Income: More than $46,500
0-2 ........ 7,770 2,770 850 1,430 450 360 1,910
3-5 ........ 8,250 2,750 1,040 1,470 490 340 2,160
6-8 ........ 8,110 2,750 1,250 1,590 520 350 1,650
9-11 ....... 7,910 2,630 1,410 1,520 540 370 1,440
12-14 ....... 8,680 2,570 1,550 1,820 870 370 1,500
15-17 ....... 9,180 2,540 1,640 2,070 820 390 1,720
Total ......... 149,700 48,030 23,220 29,700 11,070 6,540 31,140
18 Family Economics Review
A Comparison of Households
Headed by Persons
55 to 65 Years of Age:
Retired and Employed
By Frankie N. Schwenk
Research Leader
Family Economics Research Group
Using data from the 1987 Consumer
Expenditure Survey, this analysis of
families with a reference person 55 to 65
years of age compared the family char­acteristics
of retirees with those of
workers. Assets, income sources, and
consumer expenditures of retirees and
workers were compared also. Assets of
the two groups were similar. The family
income of retirees came mostly from
Social Security and pensions and was
half the income of workers, which came
mostly from wages and salaries. Family
expenditures of retirees were two-thirds
those of workers and differed from
workers in how they were distributed.
Policymakers, educators, and market
researchers may use this information on
family characteristics, income sources,
and purchasing levels as they plan
policies and programs related to early
retirement.
There is a trend in the United
States toward early retirement, i.e.,
retirement before the age of 65.
Only 67 percent of men 55 to 65
years of age participated in the
labor force in 1987, compared with
90 percent in 1947 (7).
Who are these men and women
who retire before age 65? D<t they
have demographic characteristics
that are different from workers of
comparable ages? Do they have
different levels and types of assets?
What sources of income do they
have? Do their spending patterns
differ? This study addresses these
questions by comparing information
on households where the reference
1990 Vol. 3 No. 3
person1 55 to 65 years of age is
retired, and where he or she is
working.
In other studies, factors that are
related to early retirement have
been identified. They include com­pulsory
retirement, pension incen­tive
offers, level of retirement
benefits, Social Security benefits,
tax structure, inflation rate, health
status, desire to pursue leisure
activities, gender, presence of
dependents, and job satisfaction
(1-8, 10). What is not known is how
retirees differ from workers with
respect to family characteristics
and various economic measures,
specifically asset levels, income,
and expenditures.
Data
The data for this study came from
the 1987 Consumer Expenditure
Survey (CEX), an ongoing survey
conducted by the Bureau of Labor
Statistics. A rotating sample of about
5,000 consumer units were inter­viewed
each quarter for a total of
21,000 quarterly responses in 1987.
For this analysis, consumer units
with a reference person 55 to 65
years of age were selected. There
were 443 consumer units with a
retired head of household and 1,767
units with one who was working.
The reference person was identified by
the family when respondents were asked "to
start with the name of the person or one of
the persons who owns or rents the home" (9).
This sample was weighted to repre­sent
the U.S. population of such
households. In this report, the terms
"families" and "households" are
used to refer to "consumer units,"2
which is the sampling unit for the
Consumer Expenditure Survey, and
"head of household" is used to
denote "reference person."
The intent of this study was to
examine the family characteristics
and resources of families in which
the head of the household was
retired and to compare them with
those of families in which that per­son
was working. Using the refer­ence
person as the primary subject
yielded both males and females and
various marital situations. Also,
some role or responsibility patterns
can be observed from differences in
work participation of these persons
and spouses (see table 1, p. 20).
The majority of reference persons
were male (71 percent). Sixty per­cent
of householders were working
full time (35 or more hours per
week), 8 percent were working part
time, 17 percent identified them­selves
as retired, 9 percent as ill or
disabled, 5 percent as homemakers,
and 1 percent as unable to fmd
work. Gender differences were
pronounced. Female reference
persons of this age were less likely
than men to be employed and, of
those who worked, a larger propor­tion
worked part time. Of female
householders, 16 percent identified
themselves as homemakers, whereas
2 A consumer unit is comprised of either:
(1) all members of a particular household
who are related by blood, marriage, adoption,
or other legal arrangements; (2) a person
living alone or sharing a household with
others or living as a roomer in a private home
or lodging house or in permanent living
quarters in a hotel or motel, but who is finan­cially
independent; or (3) two or more per­sons
living together who pool their income
to make joint expenditure decisions. To be
considered financially independent, at least
two of the three major expense categories
(housing, food, and other living expenses)
have to be provided by the respondent.
19
Table 1. Work participation of persons 55 to 65 years of age, 1987
Employment status
Not working:
Ill, disabled ............... .. ...
Homemaker .... ...... . . . ..... .
Could not find work .............
Retired •• • 0 0 •• • ••• 0 • •• • 0. 0 ••••
Working:
Less than 35 hours/week . . .......
35 or more hours/week ...... .. ..
none of the male reference persons
did.3 Reference persons who were
not working because they were ill,
disabled, a homemaker, or could not
fmd work were not included in fur­ther
analysis because the intent was
to compare those who were retired
with those who were employed.
Who Is Retired
Age was strongly related to retire­ment.
The average age of the retired
group was 62 years, compared with
59 years for the group who was
employed. As shown in the box on
p. 21, the proportion of reference
persons who identified themselves
as retired increased from 3 percent
of those 55 years old to 51 percent
of those 64 years old.
The percentage of people who are
retired increased at age 63 because
they become eligible for Social
Security benefits at 62 years. On
average, 20 percent of the 55- to 65-
year-old reference persons were
retired.
Marital status was related to
retirement. Retirees were: married,
70 percent; widowed, 17 percent;
3 Sixty-two percent of the reference per·
sons had a spouse. The work participation
rate of spouses, 94 percent of whom were
women, was lower than that of reference
persons. Over half of the spouses worked;
slightly over one-third worked full time. Of
the male spouses, one-third said they were
retired. One-third of the female spouses
identified themselves as homemakers.
20
Reference person Spouse
Both male Both male
and female Male Female and female Male Female
(1 000!0) (71%) (29%) (1000!0) (6%) (94%)
Percent
9 8 13
5 0 16
1 1 1
17 18 14
8 7 13
60 66 43
divorced or separated, 9 percent;
and never married, 4 percent. Of
persons who were working, a smaller
percent were widowed but a larger
percent were divorced. The marital
status of employed reference per­sons
was: married, 68 percent;
widowed, 12 percent; divorced or
separated, 15 percent; and never
married, 5 percent.
5 12 5
30 1 32
0 0 0
10 32 9
19 10 20
35 45 34
Table 2 shows the proportion of
retired household heads for each
marital type by gender. Those most
likely to have retired were married
persons whose spouses were retired
(53 percent of males and 56 percent
of females), followed by single males
who were widowed (32 percent) or
never married (30 percent). Single
females who never married were
Table 2. Marital status of retired and employed reference persons
55 to 65 years of age, 19871
Marital status
Total ... ............. . . . . . . .. . . . .
Single reference person:
Male:
Widowed ... . . . . .. .. ...... .. . .
Divorced or separated . ..... .. . .
Never married .. . . . ........ . .. .
Female:
Widowed ..... . .. . ........ ... .
Divorced or separated ...... .. . .
Never married ... . ... ........ . .
Married reference person:
Male:
Spouse retired .. . . ... . ........ .
Spouse not retired . . ..... . .. ... .
Female:
Spouse retired .. .... .. . .. . .... .
Spouse not retired ....... . .... . .
Retired
20
32
14
30
24
12
4
53
16
56
26
Percent
Employed
80
68
86
70
76
88
96
47
84
44
74
1 Reference persons who were not retired but not working because they were ill, disabled, a
homemaker, or could not find work were not included.
Family Economics Review
Age of
reference
person
55
56
57
58
59
60
61
62
63
64
Percent
retired
3
5
6
6
12
14
23
25
47
51
least likely to have retired ( 4 per­cent).
These patterns reflect family
influence on the retirement decision.
