The Caregiver Penalty: How a Rapidly Aging America Will Affect Your Pay

The New Caregiver Economy Series

The maturing Baby Boomer generation will create an unprecedented demand for care – spawning a financially and emotionally strained population of unpaid caregivers. This article explores how a combination of denial, financial unpreparedness and lack of employer-sponsored caregiver benefits will impact our jobs and futures, and cites possible solutions to the issues.

It's called The Elephant in the Room Study.

Conducted by Merrill Lynch in 2013, the study asked what steps retirees had taken so that it would not be necessary to move in with family, if they became unable to live on their own.

5% of respondents planned to live with children or family. 11% had bought long-term care insurance. 19% had ensured adequate savings to pay for their own care.

But a whopping 66% of respondents had done nothing to prepare for the possibility of long-term care requirements.

You may be thinking: “OK, but what percentage of old folks are we actually talking about here? How likely is it that I (or my dad/mom/aunt/uncle/grandpa) will require long-term care?”

A US Dept of Health and Human Services report found that 70% of people over age 65 will need long-term care, yet only 37% of people 50 and older believe they will.

It is a subject no one wants to talk about; a subject as inevitable as death and taxes. No one wants to imagine themselves in a wheelchair, or with impaired vision, or becoming frail. No one wants to picture their parent in a state of confusion, unable to cook a meal or recognize their grandchildren or do the things they once loved. And absolutely no one wants to think about a world in which the parent-child relationship is reversed – a world where child becomes parent to the human who raised them.And yet if we continue to ignore the facts – if we refuse to acknowledge what is documented and known about the future of aging – we put ourselves at substantial risk in terms of finances, time, and our own emotional health and well-being.

Perhaps this equation looks better on the other side. Perhaps while the over-fifty set is busy believing they will live long, productive, care-free lives, their future caregivers – in most cases children, friends or close relatives – have set aside plans and rainy day funds in the event of the unthinkable.

This does not appear to be the case. In fact, statistics concerning caregiver financial preparedness are particularly alarming. 66 million Americans, or 21% of the population today, provide extended care to loved ones. Yet 91% of people surveyed had not budgeted for supporting an aging parent or relative.

We are living in a culture of denial and financial unpreparedness.What will it cost us? And what can individuals and employers do about it?

To Work or Not to Work: The Caregiver Conundrum

It is a situation I know intimately. My sister and I, now thirty-one and thirty-four respectively, became caregivers for our mother in our early twenties. Diagnosed with chronic-progressive MS in 1994, her trajectory has been a slow painful one, concluding with paralysis (of the legs) in 2007, and full quadriplegia three years ago, in 2014.My mother lives with my sister and brother-in-law and their two toddlers. A revolving cast of agency-paid caretakers support my mother’s daily routines, costing us roughly $5000 a month in out-of-pocket expenses. Above and beyond that, however, the couple often have to take time off or shift work hours to accommodate the various needs of their family. From doctor’s appointments to errands to personal activities, the needs of the children and my mother are similar. The constant demands of so many things to attend to often leave them deprived of sleep and almost always strapped for time.

My mother’s condition is progressive. We knew this was coming, to an extent. We did not prepare well. And now, as we head into the year 2018, we face the harsh reality of the complete exhaustion of my mother’s bank accounts.

In terms of our careers, we are lucky. We work for employers who have allowed us flexible work arrangements. My brother-in-law and I work remotely 75% of the time, and my sister has flexibility with her start and stop times. My brother-in-law also has the option for part-time work, allowing him more time with my nephews and mother.

There was no roadmap for this – at barely thirty years old we found ourselves experiencing what many people do in their fifties or even sixties. Our arrangements were not handed to us. There was no policy book to consult to support our requests, no Caregiver Clause to protect our benefits if we had to cut back hours. Twice I had to negotiate unpaid leaves to deal with the trajectory of her health – from a care standpoint as much as a mental health one. We designed, finagled and negotiated our way into work arrangements amiable to fit our needs, and our managers and employers opted to support us.

Which begs the question: what happens when they don’t?

The Opportunity Cost of Unpaid Care

"The Caregiver Penalty"

In an estimated 36.5 million households across the US, an adult is providing unpaid care to a family member. Nearly 50% of all caregivers spend more than 8 hours each week providing care, and more than 12% spend more than 40 hours each week providing care.

What is it costing us?

