Older people stay connected... and stay at home
Findings 1: Financial dimensions of well-being in older age
Unsurprisingly, household expenditure in all areas decreases with age. However, our current research shows the proportion of total expenditure devoted to communication remains constant as people get older. The proportion of household expenditure devoted to housing payments (excluding mortgage interest) and utility bills more than doubles from ten per cent among 50-55 year olds, to 21 per cent among those aged 80 and above.
The collaboration between ILC-UK and the Personal Finance Research Centre (funded by the ESRC) is starting to produce its first results. The project, looking at financial dimensions of well-being in older age, began in earnest earlier this year and we have already had papers accepted at several international conferences over the next few months. This is the first of a series of blogs to highlight emerging findings from the research.
In our initial phase of work, we are looking at dominant patterns of expenditure among older people. As we might expect, expenditure decreases in all areas as people get older. Using data from the 2010 Living Costs and Food Survey, we see that total household expenditure falls from an average of around £590 among households where the household representative person (HRP) is aged 50-54, to around £220 where the HRP is aged 80 and over. However, the problem with absolute household expenditure is that it doesn’t allow for household composition. Clearly, expenditure in a household with two fifty-something adults and two teenage children is likely to be more than in a single household where the HRP is 83!
To address this problem we use equivalised expenditure in our analysis. To do this, we give each household member a different weight. We then sum together the weights for each household member to get a household weight. Finally, we divide total household expenditure by this weight to give us equivalised expenditure.
Looking at proportions of equivalised expenditure across age-groups ranging from 50-54 to 80+, the proportion of household expenditure devoted to communication remains constant at three per cent. This expenditure encompasses telephone, mobile phone and internet expenditure, and suggests older people place just as much importance on communication and the need to ‘remain connected’ as their younger counterparts. We know older people are less likely to use the internet than other ages and this implies older people are spending more as a proportion of their income on “non-internet” communications. It might mean they are spending more on the phone than other ages or that they simply aren’t shopping around online for better deals.
Although we might expect older households to spend proportionately more on housing payments and utilities (because they spend more time at home and require extra heating and energy), we were surprised by the magnitude of the difference. While households where the HRP is aged 50-54 see one pound in every ten go on housing, water, electricity etc; this doubles to two pounds in every ten in households where the HRP is aged 80 and above.
There has been much policy debate recently about the spending power of the boomers, and the political parties are increasingly debating cutting back pensioner benefits. The danger of this debate is that the poorest pensioners are forgotten. Policy makers should be extremely concerned that households headed by the oldest in society [1] are spending such a high proportion of their income on housing and utility payments.
David Hayes, Sharon Collard and David Sinclair
Posted on 7 May 2013
[1] We will be undertaking further detailed work to explore the financial well-being of the oldest old as part of this project.
This post is also available to view on the ILC website.