Spouses retired together. Widowed
persons were more likely than
divorced persons to retire, perhaps
because they received death benefits
or inherited assets from their partner.
In contrast, divorced persons may
have higher per capita costs, fewer
assets, and less retirement income
than they had anticipated.
Dissimilar retirement patterns for
never-married men and women may
reflect gender differences in the
labor market. Never-married women
were unlikely to have an interrupted
work history, so their lower partici­pation
in retirement probably can
be attributed to lower wages and
salaries and thus lower retirement
benefits than those received by men.
Other characteristics of retired
and employed persons are shown in
table 3. Persons with less education
were more likely to be retired. Twenty­nine
percent of those with only an
elementary school education were
retired, compared with 9 percent of
college graduates. Perhaps the less
educated retired because they were
employed in jobs such as construc­tion
that required strength and good
health, or because they had less ver­satile
job skills if they needed to fmd
anew job.
Compared with renters or
homeowners with a mortgage, a
higher percentage of homeowners
without a mortgage (28 percent)
were retired. In fact, home owner­ship
without a mortgage was the
1990 Vol. 3 No. 3
norm among retirees. Two-thirds of
retirees, compared with two-fifths of
those working, owned their home
mortgage-free.
those of other races. Perhaps
black persons work in occupations
where there are lower wages and
salaries and fewer retirement
One-person households were benefits.
more likely to be retired; nearly
one-fourth of one-person house­holds
were retired, compared with
one-filth of two- or three-person
households. The average household
size for the retired group was 2.2
persons and for the working group,
2.3 persons.
These comparisons no doubt are
affected by the ·underlying factor of
age. As previously shown, older per­sons
(within this age group}were
more likely than younger persons
Rural persons were more likely to
be retired than urban persons. There
may be fewer job opportunities for
older people in rural areas, or per­haps
they tend to move to rural areas
when they retire.
White persons were more likely to
be retired than black persons and
to be retired. To determine the
relationship between retirement and
various characteristics when age and
other factors were held constant, a
probit analysis was done. As shown
in table 4, p. 22, those factors that
were significant were age, spouse's
employment status, education,
housing tenure, household size,
marital status, and sex. Region and
race were not significant.
Table 3. Household characteristics of retired and employed reference
persons, 55 to 65 years of age, 1987
Household characteristics
Total ...... . ....... . ..... . .. . . .. ....... .
Education of reference person:
Elementary ...... . ..... . .............. .
No high school diploma . ... . ...... . . . .. .
High school diploma .. . .. . . . ... . .... . .. .
Some college . . . . .. . .. ......... . ...... .
College graduate . . . . .... .. .. . ......... .
More than 4 years of college . . .... . ..... .
Housing tenure:
Homeowners with mortgage . ...... ...... .
Homeowners without mortgage .... ... . . . .
Renters ... . ...... . .... .. ............ .
Household size:
1 member ... ... .. . . . ....... ... . .... .. .
2 members .... . .................... . . .
3 members ........ . .... .. .. . .......... .
4 or more members ... . .......... .... . . .
Region of residence:
Urban
Northeast .. . ........... . ...... . . . ... .
North Central . ....................... .
South . .... . ...... . ... . .... .. . .. . . . . .
West .. . ............ . .. . ...... ...... .
Rural . .... ..... . ... . ... .. .... . .... ... .
Race:
White ............. . ................ . .
Black and other ....... . . . ..... .. ...... .
Retired
20
29
20
22
16
16
9
12
28
13
24
20
20
11
15
21
18
19
24
20
18
Employed
Percent
80
71
80
78
84
84
91
88
72
87
76
80
80
89
85
79
82
81
76
80
82
21
The significant variables operated
in the expected direction. Retired
status was more likely as age
increased. Other factors also were
related in a positive direction to
retirement: spouse retired, home
ownership with no mortgage, widow­hood,
and male. Factors related to
retirement in a negative direction
were education and household size.
Assets
Assets studied were savings and
checking accounts, U.S. savings
bonds, and securities. Other asset
data such as home equity are not
presented because they are not on
the CEX public-use tapes. Because
asset information was asked only in
the last interview, the asset informa­tion
reported here is for about one­fourth
of the sample used for the
rest of this study.
The weighted average market
value of financial assets of retirees
was similar to those of workers,
$24,157 for retired families and
$22,029 for employed families
(table 5). In at-test comparison of
unweighted numbers, there was no
significant difference between the
retired and working groups on any
of these assets.
A difference was observed in the
percentage of families holding
securities. A smaller percentage of
retired persons owned securities, but
the average holding (among families
owning) was higher ($54,368) than
the average for workers ($32,011).
Some retirees may have received a
lump sum from a retirement plan
that they placed in securities.
Sources of Income
The income before taxes of
families with a retired reference
person was half the income of
families with one who was employed
(table 6). Wages and salaries com­prised
22 percent of the before-tax
income of households with a retired
person,4 compared with 79 percent
of family income with a working
40f the families with a retired reference
person, no one reported wage or salary
income for that person.
22
person. Social Security and pensions
accounted for 28 percent and 32 per­cent,
respectively, of the average
before-tax income of families with
a retired householder. Families
headed by a working person may
have received some Social Security,
pensions, or annuities because the
reference person or another family
member was eligible for such
benefits. Data on Social Security
and Railroad Retirement were
available for the reference person;
8 percent of those who were work­ing
were receiving Social Security or
Railroad Retirement benefits from
their previous employment.
Average dividend and interest
amounts were higher for retired than
for working families. Asset holdings,
however, were similar for both
groups in the sample subset as indi­cated
in table 5. Perhaps retired
households achieved higher returns
on their investments, because of
attention to the interest -earning
aspects of their savings, or investing
in long-term, higher-yielding
accounts.
Expenditures
Families with a retired reference
person spent most of their before­tax
income and a little more than
their after-tax income. Families with
that person employed spent 74 per­cent
of their before-tax income or
83 percent of after-tax income
(table 7, p. 24).
Total expenditures for families
with a retired household head were
Table 4. Means, proportions, and probit coefficients for retired/
employed dependent variable
Variable
Age . ..... . ..... .... . ..... . .. .
Spouse retired . ... .. .. ... ..... .
(1 = retired)
Education ..... ... ... . . . . . .... .
Housing tenure:
(Renter omitted) ...... . ..... . .
Own, with mortgage . .. . . .. .. .
Own, no mortgage ..... .. ... .
Household size ............... .
Marital status:
(Never married omitted) ...... .
Widowed . . . .. . ... . ... . .... .
Divorced . . .. .. . . .... . . .... .
Married ...... . . .. . .. . ...... .
Sex of reference person
(1 =male)
Region:
Urban:
(Northeast omitted) ...... . .. .
Midwest ...... .. .. . .... .. . .
South ............ . ....... .
West . ........... . ........ .
Rural . . .... . .... . . . . . ..... . .
Race ............ . . . ... .. .. . . .
(1 =black)
*p<.10.
**p<.05.
*** p< .01.
Means/
proportions
SO years
.07
12 years
.15
.40
.45
2.2
.05
.13
.14
.68
.76
.18
.21
.25
.17
.19
.10
Coefficients
.17185***
.60570***
-.07893***
-.08876
.23918**
-.09549**
.29811*
.07974
.15711
.17429*
.04933
.05164
.07510
.00720
.07876
Family Economics Review
Table 5. Financial assets of consumer units with a reference person 55 to 65 years of age, 19871
Mean for all Percent Mean for
consumer with consumer units
Assets units asset with asset
Retired Employed Retired Employed Retired Employed
Market value of all savings accounts ... . . . $12,245 $10,112 55 56 $21 ,872 $18,099
Market value of all checking accounts ... .. 2,736 2,499 66 69 4,142 3,640
Market value of all U.S. savings bonds . .... 514 499 14 18 3,679 2,843
Market value of all securities . . .......... . 8,662 8,919 16 28 54,368 32,011
1The Consumer Expenditure Survey collected asset data from consumer units only on the last quarterly interview so these data are from a
sample about one-quarter the size of the sample used for the rest of this study.
Note: t-tests of retired and employed, not significant.