The Population Reference Bureau cites: “The dollar value of the informal care that family and friends provide for older Americans totals an estimated $522 billion a year—more than total Medicaid spending ($449 billion in 2014), according to Chari and colleagues (2015). The researchers used new data from the 2011 and 2012 American Time Use Survey—which uses a relatively broad definition of elder care—to calculate the monetary value of the time uncompensated caregivers gave up in order to provide care. Replacing that care with unskilled paid care at minimum wage would cost $221 billion, while replacing it with skilled nursing care would cost $642 billion annually. Because most caregivers are employed, “the bulk of the economic burden of elderly care is shouldered by working adults,” the researchers argue.”

The assisted living organization estimates the cost of a private room in a nursing home upwards of $80K a year.

Who can afford that? Not many people.

What happens when your care giving demands require more time - time you don't have?

Your options are as follows:

- Cut your current hours to part-time

- Find a more flexible job

- Find contract work

- Start your own gig

- Quit

Let’s say you decide to keep your job. You earn a good living – the pay is decent but the benefits are great. How likely is it your employer will allow you to cut back to part-time and keep your benefits? Not very. A Wiser Women caregiver study found that 70% of caregivers experience disruption to their jobs, have to decline jobs and training, cut down to part-time work, and can lose out on benefits like 401(k) matching contributions, etc.

And what is the cost in terms of employee pay?

The Population Reference Bureau found that caregiving responsibilities influence labor force participation. The research suggests that women– who comprise 61% of the caregiver population – may seek lower paying jobs with more flexibility to accommodate caregiving.

“To estimate the impact of parent care on adult daughters’ current and future labor force participation and earnings, Skira (2015) created a model that accounts for declining parental health, the impact of a leave on daughters’ work history and experience, and the availability of job offers afterward. Incorporating data from HRS, she found that after taking an employment leave or cutting hours to provide parental care, the chances are low that adult daughters will return to work or increase their work hours. “Women who leave work forgo experience and the associated wage returns and also face a lower expected wage if they return to work,” she writes. The model suggests that the overall median cost to a woman in her mid-50s who leaves work is about $165,000 over two years, about equal to the cost of two years of nursing home care. This estimate is many times higher than estimates that only take into account the cost of lost wages.”

Let’s call this the Caregiver Penalty.

Similar to the oft-cited Motherhood Penalty, in which the opportunity cost of staying home with a newborn ultimately results in less career growth and inequitable wages, women may once again be at risk of workplace challenges as they are called upon to provide familial care.

The findings present a need for more research in this area. However, it can be inferred that the Caregiver Penalty will also affect men. After all, when time out of the labor force is penalized, both men and women run the risk of decreased wages, benefits and opportunities for advancement.

So what can we do?

Call to Action: Prepare and Protect

By the year 2030, 20% of the population will be over the age of 65. If employers today do not start designing jobs with the part-time worker in mind, the result may be highly capable men and women taking jobs they are underqualified (and likely underpaid) for, making the situation worse all-around. We cannot continue forward in this manner. Individuals, employers, insurers, and policy-makers must work together to prepare and protect the impending generation of care.

Individuals – Prepare

It is never too early to start the discussion around the possibility of long-term care. All individuals should take steps to prepare, whether you are the caretaker or the one that may require it.

Recommended actions include:

Potential Caregivers:

  • Talk to your employer about flexible work arrangements and leave options

  • Consider long-term care benefit options

  • Educate yourself on care options and costs

  • Educate yourself on what Medicare or Medicaid will and will not cover

  • Set aside a fund for unexpected expenses

  • Keep an open dialogue with your loved ones regarding housing and other expectations in the event of care requirements

Pre-Retirees & Retirees:

  • Recognize the health risks associated with aging and be open to dialogue about long-term care

  • Educate yourself on care options and costs

  • Educate yourself on what Medicare or Medicaid will and will not cover

  • Set aside a fund for unexpected expenses

  • Keep an open dialogue with your potential caregivers regarding your wishes and preferences

  • Seek legal counsel to prepare your will and wishes

Employers, Insurers & Policy Makers – Protect

Employers, insurers and policy makers must work together to offer programs and benefits that will protect workers from disparate impacts should they need to cut back hours or leave the workforce for an extended period of time. Instituting creative policies such as “Caregiver Leave”, or offering flexible work arrangements such as 9/80 work weeks or telecommuting will go a long way toward enabling employee work-life balance – which will likely lead to higher retention and employer satisfaction.


  • Caregiver Leave (similar to maternity/paternity policies)

  • Caregiver discrimination protection laws

  • Flexible work schedules

  • Long-term care options

  • Adult Day Care (subsidized)

Additional Resources for Individuals and Families:

  • Wiser Caregiver Guide: "Financial Steps for Caregivers"

  • Caregiving Tools (AARP)

  • Caregiving Resources (National Alliance for Caregiving)

  • Finding a Caregiver (

Want to learn more about the world in 2030? Buy The 2030 Papers on Amazon!

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