Table 3. Average total expenditures and t-statistics by age, Consumer Expenditure
Interview Survey, 1990
Age t-statistic
65 and older
Hem Under 65 to 74 vs.
65 Total 65 to 74 7 and 75 and older
Total consumer units
{in thousands) 76,889 20,079 11,318 8,761 -
Consumer unit characteristics:
income before taxes $35,433 $18,842 $21,501 $15,435 =
Average number of persons. 2.8 17 1.9 16 -
40.1 74,2 69.2 80.7 -
Average number
consumer uni
Earmers .. 1.6 4 8 2 -
Vehicles 24 1.8 18 1.0 -
Resident children under 18 2 a a 9 _
Persons aged 65 and older ° 14 14 13 -
Percent homeowners:
With mortgage. 45 15 22 6 -
Without mortgage 14 63 60 68 -
Percent renters 42 22 18 ar -
At least one vehicle.
owned (percent) . 89 78 87 67
Total expenditures .. $29,442 $18,072 $20,386 $15,082 *6.24
Food, total. 4,636 3.236 3,717 2,613 “793
Food at home.. 3,353 2,494 2.827 2,064 7.93
Food away from home .. 1,284 744 890 549 +448
Alcoholic beverages. 230 113 143 73 “4.37
Housing, total 9,029 5,752 6,174 5,208 *3.08
Shelter 5,529 3,128 3,339 2.857 1.87
‘Owned dwellings. 3,234 1,880 2,081 1,619 "2.33
Mortgage interest. .. 2,195 367 568 107 “7.64
Property taxes. 555. 760 824 677 1.76
Maintenance, repairs,
and insuranct 484 75a 689 835 -.89
Rented dweltings.. 4,715 839 734 974 *-2.38
Other lodging sat 410 524 264 *3,32
Utilities . 1,945 1,697 1,838 1,515 ¥5.32
Household operations 460 393 342 460 1.28
Housefurnishings and
equipment . 4,099 $33 654 377 "3.99
Apparel and services 1,499 615 755 434 “6.08
Transportation. 5,625 2,863 3,444 2413 "4.36
Health, total 1,204 2,109 2.102 2118 =.42
Medical services 535 664 656 674 -A7
Health insurance, 475 390 1,014 960 98
Prescription drugs,
medical supplies .. 194 456 432 485 ~1.98
Entertainment. 1,512 664 874 393 “7.37
Personal care 248 228 260 187 +453
187 137 156 112 "4.46
465, 48 36 7 ~ 55
302 156 207 90 "6.02
Miscellaneous 630 ai 510 283 “1.99
Cash contributions 761 1,026 937 1,141 89
Pensions, retirement,
and so forth... 2,712 468 730 130 *6.60
Life and other insurance 370 249 341 131 *5.00
Nore: Asterisk denotes significance at the 95-percent confidence tevel.

19904; a similar rise is seen for the older group
as well. Another reason why health insurance
accounts for a growing portion of the health
care budget involves rising premiums for the
Government’s Medicare Supplementary Med-
ical Insurance for medicare participants:
monthly premiums for this insurance tripled

over the decade, from $9.60 per individual in
1980 to $28.60 in 1990.

Transportation. While the share of expendi-
tures accounted for by transportation did not
change significantly over the 1980’s, more old-
er consumer units owned an automobile in

Monthly Labor Review May 1993 7

— —



Spending by Older Consumers

increase in the percent of consumer units
reporting pensions and annuities: the percent
doing so increased faster for the younger con-
sumer units than for the older ones. The share
of the younger group reporting such income
grew from 35 percent in 1980 to 47 percent in
1990, while the corresponding measure for the
older group rose from 29 percent to 40 percent.
This phenomenon reflects the increased avail-
ability of private retirement funds and tax ad-
vantages of certain types of funds, from which
the younger group have had more opportunity
to benefit than have the older group.