Table 6. Sources of income of consumer units with a reference person 55 to 65 years of age, 1987
Mean for all Percent Mean for
consumer with consumer units
Income sources units income with income
Retired Employed Retired Employed Retired Employed
Income before tax 0 ••• ••• 0 • •• ••• 0. 0 0 0 0. $18,3n $36,714*** 100 100 $18,3n $36,714
Income after tax ... . .. . . . .. . ..... . . .. . . 17,595 32,873*** 100 100 17,595 32,873
Money income before taxes:
Wages and salaries . .... .. . .... . .... . .. 4,066 29,160*** 28 92 14,341 31,700
Net business income ... ... . .. . ....... 2,831 15 18,345
Net farm income • ••• • • • • ••• • • 0 ••• • •• 210 5 4,529
Social Security, private and
government retirement:
Social Security ... . . . . . . . .............. 5,072 747*** 73 16 6,931 4,769
Pensions and annuities ..... . ... . ..... . . 5,871 1,655*** 56 17 10,573 9,667
Interest, dividends, property income:
Dividends, trusts, royalties, estates .. . . .. 952 597 12 14 7,786 4,273
Interest on savings accounts or bonds 0 0 1,508 960* 46 40 3,248 2,399
Roomer and boarder income .. . ... . ... 29 2 1,593
Other rental income .... . .. . ..... . . . .. 1n 187 5 6 3,664 3,049
Unemployment and workers' compensation:
Unemployment compensation .. . . ..... 50 71 3 4 1,480 1,768
Workers' compensation •• •• 0. 0 • •• • • • • 222 68** 5 3 4,698 2,023
Public assistance, SSI, food stamps:
Public assistance .... . .. . .. .. .. . . . ... 14 1 2,070
Supplemental security income ......... 162 30 4 2 4,625 1,203
Food stamps ...... . .... ... .. .. .. ... 32 7*** 7 1 484 610
Alimony and child support . . . . . . .. ...... . 84 49 2 2 3,768 2,884
Other income . .. ............ .. .. . . . .. . 5 100 751 10,624
- Insufficient number of cases.
*p<.10.
** p< .05.
*** p< .01.
1990 Vol. 3 No. 3 23
about two-thirds those for families
with that person working, $18,337,
compared with $27,164. Per capita
expenditures for persons in a house­hold
with a retired person were
$8,411, compared with $11,628 for
persons in a household with an
employed reference person.
The greatest difference in expendi­tures
by retirees and workers was
for retirement, pension, and Social
Security payments. Whereas families
with a retired head spent $534,5
working households had payments
averaging about $3,514. Also, retired
families spent about half that spent
by working families for life insurance
and other personal insurance. For
total expenditures excluding retire­ment
payments and insurance,
5Spending for retirement programs in
families with a retired reference person was
probably by other members of the family who
were working.
retired families spent three-fourths
as much as employed families.
Other areas where retired families
spent a smaller amount than working
families were household operations
(51 percent as much as working
families), shelter (60 percent), and
food away from home (68 percent).
Expenditure levels for apparel,
household furnishings, and transpor­tation
also were less for retired
families. Expenditure levels for the
two groups were most similar for
utilities (84 percent as much)and
food eaten at home (88 percent).
However, t-tests showed significant
differences between the retired and
worker groups for all the expendi­ture
categories shown in table 7
except health. Health was the only
category of expenditures for which
households with a retired reference
person spent more than those with
an employed person. This may
indicate poorer health but also may
reflect higher health insurance costs
for retirees who do not have access
to health insurance benefits from an
employer.
The distribution of expenditures
among the categories (see figure)
differed somewhat between the two
groups, although each group spent
27 to 28 percent of their expendi­tures
for housing. Retired families
spent 24 percent for transportation,
compared with 21 percent by work­ing
families; 18 percent compared
with 15 percent for food; and 8 per­cent
compared with 5 percent for
health. However, these larger shares
by retired families result from
smaller allocations to retirement
programs. Families with a retired
head of household designated 3 per­cent
of their expenditures to retire­ment
program payments, whereas
working families spent 13 percent.
Table 7. Mean expenditures of consumer units with a reference person 55 to 65 years of age, 1987
Expenditures
Income before tax .................. . ... . . . . . .. . ... .
Income after tax . : . .... . . . ... . ... .. . .. ............. .
Total expenditures ................ . ................ .
Food .. . ......... . . . ......... .. . . ... . ... . ...... .
Food at home . .. .. .... .. . . . .. . . ............... .
Food away from home .......................... .
Housing ................... . ................... .
Shelter ................................. .... . . .
Utilities and fuel . .. .. . . . ... . . . .. ... .. ........... .
Household operations ...................... . . . . . .
House furnishings and equipment ................ . .
Apparel and services . . .. .. . . .. .. .... . ............ .
Transportation ..................... . ... . ... . .... .
Health care .................... . ... . . . .......... .
Entertainment ................................ . .. .
Life insurance and other personal insurance .......... .
Retirement, pensions, Social Security payments, other
* p< .10.
** p<.OS.
*** p< .01.
24
Retired
$18,377
17,595
18,337
3,336
2,436
900
5,035
2,394
1,653
166
821
917
4,431
1,497
940
266
534
Employed
$36,714***
32,873***
27,164***
4,095***
2,764***
1,331***
7,418***
3,974***
1,966***
326***
1,151***
1,307***
5,697**
1,336
1,244*
481***
3,514***
Retired/employed
Percent
50
54
68
81
88
68
68
60
84
51
71
70
78
112
76
55
15
Family Economics Review
Percent of Total Expenditures of Consumer Units,
Reference Person Age 55 to 65, 1987
8% 5%
Retired
Implications
Educators who conduct preretire­ment
programs may wish to work
with those who are planning early
retirement on long-range plans to
assure adequate income in later
years. Even though the assets of
retirees and those who continue to
work may be similar, retired persons
draw on their savings at an earlier
age. Those who have retired are not
contributing to retirement plans or
earning Social Security or pension
credits so their benefits may be less
than if they had continued to work.
If the benefits are based on the years
of highest earnings, they may reflect
a lower base salary than if the retiree
had continued to work and experi­ence
inflationary effects on salary.
Also, knowledge of Social Security
and pension benefits is important
to retirees since these payments
constitute the primary sources of
income. Information on investing
may be useful if the retiree received
a lump sum payment at retirement.
1990 Vol. 3 No. 3
7%
5% 5% 2"..6
Employed
In addition to fmancial planning
information, consumer information
may be helpful. Early retirees may
need health insurance information
to help them maintain coverage
during the period when employee
benefits are no longer in effect and
Medicare is not yet available. Con­sumer
information on health care,
food at home, utilities, and transpor­tation
may be appropriate because
these items comprise a larger share
of the retirees' budget.
References
1. Bazzoli, G. 1985. The early
retirement decision: New empirical
evidences on the influence of health.
The Journal of Human Resources
20(2):214-234.
2. Hayward, M. and M. Hardy.
1985. Early retirement processes
among older men. Research on
Aging 7( 4):491-515.
3. Hogarth, J.M.1989. Models
of accepting an early retirement
incentive. Lifestyles: Family and
Economic Issues 10(1):61-82.
t2j Housing
II Transportation
lliJ Food
CJ Health Care
[J Apparel and Services
D Entertainment
• Ufe & Personal Insurance
0 Retirement, Pensions
~ Other
4. Mirkin, B.A. 1987. Early
retirement as a labor force policy:
An international overview. Monthly
Labor Review 110(3):19-33.
5. Packard, M. and V.P. Reno.
1989. A look at very early retirees.
Social Security Bulletin 52(3):16-29.
6. Moon, M. and J. Hushbeck.
1989. Options for extending
worklife. Generations 13(2):27-30.
7. Ruhm, C.J. 1989. Why older
Americans stop working. The
Gerontologist 29( 3) :294-299.
8. Sherman, S.R. 1985. Reported
reasons retired workers left their last
job. Social Security Bulletin 48(3):
22-30.
9. U.S. Department of Labor,
Bureau of Labor Statistics. Con­sumer
Expenditure Survey: 1987
Interview Survey Public Use Tape
and Documentation.
