Clothing expenditures definitely decrease with advancing age, about 4% at age of head 65 to 74, and 9% at age 75 and over. In part this may reflect a decreased desire to consume clothing and in part it may reflect the fact that older persons are easier on clothing. Further, it may also reflect climate insofar as the numbers of retired persons living in the warmer parts of the United States have need for less clothing. Shelter and housing outlays per capita very definitely increase; they are 10 to 20% higher at ages 65 and over as compared with age of head 55 to 64. This largely reflects the inelasticity of this item. Housing costs remain unchanged for the most part, whether the family contains 2, 3, 4, 5 or even more members. Hence, as family size decreases with advancing age, per capita expenditures automatically increase. Obviously, a family cannot move to a cheaper apartment or house every time the family size decreases in order to maintain a constant--or decreasing--per capita expenditure. Medical expense per capita at age 65 to 74 is about one-third higher, and at age 75 and over, two-thirds higher in comparison with age 55 to 64. All other items show a slight increase at age 65 to 74, and a small decrease at age 75 and over. The changes in expenditures vary by income. (See Appendix tables.) We believe that this is due in part to the small number of cases available for study. In part also it may reflect the adverse effects of the need to pay medical expenses, especially at the lower income levels. When money is scarce, expenditures for food, clothing, housing, and medical bills take precedence over other items. In summary then, older people as well as younger prefer consuming goods and services. Insofar as income is available they continue to expect to enjoy and insist upon having as much as previously. If they cannot continue this consumption they feel that they have lost status and are experiencing privation. Thus, if the basic concept of a family budget of living, as propounded by the Bureau of Labor Statistics, were to be adhered to, per capita income should remain at least as high in retirement, as in pre-retirement. Indeed, considering the increases in price levels and general economic growth, per capita income should increase over time by the combined increase in prices and economic 10/ growth. Otherwise, the retired will gradually fall farther and farther behind the general public and will feel that they have lost status and are experiencing privation. Expenditures per family. Pensions are generally scaled to the persons eligible to receive them, without regard to the number of persons whom they may be supporting. Although this concept is open to argument-we believe that pensions should be adjusted in accordance with the number of dependent persons in the family--let us accept it for the moment and examine changes in family expenditures as related to increasing age. The families with older heads are smaller on the average, than younger families. Average size was about 2.6 for heads age 55 to 64, and 2.3 for families in which the head was aged 65 to 74 and 75 and over. Accordingly, some reduction in family expenditures can be anticipated,--perhaps a reduction proportionate to the reduction in the size of the family. There was a reduction of about 4% in overall expenditures for families in which the head was aged 65 and over and compared with those whose heads were aged 55 to 64. If medical expenditures are excluded, the reduction is 6 or 7%. (Chart 2.) Expenditures on food decrease about 8%, more or less commensurate with the decline in average family size. The largest decrease was experienced for clothing: at age 65 to 74 about 16% less was spent than at age 55 to 64, and at age 75, about 20% less. Shelter and housing (including fuel, light, water, refrigeration, household operations, and house furnishings and equipment) expenditures remain largely unchanged. This is understandable since these items are rather independent of the size of the family, and cannot be changed. 10/ For further discussion of this point, see A. J. Jaffe and Joseph Froomkin, Technology and Jobs, pp 265-67, Frederick A. Praeger, New York, 1968. Chart 2. Family Expenditures at Ages of Head 55 to 64 and 75 and Over Relative to Those Aged 55 to 64, by Type U.S. 1960-61. at will. Rent or mortgage payments, real estate taxes, and other living costs cannot be easily changed. Some decreases can be effected in the light and water bills and in the purchase of some house furnishings and equipment. The only way to reduce shelter and housing costs substantially would be for the retired person and his family to move to a substantially cheaper apartment or house. This, in turn, besides costing money for moving, would result in privation and loss of status, because, for most older families a move to cheaper living quarters generally means a move to the slums. As a result of the diverse movements of food, clothing, shelter and living expenses, we find that there is but a small reduction in the totality of these basic expenditures. At age 65 to 74 about 6% less is spent, and at ages 75 and over about 3% less. Medical expenses per family increase significantly--about a fifth higher at age 65 to 74, and almost half higher at ages 75 and over, in comparison with age 55 to 64. All other expenditures ranging from contributions and gifts to 65 to 74, the decline is about 7% and at ages 75 and over, 16%. Part Some Implications for Pension Size The Bureau of Labor Statistics "moderate living standard" annual budget for a retired couple of $3,869 in the fall of 1966 is worth about $4300 in mid-1969, after allowances for the increased price level. If this "retired couple budget" is to represent what men commonly expect to enjoy, feel that they have lost status and are experiencing privation if they cannot enjoy, and insist upon having, then $4300 will be adequate for but a very small proportion of all extant and future retirees. This can be seen as follows: Let us consider family income at ages of head 55 to 64 as representing that income level which the family tries to maintain after retirement. In 1967, a little over one-quarter of all families with the head aged 55 to 64 had incomes of $4300 or less. These are the future retirees. When they retire, we submit, they should receive at least their full income as when employed during the pre-retirement period of 55 to 64 years, increased by not less than the amount of future increase in the price level. Of those family heads who were aged 55 to 64 in 1959, probably the large majority are retired as of 1969. The "moderate living budget" was worth about $3500 in 1959 prices. At that time about 3 in 10 of the 55 to 64 year olds had family incomes of under $3500. We submit that these people also should have an income--either pension or combined pension and earnings--at least as much as they had earned in 1959, increased by not less than the rise in the price level since then. Actually, we feel that any family which had earned an amount equal to or less than the Bureau of Labor Statistics "retired couple budget" should receive as pension the full budget adjusted for price increases and general economic growth. Only in this way will they be removed from the poverty category and retain some semblance of status vis a vis the general population. What about families in which the income was over this "retired couple budget" when the head was employed at age 55 to 64? As we saw previously per capita expenditures continue to increase with increasing |