Grandma Retires: How a New Grandchild Changes a Woman’s Career Choices

Affordable access to childcare plays a very significant role in the labor market decisions of parents. This has become even more important in recent decades, as labor force participation rates for women have risen from around 43 percent in 1970 to about 57 percent today. Compounding the issue of providing care for young children is the fact that, as of 2013, 35 percent of children under 18 live with a single parent, and, as of 2012, 40 percent of all births were to unwed mothers. This places a larger childcare burden on one single parent, who is likely to be working. When resources are scarce, often other family members or grandparents pick up the burden of daily childcare for their grandchildren. As the United States’ baby-boomer generation becomes grandparents, the implications of grandparent childcare become even more important.

In a new National Bureau of Economic Research Working Paper, Robin L. Lumsdaine and Stephanie J.C. Vermeer look at the behavior of grandmothers In order to determine their propensity to provide childcare and the factors that influence their decision. They also examine how the birth of a grandchild affects the labor market decisions of grandmothers, particularly the decision of when to retire from the labor force. They find that the arrival of a new grandchild is associated with as much as an eight percent increase in the likelihood of a grandmother to retire. An interaction between a grandmother retiring and providing childcare was not found, however, suggesting that the retirement decision by a grandmother must be determined by other factors.

To conduct their study, Lumsdaine and Vermeer analyze data from the Health and Retirement Study (HRS). The authors tested for the effects of caregiving and new grandchildren by sorting female survey respondents into three groups: those providing consistent care (greater than 336 hours a year) for grandchildren, those with grandchildren yet not providing consistent care, and those without grandchildren. The authors chose to study women because previous research had found more of the burden of grandparent care falling on women.

Overall, the authors find that having grandchildren and, additionally, providing a substantial amount of care for them is associated with decreased labor force activity and lower expectations about future labor force activity. Those who care for a grandchild are 19 percent less likely to work full time than grandparents who do not care for grandchildren and 29 percent less likely than those who are not grandparents. The authors do not find very much evidence, however, that the likelihood to provide care depends on any sort of labor force attachment. This suggests that grandmothers most likely do not make this childcare decision based upon their own employment status, but those who have already made a retirement decision are more likely to become caregivers.

Overall, the authors find that having a first grandchild in between surveys increases the probability of retirement by 8.5 percent and having an additional grandchild increases the probability of retirement by 1.4 percent. They find that having a new grandchild born makes a grandmother 69.5 percent more likely to provide care for grandchildren. This effect is even stronger (14 percent more likely) when the parents of the grandchildren are working full time.

The research of Lumsdaine and Vermeer has many important implications for public policy. If the retirement decision is not significantly affected by a need to provide childcare for grandchildren, then policies to make childcare easier may not have substantial effects on grandmother labor force participation or extend working years. As age demographics affect the fiscal condition and the overall labor force participation rate of the United States, it is likely that many policy proposals intended to increase working later in life will be considered. This analysis suggests providing more adequate childcare options for parents may not increase grandparent labor force participation in a meaningful way.

This is not to suggest, however, that providing additional childcare benefits will not improve the lives of grandmothers currently providing childcare for their grandchildren. As Congress considers numerous forms of child and childcare tax credits, both refundable and not, the implications of providing more access and affordability in childcare need to be known so that all economic effects can be considered prior to the passage of new policy.

Article Source: Retirement Timing of Women and the Role of Care Responsibilities for Grandchildren, Robin L. Lumsdaine & Stephanie J. C. Vermeer, National Bureau of Economic Research, 2014.

Feature Photo: cc/(Snork Maiden)