10. Vroman, W. and S. Vroman.
1989. The increase in early retire­ment
since 1969./n: M.E. Lewin and
S. Sullivan, editors. The Care of
Tomorrow's Elderly, pp. 81-101. iS
25
Research Summaries
Changes in Family
Spending Since
1901
Consumption patterns since the
turn of the century reflect changes in
social and economic conditions, and
in the demographic composition of
the U.S. population. Wars, the Great
Depression, recessions, booms, and
energy crises have affected the
economic status of the American
family. Also, the number of women
in the labor force and single parents
have increased over the years, as
family size has declined. Data from
national expenditure surveys con­ducted
by the U.S. Department of
Labor were used to examine expend­iture
and income patterns for families
of urban workers who were wage
earners and clerical or sales
employees (see table). Restricting
the population in this manner
resulted in the longest data series for
similarly defmed households. These
families accounted for four-fifths of
the population in 1901 but less than
one-third in 1986--87. However, a
review of expenditure survey data
for the total population from 1960-
61 to 1987 shows that the trends
reported here are applicable to the
total population.
Food Expenditures. As household
purchasing power increased and
family size decreased, the percent
of overall expenditures allocated to
food and alcohol declined from
43 percent in 1901 to 19 percent in
1986--87. Within the food budget,
however, spending for food away
26
from home has increased. Data from
a 1909 report (the earliest such infor­mation
available) show that only
3 percent of the food budget went
for food away from home. This share
has grown steadily over the years to
27 percent in 1986--87.
Shelter. Home ownership has in­creased
dramatically over time, as
have outlays associated with owning
a home. In 1901 only 19 percent of
worker families owned a home.
Increasing incomes, a shorter work­week,
the spread of auto ownership
and highway development (and con­sequential
access to less expensive
land in the suburbs) made home
ownership more feasible for more
families. By 1917-19,27 percent of
worker families owned a home. Even
though the depression caused many
people to lose their homes, among
families surveyed in 1934-36, 30 per­cent
were homeowners. The Federal
Housing Administration was created
in the early 1930's to promote im­provement
in housing standards and
to provide mortgage insurance. By
1960, 56 percent of urban worker
families owned a home and the
home ownership rate has remained
at about this level through 1986--87.
Soaring house prices and mortgage
rates in the late 1970's and early
1980's slowed the rise in home
ownership.
The share of expenditures allo­cated
for shelter, which includes
rent as well as payments on owned
homes, has fluctuated, but the over­all
trend has been upward. Working
families allocated 14 percent of their
budget for shelter in 1901, 18 per­cent
in 1934-36, and 20 percent in
1986--87. This increase in budget
share was matched by increased
size, improved conditions, and addi­tional
amenities in the homes owned
by families. The median owner­occupied
home in 1985 had 6 rooms,
compared with 5.6 in 1970. In 1988,
79 percent of all new homes had a
garage, up from 64 percent 10 years
earlier; three-fourths had central air­conditioning,
an almost 50-percent
increase; and 42 percent had more
than 2.5 bathrooms, almost double
the number in 1978.
Transportation. Transportation
expenditures were collected as part
of other goods and services in the
1901 survey and so cannot be iden­tified
separately for comparison.
Other studies indicate that transpor­tation
outlays ranged between 1. 7
and 2.5 percent of average income
during this time. With the increase
in the ownership of cars over time,
transportation expenditures ac­counted
for a larger proportion of
the budget. In 1950 vehicle expenses
made up 12 percent of total expendi­tures,
compared with 25 percent in
1986--87. Data from the 1986--87
survey show that 91 percent of all
worker households owned a vehicle
and the average number of vehicles
per household was 2.2 (average
family size was 2.9 persons).
Health Care. The 1901 detailed
expenditure survey found that
families spent 3 percent of their
total outlays for products and ser­vices
in the category "sickness and
death," that is, medical care and
funeral expenses. This share rose to
7 percent by 1960-61 as improved
economic conditions, education, and
Family Economics Review
Consumption expenditures of urban wage and clerical consumer units, 1901 to 198~7
Item 1901 1917-19 1934-36 1950 1960~1 1972-73 1986--87
Income before taxes •• 0 ••• •• • •• • ••• 0 0 $827 $1,505 $1,518 $6,678 $12,771 $27,576
Income after taxes ... ....... . ........ $3,923 $5,912 $11,054 $24,986
Average family size • • • •• • • 0 •• 0 ••••• 0. 5.3 4.9 3.6 3.4 3.2 3.2 2.9
Percent homeowner ....... . ..... . .... 19 27 30 44 56 57 56
Current consumption expenditures . . . . .. $791 $1,353 $1,463 $3,925 $5,431 $8,601 $20,226
As a gercent of consumgtion
Food and alcohol .... . .. . .... .. .... . . 43.0 41 .1 34.7 32.5 26.0 22.6 19.4
Shelter . . ... . .... . .. ... .. .... . . .... . 14.0 13.9 17.7 10.6 13.7 16.4 20.2
Utilities, fuels, and public services ••••• 0 5.2 5.5 7.4 4.2 6.1 6.9 8.2
Household operations .... . .. . ........ 2.7 4.0 3.9 4.2 1.2 1.4
Household furnishings and equipment .. . 3.4 4.6 4.1 7.1 5.2 4.8 3.9
Apparel and services ... ...... . ... . ... 13.5 17.6 10.9 11 .5 10.3 8.4 5.2
Vehicle expenses .... . .. . ........ .. . . 1.2 5.9 12.0 13.4 22.9 24.7
Public transportation • • ••• 0 0 0 • • •• • • • • • 1.9 2.6 1.8 1.7 1.2 1.0
Health care ..... .. .. . ....... ... .. .. . 2.7 4.7 4.0 5.1 6.6 4.7 4.0
Entertainment and reading • •• •. ..• 0. 0. 2.7 3.3 3.6 5.4 4.9 5.2 5.8
Personal care . .... . ... .. . ....... . ... 1.0 2.1 2.3 2.9 1.3 1.1
Education . . ........... . ..... . .. .... 0.5 0.5 0.4 1.1 1.1 1.0
Miscellaneous (sundries) ............ . . 15.7 2.0 2.5 3.2 3.9 3.3 4.1
Source: Jacobs, E. and S. Shipp, 1990, How family spending has changed in the U.S., Monthly Labor Review 113(3):20-27, U.S. Department
of Labor, Bureau of Labor Statistics.
the availability of insurance enabled
households to purchase more health
care, and then declined to 4 percent
by 1986-87, as employer-provided
health insurance became more
prevalent. In 1987, 64 percent of
individuals had employment-related
health insurance, some or all of
which was paid for by employers.
An increasing share of the family
medical budget was spent on
insurance (35 percent in 1986-87,
compared with 19 percent in 1950),
with a decreasing share spent on
services and prescription drugs.
Recreation. Increasing income
and leisure time have resulted in
households spending a larger per­centage
of their budget on entertain­ment
and reading, doubling from
3 percent in 1917-19 to 6 percent
1990 Vol. 3 No. 3
in 1986-87. However, most of this
growth reflected an increase in
entertainment expenditures. Expendi­tures
associated with reading, as a
proportion of the entertainment
and reading budget, declined from
41 percent in 1901 to 10 percent in
1986-87.
Source: Jacobs, E. and S. Shipp, 1990,
How family spending has changed in the
U.S., Monthly Labor Review 113(3):20-27,
U.S. Department of Labor, Bureau of Labor
Statistics.
27
Supplementing
Retirement Income
Until Social
Security Begins
Retirement income is derived
from three primary sources: Social
Security, employer-sponsored retire­ment
plans, and workers' savings.
The earliest age at which regular
Social Security benefits1 may begin
is 62; workers who retire before
reaching this age must rely, in the
interim, on pensions and savings for
their retirement income. Currently,
a worker may receive full Social
Security benefits beginning at age 65
and reduced benefits at age 62. In
the future, governmental policy will
encourage people to work longer
and retire later. Beginning in 2003,
the normal retirement age (with full
benefits) will climb 1 month per
year, reaching age 67 in 2027. The
earliest age that Social Security
retirement benefits may be received
will remain at 62, although benefit
reduction for early receipt will
increase.
