ASSESSING THE IMPACT OF SEVERE ECONOMIC RECESSION ON THE ELDERLY

Summary of a Workshop

Malay Majmundar, Rapporteur

Steering Committee on the Challenges of Assessing the Impact of Severe Economic Recession on the Elderly

Committee on Population

Division of Behavioral and Social Sciences and Education

NATIONAL RESEARCH COUNCIL
OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

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ASSESSING THE IMPACT OF SEVERE ECONOMIC RECESSION ON THE ELDERLY Summary of a Workshop Malay Majmundar, Rapporteur Steering Committee on the Challenges of Assessing the Impact of Severe Economic Recession on the Elderly Committee on Population Division of Behavioral and Social Sciences and Education

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Govern- ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineer- ing, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropri- ate balance. This study was supported by the National Institute on Aging’s Division of Behav- ioral and Social Research through Contract No. N01-OD-4-2139, TO #92 between the National Academy of Sciences and the U.S. Department of Health and Human Services. Any opinions, findings, conclusion, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organization or agencies that provided support for the project. International Standard Book Number-13: 978-0-309-20969-4 International Standard Book Number-10: 0-309-20969-2 Additional copies of this report are available from the National Academies Press, 500 Fifth Street, NW, Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); http://www.nap.edu. Copyright 2011 by the National Academy of Sciences. All rights reserved. Printed in the United States of America Suggested citation: National Research Council. (2011). Assessing the Impact of Se- vere Economic Recession on the Elderly: Summary of a Workshop. M. Majmundar, Rapporteur. Steering Committee on the Challenges of Assessing the Impact of Severe Economic Recession on the Elderly. Committee on Population, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Acad- emy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding en- gineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineer- ing programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is presi- dent of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Insti- tute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sci- ences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Coun- cil is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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STEERING COMMITTEE ON THE CHALLENGES OF ASSESSING THE IMPACT OF SEVERE ECONOMIC RECESSION ON THE ELDERLY DUNCAN THOMAS (Chair), Department of Economics, Duke University ROBERT M. HAUSER, Division of Behavioral and Social Sciences and Education, National Research Council, Washington, DC, and Vilas Research Professor, Emeritus, University of Wisconsin, Madison ARIE KAPTEYN, RAND Corporation, Santa Monica, California JONATHAN S. SKINNER, Department of Economics, Dartmouth College ROBERT WILLIS, Population Studies Center, University of Michigan BARNEY COHEN, Study Director MALAY MAJMUNDAR, Program Officer DANIELLE JOHNSON-BLAND, Senior Program Assistant v

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COMMITTEE ON POPULATION LINDA J. WAITE (Chair), Department of Sociology, University of Chicago CHRISTINE BACHRACH, Social Science Research Institute, Duke University, and School of Behavioral and Social Sciences, University of Maryland EILEEN M. CRIMMINS, Department of Sociology, University of Southern California PETER J. DONALDSON, Population Council, New York BARBARA ENTWISLE, Department of Sociology, University of North Carolina, Chapel Hill JOSHUA R. GOLDSTEIN, Max Planck-Institute for Demographic Research, Rostock, Germany CHARLES HIRSCHMAN, Department of Sociology, University of Washington BARTHÉLÉMY KUATE-DEFO, Department of Demography, University of Montreal WOLFGANG LUTZ, World Population Program, International Institute for Applied Systems Analysis, Laxenburg, Austria DUNCAN THOMAS, Economics Department, Duke Global Health Institute, Duke University BARBARA B. TORREY, Independent Consultant, Washington, DC MAXINE WEINSTEIN, Center for Population and Health, Georgetown University BARNEY COHEN, Director vi

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Acknowledgments Although the effects of a severe economic recession can be felt by many segments of society, some groups are potentially more vulnerable than oth- ers. Older Americans represent one such group because they face significant challenges not only in adjusting their labor market participation, but also in their limited ability to alter their consumption or savings patterns. Given the severe nature of the 2008 economic collapse, particularly in the housing market and the stock market, and given that growing numbers of Americans are nearing retirement age, the National Institute on Aging (NIA) requested the Committee on Population convene a workshop to as- sess the effects of severe economic recession on the elderly. This project would not have been possible without the help of a number of people. I would particularly like to acknowledge the role played by the members of the steering committee, particularly the chair, Duncan Thomas. The steering committee played a primary role in organizing the workshop and shaping its intellectual content, although institutional procedures pre- cluded them from participating in the writing of this workshop summary. Special thanks also go to Richard Suzman, director of the Division of Be- havioral and Social Research at NIA, for providing essential support and encouragement. Several staff members at the National Research Council (NRC) made significant contributions to the report: Malay Majmundar helped orga- nize the workshop and served as rapporteur for this workshop summary, Danielle Johnson-Bland provided logistical support, Christine McShane edited the document, and Yvonne Wise managed the production process. vii

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viii ACKNOWLEDGMENTS This workshop summary has been reviewed in draft form by individu- als chosen for their diverse perspectives and technical expertise, in accor- dance with procedures approved by the Report Review Committee of the NRC. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its products as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the charge. The review com- ments and draft manuscript remain confidential to protect the integrity of the process. We thank the following individuals for their review: M. Harvey Brenner, School of Public Health, University of North Texas; Andrew D. Foster, Department of Economics, Brown University; and Brigitte Madrian, John F. Kennedy School of Government, Harvard University. Although the reviewers listed above provided many constructive com- ments and suggestions, they were not asked to endorse the content of the report nor did they see the final draft of the report before its release. The review of this report was overseen by David Lam, Department of Economics and Population Studies Center, University of Michigan, Ann Arbor. Appointed by the NRC, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the author and the institution. Barney Cohen, Director Committee on Population

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Contents Assessing the Impact of Severe Economic Recession on the Elderly 1 Introduction, 1 The Economic Crisis Now and in Historical Perspective, 2 Markets, Expectations, and Preferences, 5 Work, Labor Markets, and Retirement, 8 Consumption, Savings, Pensions, and Wealth, 13 Health and Well-Being, 21 Living Arrangements and Transfers, 26 Housing, 29 General Discussion: Priorities for Data Collection, 32 References 35 Appendix: Workshop Agenda and Participants 39 ix

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