Stephanie Rennane, RAND CENTER for DISABILITY RESEARCH Parents with an Unemployed Adult Child: Labor Supply, Consumption, and Savings Effects Stephanie Rennane, RAND RRC Annual Meeting August 3, 2017 Discussant Comments

Research Question We know that: Children provide assistance when parents reach old age (e.g., McGarry and Schoeni 1995, 1997, O’Shaughnessy 2013, Dalton and LaFave 2017) Parents provide assistance for children's economic shocks (e.g., Cox and Way 2011, Kaplan 2012, McGarry 2016, Edwards 2016)

Research Question We know that: We know less about: Children provide assistance when parents reach old age (e.g., McGarry and Schoeni 1995, 1997, O’Shaughnessy 2013, Dalton and LaFave 2017) Parents provide assistance for children's economic shocks (e.g., Cox and Way 2011, Kaplan 2012, McGarry 2016, Edwards 2016) We know less about: How do parents finance their assistance to adult children? What is the impact on parents: retirement, well-being?

Share of Mothers Reporting Transfer to Adult Child

Share of Mothers Reporting Transfer to Adult Child

Methodology Use the Panel Study on Income Dynamics (PSID) Observe adult children linked to mothers Exclude co-resident children Do not observe separated/divorced parents Lower bound on response? Mother FE: within-parent variation unemployment spells over time Assume: unemployment is unanticipated, random shock

Presence of an unemployed child increases: Findings Presence of an unemployed child increases: Monetary transfers from mothers to children Labor supply of young mothers < 62 (~0.5 wks/yr) Receipt of Social Security (among mothers >FRA) Presence of an unemployed child decreases: Food consumption Pension contributions, assets

Risk Sharing or Investment? 70% of unemployment spells are voluntary: Is this a shock, or is it planned? Do parents anticipate transfers from children later (when they have a better job?) Digging deeper: What does ``voluntary'' mean? What happens after unemployment spell? Compare spells for voluntary, involuntary, and recently graduated

Policy Considerations Benefits are transferred to individuals, but shared with the family: From parents to children, and from children to parents Employment subsidies for young adults could help aging parents Retirement income could be shared with children

Policy Considerations Benefits are transferred to individuals, but shared with the family: From parents to children, and from children to parents Employment subsidies for young adults could help aging parents Retirement income could be shared with children Correlated shocks: We worry a lot about how employment shocks for adults in their late-50s affects retirement, but impacts on children could be important too

Possible Extensions Persistence of parental responses over time? Marital status/family composition (for parents and children) Compare with trends for co-resident children? Reverse transfers after unemployment Variation over the business cycle?