The Employee Benefits Survey,
conducted by the Bureau of Labor
Statistics, is an annual study of the
incidence and characteristics of
employee benefits. Separate data are
developed for three occupational
groups: professional and administra­tive,
technical and clerical, and
production and service workers. The
1988 survey of full-time employees in
private industry (medium and large
firms) found that 63 percent par­ticipated
in defmed-benefit pension
plans. A defmed-benefit pension
plan specifies a formula for calculat­ing
benefits, and age and length of
service requirements that must be
met before a worker is eligible for
either normal or early retirement
benefits.
10ther Social Security benefits, such as
those for disabled employees and survivors,
may be received at earlier ages.
28
Full-time participants in defined-benefit pension plans by provisions
for supplemental payments, 19881
Professional Technical Production
Supplemental All and and and
payment status participants administrative clerical service
Percent
Total . . .... . ... . .... . ... . 100 100 100 100
With supplemenf • 0 . 0 •• • • • 12 11 7 16
Normal retirement .. . .. . . 8 7 5 10
Early retirement ... . .. . .. 9 7 5 12
Without supplement . . . .. .. 88 89 93 84
1Private industry, medium and large firms.
2The total is less than the sum of the components because some participants could receive
supplements to both normal and early retirement benefits.
Source: Wiatrowski, W.J., 1990, Supplementing retirement until Social Security begins,
Monthly Labor Review 113(2):25-29, U.S. Department of Labor, Bureau of Labor Statistics.
Normal retirement benefits are
the full amount determined by the
pension plan's benefit formula,
without reduction due to age at
retirement. Early retirement benefits
are systematically reduced because
they begin at an earlier age and, on
average, will be received over a
longer period.
Some private pension plans pro­vide
extra payments designed to
compensate for delayed Social
Security benefits until a retired
worker becomes eligible to receive
them. These supplemental pension
payments help to bridge the gap, but
they are available to relatively few
employees. In 1988 only one in eight
defmed-benefit pension plan par­ticipants
was in a plan that provided
such supplemental payments (see
table). Production and service
workers were the most frequent
beneficiaries (16 percent) because
of the prevalence of supplementary
benefits in several large collective
bargaining plans. Technical and
clerical workers were the least likely
to receive supplemental payments
(7 percent). Thirty percent of par­ticipants
in plans supplementing
normal benefits faced special age or
length-of-service requirements, or
both, to be eligible for supplemental
payments.
Employers are using other
methods to help retirees augment
basic pension payments. Some firms
offer additional employee benefit
plans, most commonly savings and
thrift plans, that provide retirement
income. These plans encourage
employees to save by establishing
an account that is usually payable at
retirement. An alternative is for an
employer to encourage early retire­ment
by providing "open windows"­limited
periods during which
employees are offered special incen­tives
to retire. The incentives may
include lump-sum cash payments,
modified or eliminated early-retire­ment
reductions, more favorable
benefit formulas, or -as described
in this article- supplemental pen­sion
payments until Social Security
begins.
Source: Wiatrowski, W J., 1990, Sup­plementing
retirement until Social Security
begins, Monthly Labor Review 113(2):25-29,
U.S. Department of Labor, Bureau of Labor
Statistics.
Family Economics Review
Public Attitudes
Toward Social
Security
Since passage of the original
Soci~ Security Act in 1935, the pro­gram
1t created has been expanded
greatly. Each month, approximately
15 percent of all Americans receive
a benefit from the program. Each
Y.ear, more than half of the popula­tion
pays FICA (Federal Insurance
Contributions Act) or SECA (Self­Employment
Contributions Act)
taxes on their earnings. The Old­Age,
Survivors, and Disability In­surance
program is widely regarded
as one of the most popular social
programs ever enacted by the U.S.
Government.
Initial public acceptance of both
the Old-Age Insurance (OAI) and
Old-Age Assistance (OAA) pro­grams
was high and increased from
a 68-percent approval rate in 1936
to a nearly unanimous % percent in
1944. During this first decade of the
program, a substantial portion of
those paying into the system did not
understand that their participation
would entitle them to benefits
regardless of need. Gradually, what
had begun as a program for the aged
worker grew to include benefits for
survivors, the disabled, and others.
Program Developments and
Public Responses
. A major expansion designed to
rmprove the program was contained
in the Social Security Amendments
of 1972. This legislation provided for
a 20-percent increase in monthly
cash benefits and, effective in 1975,
benefits would increase automat­ically
as prices rise. A number of
other major provisions were in­cluded
in the 1972 amendments but
the benefit increases, together ~th
an economic downturn, precipitated
a financial crisis in the trust funds.
A higher than anticipated inflation
triggered large automatic benefit
increases as lower real wage levels
and higher unemployment were
decreasing the flow of taxes into the
trust funds. By 1975 annual expendi­tures
were exceeding annual income.
Confidence in the future of the
Social Security system declined
considerably in the late 1970's (see
table 1). Public opinion still sup­ported
the concept that the Govern­ment
should spend more to help
older people; that benefits should
increase when the cost of living in­creases;
and that benefits should
increase even if it means higher
taxes. New legislation in 1977 con­tained
provisions intended to reduce
the projected trust fund deficits and
to eliminate the deficits beginning in
1980. The most important fmancial
changes were an increase in future
tax rates, an increase in the level of
earnings subject to the payroll tax,
and a revised benefit formula that
modified the method of indexing
benefits to take account of inflation.
The National Commission on
Social Security was established to
study both long-term and short-term
issues involving Social Security. In
1979 the Commission funded a sur­vey
of public attitudes by Peter D.
Hart Research Associates, Inc. The
Hart survey determined that only
42 percent of the population were
confident that Social Security would
have the funds to provide their
benefits. Among the nonretired only
32 percent expressed confidence.
Nevertheless, 77 percent of the
~erican public would opt to stay
m the program, if given a choice.
Additional opinions reported in the
Hart survey include:
• Of the total, 65 percent believed
(correctly) that Social Security
benefits alone were not meant to
be the only source of retirement
income. However, more than
60 percent thought that benefits
should provide for all basic
needs.
Tyeaabrlse, 11. 9C7o5n-8f8id ence in the future of s oc•·a 1s ecun·t y: Percent distribution of level of confidence, by selected
Selected years
Level of confidence 1975 1976 1977 1978 1981 1982 1983 1984 1985 1986 1988
Total percent .......... 100 100 100 .100 100 100 100 100 100 100 100
Very confident .. . .... 22 18 15 8 12 8 9 9 9 9 17
Somewhat confident . . 41 39 35 31 30 24 25 23 26 30 32
Not too confident . . ... 27 32 30 39 39 43 38 43 37 37 30
Not at all confident .... 10 10 20 21 18 24 26 25 24 21 15
Don't know/no answer . 0 1 0 1 2 0 3 4 6
Source: Monitoring Attitudes of the Public, American Council of Life Insurance (annual survey).
1990 Vol. 3 No. 3 29
30
• More than 90 percent of respon­dents
expected to receive Social
Security benefits (table 2).
• The retired were somewhat
more likely to list Social Security
as a "major" source of retire­ment
income-75 percent,
compared with 60 percent of
the nonretired.
• Asked to choose between in­creasing
taxes or lowering
benefits, 69 percent opposed
lowering benefits. Also, respon­dents
preferred higher taxes as
an alternative to raising the
retirement age.
• There was support for the
present system of funding.
Given a choice, 49 percent
favored raising the payroll tax
and 26 percent preferred rais­ing
the Federal income tax.
When the alternative was a new
national sales tax, 45 percent
preferred raising the payroll tax
and 31 percent preferred the
sales tax.
• Only 45 percent of the public
were aware of the provision to
increase benefits automatically
by the amount of the rise in the
cost of living-4 years after the
provision had become effective.
• One half of the population could
not estimate the amount paid in
Social Security taxes for the pre­vious
year; 59 percent did not
know the tax rate.