Income from interest and dividends fol-
lowed a pattern that differed from that of pen-
sions and annuities. The level of income
derived from interest and dividends doubled
for the younger group, and increased by one-
third for the older group over the period
1980-90. However, the share of total income
derived from interest and dividends fell from
12 to 11 percent for the younger group and
from 24 to 18 percent for older households.
The percent of consumer units reporting such
income also declined—from 47 to 45 percent
for the younger group and from 45 to 43 per-
cent for the older group.

As with income, there are large differences
in poverty rates between the age groups. For
those aged 65 and older, the poverty rate fell
from 16 percent in 1980 to 11 percent in 1990.
The following tabulation shows poverty rates
of older persons in 1990 by age:!8

Percent in poverty

Age 1960 1990
Under 65 years... 12.3 13.0
65 years and older . 15.4 12.2
65 to 74 years... 13.1 97
15 years and older . 20.1 16.0

The dramatic differences in poverty rates
among the groups is partially accounted for by
factors such as number and sex of earners in
the household. Older groups are characterized
by fewer earners and more women. Both men
and women have longer life expectancies than
they did in 1980, part of a long-term trend ex-
plained by improvements in medicine and
technology. At 65 years, the average life expec-
tancy was 16.4 years in 1980 and 17.2 years in
1990. But women still outlive men. At age 65, a
woman’s average life expectancy exceeds a
man’s by 4 years. Women over the age of 65,
who grew up during an era in which fewer
women worked outside the home, are less like-

, 12 Monthly Labor Review May 1993

tc

ly to have access to pension and Social Security
income in their own names. However, with the
increase in the number of women who have en-
tered the labor force over the last 20 years, it is
more likely that women over 65 will be entitled
to their own pension and Social Security in-
come in the future.

THESE FINDINGS tend to support assertions of
other analysts that we are seeing a “golden age
of the golden years,” in that persons aged 65
years and older have higher expenditures and
income than they did 10 years ago. Over the
1980's, the two older groups studied here more
or less followed the same trends in terms of
home and vehicle ownership and health, pen-
sion, and travel expenditures. The continuing
availability of data from the Consumer Expen-
diture Survey will allow analysts to follow the
economic activities of the growing cohorts of
older persons in the future. Oo

Footnotes

1 Gregory Spencer, Projections of Population of U.S., by
Sex, Age, and Race 1980 to 2080, Current Population Re-
ports, Series P-25, No. 1018 (Bureau of the Census, Janu-
ary 1989).

2 Cynthia Taeuber, Sixty-five Plus in America, Current
Population Reports, Special Studies P23-178 (Bureau of
the Census, 1992).

3 Tbid.

4 Ibid. The population aged 75 to 84 grew by 30 percent.
The cohort aged 80 and older grew by 33 percent.

5 Beth Harrison, “Spending patterns of older persons re-
vealed in expenditure survey,” Monthly Labor Review,
October 1986, pp. 15-17.

6 A consumer unit is either (1) all members of a house-
hold who are related by blood, marriage, adoption, or oth-
er legal arrangements; (2) two or more persons living
gether who pool their income to make joint expenditure dé-
cisions; or (3) a person living alone or sharing a household
with others, or living as a roomer ina private home or lodg-
ing house or in permanent living quarters in a hotel or mo-
tel, but who is financially independent. A person is consid-
ered financially independent if he or she provides the in-
come for at least two of the three major living expenses—
food, clothing, and shelter. The terms consumer unit and
household are used interchangeably throughout this ar-
ticle.

T Louise B. Russell, The Baby Boom Generation and the
Economy (Washington, The Brookings Institution, 1982),
p. 13.

