Who supports whom? Co-residence between young adults and their parents Maria IacovouMaria Davia Funded by JRF as part of the Poverty among Youth: International Lesson for the UK project, under LOOP programme

Motivation and literature Evidence that higher incomes among young people are associated with a higher propensity to leave home (Aassve et al 2001, Iacovou 2002, Avery et al 1992, Ermisch & Di Salvo 1997). Also clear that living with parents is associated with a lower risk of poverty for young people (Iacovou & Berthoud 2000; Aassve, Iacovou and Mencarini, 2005, Ayllon 2004) Assumption across much of the literature that young people who live in their parents’ homes are being ‘supported’ by their parents There is little evidence on how far this is actually true. After all, some young people could be supporting their parents. In this paper, we develop a typology of households where young adults co-reside with their parents, based on who (if anyone) is supporting whom. Issue of what we mean by “support” – is income pooling hypothesis valid?

Poverty rates by whether young people live with their parents 3 age groups: 16-19; 20-24; 25-29

An eightfold typology Typology based on: –Whether the household is currently poor –Whether parents would be poor if the adult child moved out –Whether the adult child would be poor if he or she moved out Some situations are unlikely to arise, but are included for completeness

An eightfold typology

Data European Community Household Panel Exclude Sweden and Luxembourg 8 waves Young people aged Computing incomes: Use personal income data from year t+1 (which relates to year t) for each individual present in the household in year t If one individual in the household has missing data at year t+1, impute their income at t+1 using income at year t.

Need to know: Whether household is currently “poor” –Easy (though there is a choice of poverty lines) –Choice of before and after housing costs Whether parents would be poor if adult children moved out –Remove adult child, plus any partner and children –Reduce equivalence scale correspondingly –Remove these individuals’ personal incomes –Option: remove a fraction of family benefits –… and re-calculate household’s poverty status Whether adult children would be poor if they moved out –Much more difficult to compute – need a counterfactual

Would children be poor if they moved out? Assumptions on the family status of leavers –Alternative 1: all singles would form single-person households on leaving home; all couples would form couple households –Alternative 2: home-leavers would form single, couple or other households in same proportions as those who left home in the last 2 yrs. –(1) overestimates, and (2) underestimates, the number of single-person households – and hence, poverty rates. Assumptions on poverty status, given assumed family status –Alternative A: hypothetical leavers would have the same risk of poverty as young people with similar characteristics who are currently living away from home. –Alternative B: hypothetical leavers would have the same risk of poverty as young people with similar characteristics who left home in the last 2 yrs. –In fact, both these may overestimate poverty rates

Run country-by-country Probit regressions on the sample of those who have left home, predicting poverty status –Sex, age, age squared, employment status, wages (NOT income), number of children –Pseudo R-squared typically 0.3 – 0.4 Separate regressions for singles and couples Predict counterfactual risk of poverty for the sample who have not yet left home. Add in simulated disturbance term (100 replications) Assume that YP still at home would have the same incidence of poverty as those who have left home. Assume YP with the highest predicted risk of poverty would be poor if they left home. Generate typology based on household poverty status before leaving home, and predicted poverty levels of parents and children if children were to leave home

Many possible sets of estimates –2 alternative assumptions on what young people’s family situation would be if they left home –2 alternative assumptions on poverty risk –Poverty lines at 50% and 60% of median –Alternative assumptions on whether parents lose a proportion of family benefits when adult child leaves. –Before housing costs and after housing costs calculations Start by assuming: –Singles leave as singles, couples leave as couples –Hypothetical leavers would have the same risk of poverty as those in the same country who left home in the past 2 years –Use 60% poverty line –Omit consideration of family benefits –Calculations both before and after housing costs

Relationships with “no support necessary” Young people aged 17-34

Relationships with “no support necessary” Young people aged 17-34

Housing costs A few percentage points difference in all countries between BHC and AHC figures. The difference is visible mainly in “no support necessary” and “parents support children” figures – hardly evident in “children supporting parents”. From now on, use AHC figures.

Parents support the child By whether the young person has a job

Parents support the child By age of the young person

Parents support the child By whether the parent is single or in a couple

The child supports the parents By whether parent is a single or a couple

The child supports the parents By age of the child

The child supports the parents Much more common where young person has a partner

The child supports the parents Much more common where parents are older

Compositional factors? Many of the factors associated with a higher probability of children supporting parents are more common in Southern countries –Older children –Elderly parents –Children with jobs –Children with co-resident partners Multinomial logit regression with three outcomes: –parents supporting children –children supporting parents –“other” include dummies for countries.

Conclusions Much more common for parents to keep children out of poverty than vice versa A considerable proportion of “support” for young people is via housing costs The “younger young”, and those without jobs, are most likely to be receiving support However, in a non-trivial proportion of cases, the young adult is in some sense supporting his or her parents. Southern countries are those where adult children are most likely to be supporting parents.