• Almost 90 percent agreed with
a statement that Social Security
paid benefits to families of
workers who became disabled
or died.
• Social Security was cited more
often as the most important
source of survivors' income
(39 percent) than was life
insurance (28 percent).
Crisis in the Early 1980's
A 1981 study of attitudes toward
aging and the aged, conducted by
Louis Harris and Associates, Inc.,
found a majority of American adults
had little confidence that Social
Security would be able to pay them
benefits when they retire. Although
three-quarters of the public under­stood
that Social Security was a pay­as-
you-go system, only 51 percent
would raise taxes to provide ade­quate
income for older people.
Reducing benefits for people
already retired was opposed by
92 percent, and for those who will
retire in the future, by 85 percent.
Also, 70 percent of American adults
did not want a reduction in cost -of­living
adjustments.
The National Commission on
Social Security Reform was estab­lished
in 1981 to review the fmancial
condition of the trust funds and to
make recommendations based on its
fmdings. Those recommendations
became the basis for the 1983
amendments. In the period 1982-84,
only one-third of the public des­cribed
their level of confidence in
Social Security as "very'' or "some­what"
confident.
As a result of this concern, survey
responses showed that the American
people were giving serious consider­ation
to reforms that formerly had
been unpopular. In 1982, at the
depth of the crisis, one poll showed
divided feelings- 52 percent of the
population still opposed raising the
retirement age but 45 percent
favored such action. About three­quarters
of the population remained
of the opinion that Social Security
should provide enough for at least
an adequate standard of living. Also,
a majority said the Government
should spend more on Social
Security; there was increasing op­position
to a spending cut for Social
Security; three-fourths of the public
chose a cut in defense spending over
a cut in Social Security benefits.
Table 2. Sources of retirement income: Percent of persons expecting
to receive or receiving income and percent for whom source is or will
be a major source, by retirement status, 1979
Source of income
Social Security ...... . . . .. . ...... . .
Savings, investments, insurance,
or annuity . . ... . . ... . . . . ........
Private employee pension . . .........
Part-time work after retirement .... . ..
Government employee pension .. ....
Individual Retirement Account
or Keogh plan • 0 . 0 0 •••••••••••••
Other government programs:
Veterans' benefits, Food Stamp,
Supplemental Security Income . . .. .
Children, other relatives, friends ......
Nonretired
Expecting Major
income source
Retired
Receiving Major
income source
Percent
91 60
75 39
55 35
69 18
21 13
26 15
29 23
11
92
61
33
21
16
6
19
8
75
18
18
3
11
9
3
Source: A Nationwide Survey of Attitudes Toward Social Security, Peter D. Hart Research
Associates, Inc., June 1979.
Family Economics Review
Table 3. Main source of expected income in retirement: Percent distribution of nonretired persons by level
of current earnings, 1985 '
Total Less
non- than $20,000- $30,000- $50,000
Main source of expected income retired $20,000 $29,999 $49,999 or more
Total percent 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100 100 100 100 100
Pension payments from a company, pension
plan of your own or your spouse .......... 28 18 31 36 26
Payments from Social Security 0 0 0 0 0 0 0 0 0 0 0 0 0 0 23 43 20 13 3
Money accumulated through savings
or investments ••• ••••••••••••• • 0 •• 0 • • 0 0 20 16 17 19 37
Money from an IRA or Keogh plan ........... 11 5 11 15 17
Other sources 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13 12 15 11 11
Not sure/no answer •••••• 0 0 ••••••••••••••• 6 6 6 6 6
Source: A Fifty Year Report Card on the Social Security System-The Attitudes of the American Public Yankelovich Skelly and White Inc
August 19850 ' ' ' '
0
,
Confidence Returns
The 1983 amendments made a
number of changes, some of which
were phased in gradually. Major
provisions included the extension of
coverage to many Federal employees
and to employees of nonprofit or­ganizations.
Scheduled increases in
the tax rates were accelerated, and
the tax rates for the self-employed
were increased. Up to 50 percent of
Social Security benefits were to be
included in the taxable income of
higher-income beneficiaries, and the
additional revenue generated would
be transferred to the trust funds.
Beginning early in the next century,
the age of eligibility for full benefits
would be increased gradually.
It soon became clear that the 1983
amendments had restored the fman­cial
soundness of the Social Security
system. By 1985, 46 percent of the
population expressed confidence in
the program's future in a survey
sponsored by the American Associa­tion
of Retired Persons (AARP)
and conducted by Y ankelovich,
Skelly, and White, Inc. The AARP
survey showed that Social Security
had strong public support. It was
regarded as an important Govern­ment
program by 96 percent of the
population and a success by 92 per­cent,
and 88 percent said it should
1990 Vol. 3 No. 3
continue. Reasons given included:
more people were living to an older
age (94 percent); relief from the
fmancial burden of having to care
for aged parents (80 percent); and
an essential source of income for
many elderly Americans. Only
16 percent of the population believed
Social Security had outlived its use­fulness.
In spite of the Federal
budget deficit, 68 percent of the
public disagreed that the country
could not afford Social Security-it
was lowest on the list of which
programs to cut to reduce Federal
spending. Most nonretired persons
(73 percent) would stay in the
system even if they were given the
option of leaving.
For those already retired, 55 per­cent
chose Social Security as the
most important source of retirement
income. Among the nonretired, only
23 percent anticipated that their
main income would be from Social
Security payments; 28 percent said
that private company pension pay­ments
would provide their main
source of income (table 3). Of the
nonretired, more than 7 in 10 said
Social Security should provide a
retirement income sufficient for an
adequate or comfortable standard
of living, but only 38 percent thought
that it actually did.
A 1986 AARP study found that
64 percent of the population strongly
agreed that the Government was not
doing enough for them and the
Government should spend more
for Social Security payments. Most
perceived the Social Security tax to
be fair, although the percentage
increased with age.
Source: Sherman, So R, 1989, Public
Attitudes toward Social Security, Social
Security Bulletin 52( 12):2-16, U oSo Depart­ment
of Health and Human Services, Social
Security Administration.
31
RECENT LEGISLATION AFFECTING FAMILIES
Public Law 101-127 -revises and
extends the programs established in
the Temporary Child Care for the
Handicapped Children and Crisis
Nurseries Act of 1986. Changes
references from "handicapped
children" to "children with dis­abilities,"
sets forth additional
requirements for State annual
evaluation reports, and extends
through fiscal years (FY) 1990
and 1991 the authorization of
appropriations.
Enacted October 25, 1989.
Public Law 101-137- extends the
expiration date of the Defense
Production Act of 1950. Provisions
relevant to family economics amend
the National Housing Act of 1949 to
extend through FY 1990:
(1) the authority for the provision
of direct and insured loans to pro­vide
housing and related facilities
for elderly persons and families in
rural areas;
(2) the current determinations for
rural area classification;
(3) the authorization of appropria­tions
for mutual self-help housing
grant and loan authority.
It also amends the Housing and
Community Development Act of
1987 to extend through FY 1990 the
authority of the Secretary of Hous­ing
and Urban Development (HUD)
to carry out a rural rental rehabilita­tion
demonstration program.
Enacted November 3, 1989.
Public Law 101-147 -amends the
Child Nutrition Act of 1966 and the
National School Lunch Act to ex­tend
certain authorities contained in
such acts through FY 1995. The law:
(1) requires that lunches served
through the National School Lunch
Program offer students fluid whole
milk and fluid unflavored lowfat
milk;
(2) makes certain private non­profit
organizations eligible to spon­sor
programs under the Summer
Food Service Program for Children;
32
(3) directs the Secretary of
Agriculture to conduct demonstra­tion
projects to test innovative
approaches to remove or reduce
barriers to Child Care Food
Program participation by family
or group day care homes primarily
serving low-income children;
( 4) requires that meals served in
reimbursed adult day care programs
provide, on the average, at least one­third
of the daily recommended
dietary allowance;
(5) directs the Secretary of
Agriculture to conduct demonstra­tion
projects designed to provide
food service throughout the year to
homeless children under age 6 in
emergency shelters and to enter into
agreements with private nonprofit
organizations to participate in such
projects;
( 6) directs the Secretary of
Agriculture and the Secretary of
Health and Human Services (HHS),
in consultation with the Surgeon
General, to develop jointly, approve,
and update as necessary, a publica­tion
on nutrition guidance for child
nutrition programs, and requires
school food authorities and other
organizations to apply such dietary
guidance in preparing meals and
supplements under the School
Lunch Program and the School
Breakfast Program;
(7) provides for the expansion of
the School Breakfast Program;
(8) sets forth additional activities
and requirements with respect to the
Special Supplemental Food Program
for Women, Infants, and Children
(WI C), requiring the State WIC plan
to include a provision for getting
benefits to eligible persons most in
need, and to expand a specified
portion ofWIC funds for nutrition
education and breastfeeding promo­tion
and support.