8 Economic Report of the President (Government Print-
ing Office, 1992), table B-69.

9 The health care component of expenditures was un-
usually large for households headed by persons 75 and old-
er in 1980 due toa few large medical service expenditures.
Average medical service expenditures for those 75 and old-
er were $487 in 1981 and $447 in 1982. Therefore, medical
services in 1980 were a larger portion of total expenditures
than one might expect, but still a larger portion than health
insurance. In 1981, total health care expenditures for those
75 and older was $1,037; health insurance was $388; 47


The second largest component of pensions
and Social Security comprises IRA’s and
Keogh fund contributions, reflecting the readi-
er availability of the plans and the tax advan-
tages of IRA’s, which were introduced into the
tax code in 1981. Expenditures for tax-def-
erred saving plans increased from an average
of $14 in 1980 to $211 in 1990 for households
aged 65 to 74. The percent of consumer units in
this age group reporting IRA and Keogh fund
expenditures rose from 3 percent to 12 percent
over the same period.

Entertainment. Both the younger and older
groups spent significantly larger shares of total
expenditures on entertainment in 1990 than
they did in 1980. (See table 4.) While some of

this change is due to an increase in fees and
costs of admission, and part reflects greater TV,
radio, and sound equipment expenditures. (See
table 6.) Spending on TV, radio, and sound
equipment more than tripled for the younger
group, and more than doubled for older house-
holds. Over the same period, the percent of
consumer units reporting TV, radio, and sound
equipment expenditures grew from 30 to 61
percent for the younger group, and from 24 to
43 percent for older households. A large part
of this increase is accounted for by growth in
cable TV expenditures. The average annual
outlay for cable TV increased from $19.59
to $148.10 for the younger group, and from
$18.41 to $90.56 for the older group. Three
times as many of the younger households and

Table 5. Itemized expenditure shares for the older population, by age group, from the
Consumer Expenditure Interview Survey, 1980 and 1990

‘Age group ‘share, ‘Age group ‘Fahare,
Share of total 65 to 74 1990 78 and over 1990
expenditures by Item versus versus
1980 1990 1980 1980 1990 1980
Food at home... 175 13.9 4.09 168 13.7 “2.10
Food away from home 45 44 -.29 3.6 3.6 108
30.0 30.0 48 37.3, 345 ~83
42 a7 “141 27 29 37
18.4 17.0 1.02 14.5 14.0 4.10
84 10.0 *3.06 12.8 14.0 87
3.0 43 *3.30 1.8 28 *2.34
8 8 -88 8 7 52
17 36 *3.94 8 a 32
14 17 1.22 9 9 19
10.2 10.3 49 11.0 122 1.81

Note: Asterisk denotes significance at the 95-percent confidence level.
LSS a

Table 6. Entertainment and travel expenditures for the older population, by age,
Consumer Expenditure Survey, 1980 and 1990
1980, 1990,
tem Persons aged— Persons aged—
65 to 74 TSandolder | 65074 75 and older

Entertainment, total. $340 $168 $874 $393
Fees and admissions .. 130 87 330 153
‘TVs, radios, and sound equipmer 116 75 316 160
Other entertainment... 94 36 229 79
Travel, total 417 235 854 435
Food on tr 114 58 245 120
Lodging on trips.. 89 62 253 131
Transportation on 214 115 356 202
Gasoline. 93 34 100 42
Airfare. 78 61 175 107
intercity bus far 14 5 19 15
Other. 29 15 52 38

‘Includes pets, toys, playgrounds, boats, and photographic equipment and supplies.

Monthly Labor Review May 1993 9

—- — _


8 Monthly Labor Review

Spending by Older Consumers

1990 than in 1980. The percentage of consum-
er units who owned an automobile increased
from 79 percent in 1980 to 87 percent in 1990
for the younger group, and from 55 percent to
67 percent for older households. As a conse-
quence, the share of the transportation budget
devoted to vehicle finance charges and insur-
ance increased significantly. The share attrib-
utable to gasoline expenditures declined sub-
stantially, in part due to falling oil prices, while
the level of such expenditures remained virtu-
ally unchanged. In 1980, oil prices were high
after the 1979-80 oil shock, but in 1982, the
price of gasoline began to decline as the oil sup-
ply situation eased. It was not until 1990 that
the price of gasoline reached a level above that
of 1980. As measured by the Consumer Price
Index for All Urban Consumers, the price of
gasoline rose 24 percent from 1980 to 1990.

