The Economic Wellbeing of Multi-Generational Households with Children: Measurement Issues and Policy Implications

Pamela Davidson, University of Wisconsin at Madison
Nancy Folbre, University of Massachusetts
Tamara Ohler, University of Massachusetts

What economic resources are available to children living in multi-generational households? Most answers to this question rely on measures of money income. Yet it is well known that households with individuals over age 65 typically own more assets than other households and also receive in-kind public and private benefits that have important consequences for their standard of living. In this paper, we exploit imputations based on the 2000 Current Population Survey to estimate the total income of multigenerational households with children in the U.S., including capital gains, health insurance supplements to wage or salary income, the value of Medicare, Medicaid, other means-tested government non-cash transfers, and the net imputed return on equity in own home. Deducting Social Security payroll taxes, and federal and state income taxes, we arrive at a measure of disposable income that provides a better basis for comparing multigenerational and single-generational households with children. Our analysis speaks to the potential impact of changes in public assistance, Social Security, home ownership, and employer-provided health insurance on children’s economic wellbeing. Even though the percentage of children living in households with grandparents has declined steadily over time, it remains significant. In 2000, more than 8% of all children lived in households with one or more grandparents, though this was far more common in low and middle-income than high-income households. Children living with grandparents were more likely to live in three-generation households (in which one or more parents were also resident) than in "skip-generation" households in which no parent was present. Among "skip-generation" households, few included married grandparents; most included a single grandmother, echoing patterns of female responsibility among younger parents. Our preliminary analysis of all low-income households (defined as those with adjusted household income below one-half the median level) with children shows that they received a significant public boost to their private income, but that a substantial portion of this boost shows that low-income households with children received a significant public boost to their private income, but a substantial portion of this boost ($1,065 out of a total of $5,306, or about 20%) came from public programs that were not means-tested, such as Social Security. This finding reflects the complex coresidence patterns of grandparents in low-income households, and shows that the benefits of Social Security extend well beyond the elderly population. More detailed analysis of the sources of income and employment patterns in multigenerational households with children promises important insights.