Enacted November 10, 1989.
Public Law 101-189-The National
Defense Authorization Act for FIScal
Years 1990 and 1991 authorizes
appropriations for military functions
of the Department of Defense (DOD)
and prescribes military personnel
levels. The Military Child Care Act
of 1989 earmarks specified funds for
operating expenses for military child
development centers and for other
child care and child-related services
of DOD. It requires:
(1) the establishment and imple­mentation
of a program to train
child care employees;
(2) each child care employee
to complete such training within
6 months of employment;
(3) at least one employee at each
military child development center
be a specialist in training and cur­riculum
development;
( 4) a program to increase the
compensation of its child care
employees.
Enacted November 29, 1989.
Public Law 101-239-The Om­nibus
Budget Reconciliation Act of
1989, related to family economics:
(1) directs the Secretary of Educa­tion
to establish a student loan
default reduction program and to
widely publicize the availability of
the program;
(2) amends the Medicare Pro­gram
to reduce payments for the
capital-related costs of inpatient
hospital services for the fmal three
quarters of FY 1990 by 15 percent;
(3) increases Medicare payments
for the operating costs of inpatient
hospital services in FY 1990 by the
market basket percentage increase
in such costs, and increases pay­ments
to hospitals serving a dis­proportionate
share oflow-income
patients;
( 4) increases Medicare payment
rates for hospice care;
(5) provides for the gradual transi­tion,
from 1992 through 1995, to the
determination of Medicare payments
for physician services pursuant to
Family Economics Review
a fee schedule, which takes into
account the relative value of the
work, practice expenses, and
malpractice risks associated with
these services;
( 6) amends title XIX (Medicaid)
of the Social Security Act to require
States to provide Medicaid coverage
of children between the ages of 1
and 5, inclusive, whose family in­come
does not exceed 133 percent
of the Federal poverty guidelines;
(7) directs the Secretary of Health
and Human Services to develop,
publish, and make available a mater­nal
and child health handbook;
(8) requires the Comptroller
General to conduct a study regard­ing
the loss by retirees of health
benefits due to the liquidation of
their employer in bankruptcy;
(9) extends, through FY 1992,
Federal funding for State programs
to assist children who have attained
age 16 in making the transition from
foster care to independent living;
(10) amends the Child Support
Enforcement Amendments of 1984
to permanently extend the provision
continuing a family's Medicaid
eligibility if such family loses eligi­bility
due to the collection or in­creased
collection of child support;
(11) amends the Foster Care and
Adoption Assistance Program to
cover, through FY 1992, 75 percent
of the costs for the short-term train­ing
of current or prospective foster
or adoptive parents and the staff of
licensed child care institutions;
(12) requires that the written case
plan developed for each foster care
child include specified health and
education records, which are to be
reviewed and updated when the
child is placed in foster care and to
be supplied to the foster care parent
or provider;
(13) provides for the conduct of
demonstration projects in up to 10
communities to determine the extent
to which the use of volunteer senior
aides, in the provision of basic
medical assistance and support to
families with disabled or chronically
ill children, reduces the cost of
caring for such children.
Enacted December 19, 1989.
1990 Vol. 3 No. 3
age, sex,
1989
Male Female
~
~White
~Black
r-1 ~-,------,1
1~1
1~1
~~~
.b--AV~AOY~
~
loan rates
2025
I!WTAkeJ
tw~
~/km
~~
33
CURRENT REGIONAL RESEARCH PROJECT
NC-182. Family
Resource Utilization
as a Factor in
Determining Economic
Well-Being of Rural
Families
Administrative advisor:
Dr. S.A. Helmick
U Diversity of Missouri
Columbia, MO 65211
Cooperating States: University of
Arizona, U Diversity of California at
Riverside, U Diversity of Illinois,
Purdue University (Indiana), Iowa
State U Diversity, Kansas State
University, Michigan State Univer­sity,
and University of Minnesota
Project dates: October 1986 to
September 1991
Objectives: Determine and model:
Effects of external factors,
demographic characteristics, and
functioning styles on family resource
utilization and the effects of family
resource utilization in achieving
family economic well-being. Develop
a basis for intervention guidelines
for cooperative extension educators
and others helping families to maxi­mize
family economic well-being.
Approach: Survey data were col­lected
via a mailed questionnaire
using the Dillman method. A com­mon
instrument, using structural and
open-ended questions, and common
procedures were developed by the
NC-182 regional research committee.
A stratified random sample of rural
families was drawn from each co­operating
State. Existing measures
and scales were used or revised as
needed. Implications for rural com­munities
will be determined, based
on fmdings that concern patterns of
family resource utilization and
recommendations made to families
to enhance their economic well-being.
34
Progress: Questionnaires were
mailed to the fmancial manager and
another adult (usually spouse) in the
household during the summer of
1988. Responses from 2,508 fmancial
managers and 1,381 other adults
were received. States collected data
from two rural counties- one that
was in an economic decline and
another that was stable or growing
as determined by changes in per
capita income. Coding was com­pleted
for the data collected in com­mon
by all States in the regional
project, and a regional data tape
was developed by the University of
Illinois. The regional data tape has
been completed. The regional re­search
committee divided into sub­groups,
each taking responsibility for
manuscript preparation in specific
topic areas. Information on family
economic well-being included
family's net worth, savings, percep­tion
of income adequacy, and satis­faction
with financial situation.
A "basebook" was prepared and is
expected to be available in 1990.
Information included in this publica­tion
describes the rationale for the
study, its methodology, and basic
frequencies of the major variables.
A workshop session was presented
by researchers from Arizona, Iowa,
Illinois, Michigan, Minnesota, and
California at the 36th Annual Con­ference
of the American Council on
Consumer Interests in New Orleans,
LA (March 1990).
Selected publications:
Hira, T. and K.P. Varcoe. 1989. Use
of consumer debt and satisfaction
with level of living among rural older
adults [summary]. In: R. Walker,
editor. Families in Transition: Struc­tural
Changes and Effects on Family
Life, p. 205. American Home
Economics Association, Alexandria,
VA.
The following articles were prepared
using individual State data and were
presented at the 36th Annual Con­ference
of the American Council on
Consumer Interests, New Orleans,
LA in March 1990:
Bauer, J.W.1990. Rural families and
their economic well-being: Proce­dures,
methods, and conceptual
model of North Central regional
project NC-182. In: M.L. Carsky,
editor.American Council on Con­sumer
Interests- The Proceedings,
p. 329.
Hafstrom, J.L. and V.S. Fitzsimmons.
1990. Rural communities and per­ceptions
of Illinois residents. In:
M.L. Carsky, editor. American
Council on Consumer Interests­The
Proceedings, p. 330.
Hira, T.K.1990. Residents in
economically gaining and declining
rural communities and their percep­tions
of changes in community and
impact of household's financial
situation. In: M.L. Carsky, editor.
American Council on Consumer
Interests- The Proceedings, p. 334.
Keefe, D., R. Walker, C. Fratzer,
and E. Avila. 1990. Sustaining/grow­ing
and declining rural areas in
Michigan: Perceived impact of
residents. In: M.L. Carsky, editor.
American Council on Consumer
Interests- The Proceedings, p. 333.
Varcoe, K.P. 1990. Rural California
households-A proftle. In: M.L.