Retirement, pensions, and Social Security.

Shares of total expenditures for retirement
funds changed significantly for the younger
group over the 1980-90 period. (Seetable 5.) So-
cial Security taxes, the largest component of re-
tirement expenditures, more than tripled forthe
younger households, rising from $148.83 in
1980 to $463.15 in 1990. (Because the older
group has fewer earners, they are less affected
by changes in Social Security tax rates.) The So-
cial Security tax on wage and salary workers
rose from 6.1 percent in 1980 to 7.7 percent in
1990, and that for self-employed persons, from
8 percent to over 15 percent. At the same time,
the earnings base to which the Social Security
tax is applied was raised from $25,900 to
$51,300. Of course, whilesomeoftheincreasein
retirement expenditures is accounted for by
changes in Social Security regulations, another
contributing factor is higher earnings, which
will be discussed in the section below on income.

Table 4. Health expenditures by age group from the Consumer Expenditure Interview
Survey, 1980 and 1990
1980 1990
Expenditure type 65 and older 85 and older
75 and 75 and
Total | @5to74 | “Hand Total 65 to 74 ‘older
Total health care expenditure $992 $899 $1,152 $2,109 $2,102 | $2,118
487 393 647 663 656 674
152 149 158 227 232 220
335 245 489 437 424 454
Prescription drugs... 148 138 161 395 372 424
Health insurance, total 320 333 298 990 1,014 960
Health maintenance
organizations,
Blue Cross/Blue Shield. 93 39 83 284 269 303
Commercial health
Insurance... 7 82 69 164 185 137
Medicare payments 113 113 114 348 349 345
Commerciat supplements
to medicare, other
health insuranc 37 40 32 194 210 174
Medical supplies... 39 35 46 61 60 61
Percent of health budg
Medical services 49.0 43.7 56.2 a4 2 31.8
Physician service: 153 165 13.7 108 11.0 10.4
Nonphysician service: 33.7 273 42.5 206 20.1 214
Prescription drugs" 14.8 15.4 14.0 18.7 176 20.0
Health, insurance, tote 32.3 37.0 25.9 46. 48.1 45.3
Health maintenance organizations,
Blue Cross/Blue Shield 94 11.0 73 13.8 12.8 143
Commercial health inst 78 6.0 7.8 88 65
Medicare payments... 11.4 126 99 165 16.8 163
Commercial supplements.
to medicare, other health
37 44 28 9.2 10.0 8.2
39 3.9 4.0 29 2.8 29
Includes prescription drugs and nonprescription drugs.
NOTE: Asterisk denotes significance at the 95-percent confidence level.

May 1993



were up 75 percent. Explaining much of this
rise in average expenditure is the fact that more
older people (those 65 and older) are traveling
via airplane. Both the younger and older
groups reported similar increases in percent
reporting airline expenditures. In 1980, 5 per-
cent of the younger group and 4 percent of the
older group reported such expenditures, but by
1990, these figures were 8 percent and 5 per-
cent, respectively.

Over the same period, the level of gasoline
expenditures on trips remained about the
same, in part due to falling oil prices. The
growth in the percent of consumer units re-
porting gasoline expenditures on trips is evi-
dence of a general increase in travel by car.
Over the period 1980-90, the percent of house-
holds reporting gasoline expenditures for trips
increased 2 percentage points for both the
younger and older groups (27 percent to 29
percent for the former, and 14 percent to 16
percent for the latter).