Carsky, editor. American Council
on Consumer Interests- The
Proceedings, p. 331.
Family Economics Review
Cost of Food at Home
Cost of food at home estimated for food plans at four cost levels, June 1990, U.S. average1
Cost for 1 week Cost for 1 month
Sex-age group Thrifty Low-cost Moderate· Liberal Thrifty Low-cost Moderate- Liberal
plan plan cost plan plan plan plan cost plan plan
FAMILIES
Family of 2:2
20-50 years • 0 •• ••• 0 •••• 0 0 •• •• • 47.30 59.50 73.40 90.90 204.90 258.10 317.90 393.70
51 years and over ... . ... . .. . .... 44.90 57.20 70.40 84.20 194.50 247.90 305.10 364.50
Familyof4:
Couple, 20 - 50 years and children-
1-2 and 3-5 years • 0 •• • •••• • •• 69.00 85.90 104.80 128.50 299.10 372.30 454.30 556.80
6 - 8 and 9 - 11 years •• • 0 • • •• • • • 78.90 100.90 126.20 151 .70 342.20 437.30 546.70 657.30
INDIVIDUALS3
Child:
1 -2 years .. . . ... . . . .. . . ... . . . . 12.50 15.20 17.70 21.40 54.30 65.90 76.70 92.70
3-5 years . . . ... .... .. ... ...... 13.50 16.60 20.40 24.50 58.50 71.80 88.60 106.20
6-8 years ....... .. ........... . 16.40 21 .90 27.50 32.00 71 .20 94.90 119.00 138.50
9- 11 years . .... . .. . . . . . . .... . . 19.50 24.90 32.00 37.10 84.70 107.80 138.70 160.90
Male:
12- 14 years . . .. .. ... .. ...... . . 20.40 28.20 35.20 41 .30 88.20 122.30 152.50 178.90
15-19years ... . .. . . ........ . .. 21.20 29.20 36.20 42.00 92.00 126.50 156.90 182.10
20 - 50 years ........... ....... . 22.60 28.80 36.00 43.50 97.90 124.90 156.10 188.50
51 years and over ........ ... .... 20.60 27.40 33.70 40.30 89.20 118.70 145.90 174.60
Female:
12-19years ................ ... 20.50 24.40 29.60 35.70 88.80 105.80 128.00 154.70
20 - 50 years .. ........ . .. . ... .. 20.40 25.30 30.70 39.10 88.40 109.70 132.90 169.40
51 years and over . .... .. ... .... . 20.20 24.60 30.30 36.20 87.60 106.70 131.50 156.80
1 Assumes that food for all meals and snacks is purchased at the store and prepared at home. Estimates for the thrifty food plan were
computed from quantities of foods published in Family Economics Review 1984(1). Estimates for the other plans were computed from
quantities of foods published in Family Economics Review 1983(2). The costs of the food plans are estimated by updating prices paid by
households surveyed in 1977-78 in USDA's Nationwide Food Consumption Survey. USDA updates these survey prices using information
from the Bureau of Labor Statistics, CPI Detailed Report, table 3, to estimate the costs for the food plans.
210 percent added for family size adjustment. See footnote 3.
3The costs given are for individuals in 4-person families. For individuals in other size families, the following adjustments are suggested:
1-person -add 20 percent; 2-person -add 10 percent; 3-person -add 5 percent; 5- or 6-person -subtract 5 percent; 7- or more-person-subtract
10 percent.
1990 Vol. 3 No. 3 35
Consumer Prices
Consumer Price Index for all urban consumers [1982-84 = 100]
Group
All items . .. . . . .. . ....... . . ...... . ................ .
Food ................ .... ...................... .
Food at home ... .... .................. ..... .. . .
Food away from home .......................... .
Housing .. . ........ .. .... ... . ............ ... .... .
Shelter .. .. .... . .... .. .... .... .. .............. .
Renters' costs 1
••• • ••••••••••••••••••••• • •••• • •
Homeowners' costs 1
.••..••.••.....•••.•.•....•
Household insurance 1 .•..... •. . • ........... • .
Maintenance and repairs ............ ........... .
Maintenance and repair services ............... .
Maintenance and repair commodities .......... .
Fuel and other utilities .......... .. . .. ..... ... . .. .
Fuel oil and other household fuel commodities ..... .
Gas (piped) and electricity .......... .. ... ...... .
Household furnishings and operation . ..... . . ...... .
Housefurnishings ............................. .
Housekeeping supplies ....... . ....... . ........ .
Housekeeping services .......... ... . .......... .
Apparel and upkeep .. .. . .... ...... ...... ..... .... .
Apparel commodities .............. .... .. ...... . .
Men's and boys' apparel ..................... .. .
Women's and girls' apparel ................ .... .
Infants' and toddlers' apparel .... ..... . .. .. . . ... .
Footwear ................................... .
Apparel services .... ... . ...................... .
Transportation ................................... .
Private transportation ..... .. ..... ............... .
New vehicles ... ... ... ... . .. .. .. ............. .
Used cars ... .. .............. .. . .. ..... ... . .. .
Motor fuel . ......... ......................... .
Automobile maintenance and repair ...... ....... .
Other private transportation ... ........ .... ..... .
Other private transportation commodities ....... .
Other private transportation services ........... .
Public transportation ......... . ......... ... . .... . .
Medical care .... ............. ................... .
Medical care commodities ........ .. ... ... ... .... .
Medical care services . .. ................. . ...... .
Professional medical services . . ... ..... .......... .
Entertainment ................................ .. . .
Entertainment commodities ........... . .......... .
Entertainment services .......................... .
Other goods and services ........ ... .............. .
Personal care ... .... . .... ...... . . . .. .... ...... .
Toilet goods and personal care appliances ........ .
Personal care services ......................... .
Personal and educational expenses ...... . ........ .
School books and supplies ...... . ..... . ... .. . .. .
Personal and educational services ........ ....... .
11ndexes on a December 1982 = 100 base.
Source: U.S. Department of Labor, Bureau of Labor Statistics.
36
June
1990
129.9
132.0
131.7
133.4
128.3
139.5
145.3
144.4
135.2
121.8
125.4
117.0
112.2
84.9
112.4
113.1
106.3
125.8
119.8
123.3
121.1
119.9
120.9
127.8
117.3
136.4
118.2
116.4
120.6
117.6
94.6
129.6
141 .0
101.8
149.7
141.5
161 .9
163.3
161.5
155.8
131.9
123.5
142.6
157.8
131.0
129.2
132.8
168.0
169.8
168.1
Unadjusted indexes
May April
1990 1990
129.2
131.3
130.9
133.0
127.1
138.3
144.4
143.1
134.9
122.2
126.2
116.7
109.9
88.0
107.8
113.2
106.7
125.0
119.5
125.5
123.6
121 .9
124.7
127.2
118.5
136.2
117.7
115.9
121.0
116.9
92.5
129.4
140.8
101.8
149.3
140.9
160.8
162.2
160.5
155.1
131.7
123.7
142.0
156.6
130.2
128.3
132.1
167.7
169.9
167.7
128.9
131.3
131.1
132.5
126.8
138.0
144.7
142.5
134.4
121.2
125.6
115.4
109.4
89.6
106.8
112.8
106.6
123.9
119.1
126.7
125.0
121.0
127.9
130.0
118.6
134.8
117.3
115.5
121 .1
116.2
. 91.2
129.4
140.8
101.9
149.4
140.3
159.8
161.3
159.4
154.1
131.4
123.5
141.6
155.8
130.3
128.3
132.3
166.6
169.9
166.6
June
1989
124.1
125.0
124.3
127.1
122.9
132.3
138.7
136.5
132.8
118.3
121.0
114.7
109.2
80.2
110.5
111.1
105.1
121.2
117.4
117.8
115.8
115.9
114.8
123.9
114.0
130.0
115.9
114.9
118.9
121.3
96.0
124.5
135.9
101.9
143.2
129.6
148.5
151.0
147.9
146.1
126.2
119.5
135.0
146.3
124.5
122.2
127.0
155.8
155.6
156.0
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