Income

Changes in expenditures often reflect changes
in income. The average income for households
with reference persons aged 65 or older
doubled during the 1980’s. But this figure
masks the diversity of income patterns that ex-
ists within the older population. The hetero-
geneity of the group becomes particularly ap-
parent when one looks at income sources, lev-
els, shares, and poverty rates. The younger
group’s income rose faster, increasing 112 per-
cent (in 1990 dollars), versus 79 percent for the
older group. (See table 7.) In 1980, the younger
group’s average income was 18 percent higher
than that of the older group, but by 1990, the
younger group’s income was 39 percent high-
er. The larger increase in income among the
younger households is accounted for by the
fact that their lifetime earnings and contribu-
tions to Social Security and government or pri-
vate pensions are greater than those of their
older counterparts.!¢

Social Security remained a less important
source of income for the younger group than
for the older group over the study period. Asa
proportion of total income, Social Security in-
come decreased for the younger group (41 to 38
percent), and increased for the older group (46
to 54 percent) between 1980 and 1990. Howev-
er, the current-dollar level of Social Security

income increased 96 percent for the younger
group and 110 percent for older households, a
substantial rise for both groups, and well above
the 58-percent increase in the Consumer Price
Index. And, more consumer units from each
group reported receiving Social Security in-
come: for the younger group, the percent re-
porting such income rose from 90 percent in
1980 to 94 percent in 1990, while that for older
households was up from 93 percent to 97 per-
cent. This increase could be accounted for by
the long-term trend toward earlier retirement,
which continued throughout the 1980’s for
men. Civilian labor force participation rates
fell from 19 percent in 1980! to 16 percent in
1990'8 for men aged 65 and older.

Wages and salaries remain the second larg-
est source of income for those aged 65 to 74.
Wages and salaries more than doubled for the
younger group over the 1980-90 timespan,
while increasing almost one-third for the older
group and a little over two-thirds for all other
age groups. For the younger group of persons
65 and older, the proportion of income derived
from wages and salaries rose from just under
23 percent in 1980 to slightly over 25 percent
in 1990, while the corresponding ratio for the
older group decreased from 10 percent to 7
percent. The changes can be accounted for by
trends in the number of earners per consumer
unit, specifically, an increase in the number of
earners per household in the younger group,
from 0.5 to 0.6, compared with a decrease of
0.3 to 0.2 earners for older households. Addi-
tionally, while civilian labor force participa-
tion rates fell for older men, those for older
women actually rose. The rate of increase in la-
bor force participation among women aged 65
to 74 could account for the rise in the average
number of earners per consumer unit in the
younger group.”

For the older group, a higher percentage of
whom are retired, private pensions and annui-
ties remain the second largest source of income.
However, pensions and annuities were a more
important source of income for both age groups
in 1990 than in 1980. Suchincomerose 167 per-
cent for the younger group and 139 percent for
the older group over the study period. Asa pro-
portion of total income, pensions and annuities
grew from 15 percent in 1980 to 18 percent in
1990 for the younger group, and from 13 per-
cent to nearly 17 percent for older households.
Explaining much of this pattern of rise is an

Monthly Labor Review May 1993 11



Pamela B. Hitschler

Pamela B. Hitschler is an
economist in the Office of
Prices and Living Condi-
tions, Bureau of Labor
Statistics

Spending by older consumers:
1980 and 1990 compared

Estimates of expenditure and income suggest that today’s
older Americans have higher preretirement

and pension earnings than their 1980 counter parts;

this is especially true of those aged 65 to 74

s the century draws to an end, more

attention is being focused on the aging

of the Nation’s population. Persons
aged 65 years and older will comprise more
than 14 percent of the U.S. population by 2010,
and 22 percent hy 2030.1 (See table 1.) Today, 1
in 8 consumer units has a household head aged
65 or older.? With such a large demographic
shift, spending patterns in the economy will
change. Over the last 10 years, the population
aged 65 and older has grown by 22 percent,
compared with 9 percent for those under age
65.3 Among persons 65 and older, the rate of
population increase rises with age. During the
1980’s, the population aged 65 to 74 grew by 16
percent, while the numbers of persons aged 75
and older rose 31 percent.‘ The economic con-
sequences of an aging population are being
studied closely by economists, sociologists,
and policymakers.

An earlier article in the Review, which ex-
amined the expenditures of older persons us-
ing 1984 data from the Bureau of Labor Statis-
tics Consumer Expenditure Survey, reported
distinct differences in spending patterns be-
tween persons aged 65 to 74 and those aged 75
and older.5 In particular, differences were
found in expenditures for housing, transporta-
tion, and health care. Differences also were
found in income. This article updates esti-
mates of expenditures and income for the same

two age groups. Consumer units (or “house-
holds”)’ whose reference person (or “house-
hold head”) is aged 65 to 74 are referred to as
the “younger group,” while those with refer-
ence persons aged 75 and older are termed the
“older group.”

Tables 2 and 3 summarize the differences in
characteristics and spending patterns of the
two major subgroups of older Americans be-
tween 1980 and 1990. For both groups, the
largest expenditures in both years were for
housing, followed by food and transportation.
(Unless otherwise indicated, all expenditure
and income estimates presented in this article
are in current dollars.) However, the younger
group had higher total expenditures and in-
come than the older group in both 1980 and
1990. Consumer units in the younger group
spent, on average, a significantly larger
amount on every major expenditure cate-
gory except housing and health care
in both years. They did not spend much more
on housing than the older group in 1980, but
did in 1990. However, they did spend less
on health care. In addition, other important
changes occurred in measures for transporta-
tion, Social Security and pensions, entertain-
ment, and travel.

Expenditure trends

Housing. Older consumer units benefited from
the post-World War II building boom,

Monthly Labor Review May 1993 3

——- — —


percent of total health care expenditures went to medical
services, and 32 percent to health insurance.

1 Social Security Bulletin, Annual Statistical Supple-
ment, 1991.

1 These estimates are presented at a quarterly rate—
that is, they are the percent of consumer units reporting
this type of expenditure in a 3-month period.

12 See Geoffrey Paulin, “Consumer expenditures on
travel, 1980-87,” Monthly Labor Review, June 1990, pp.
56-60, for more information on travel expenditures.

18 Food away from home includes meals at restaurants,
board, catered affairs, school lunches, and meals as pay.

M Michael Hurd, “The Economic Status of the Elder-
ly,” Science, vol. 244, 1989, p. 659.

18 Handbook of Labor Statistics, Bulletin 2340 (Bureau
of Labor Statistics, August 1989), pp. 25-27.

18 Employment and Earnings, January 1991, p. 164.

1 See Murray Gendell and Jacob S. Siegel, “Trends in
retirement age by sex, 1950-2005,” Monthly Labor Review,

July 1992, p. 22, for a more detailed discussion of these
findings. Among other trends, Gendell and Siegel found
that participation rates for men aged 65 to 69 fell from 28.5
percent in 1980 to 26 percent in 1990; those for women of
comparable age rose from 15.1 percent to 17.0 percent.
Among persons aged 70 to 74, men’s rates dropped from
17.9 percent to 15.4 percent, while women of the same co-
hort increased participation rates from 7.5 percent to 15.4
percent. Men aged 75 and older decreased their participa-
tion rates from 8.8 to 7.1 percent, while their female coun-
terparts increased theirs, from 2.5 to 2.7 percent.

'8 Data are from the Bureau of the Census. See “Single
Years of Age—Poverty Status in 1990,” March 1991, table
23; and “Single Years of Age—Alll Persons and Related
Children Under 18 by Low-Income Status,” March 1981,
table S-1. Unpublished data.

19 See Mark Weinstein, “The Changing Picture in Retir-
ee Economics,” Statistical Bulletin (Metropolitan Life In-
surance), July-September 1988, p. 7.

A note on communications

The Monthly Labor Review welcomes communications that supplement,
challenge, or expand on research published in its pages. To be considered
for publication, communications should be factual and analytical, not
polemical in tone. Communications should be addressed to the Editor-in-
Chief, Monthly Labor Review, Bureau of Labor Statistics, U.S. Department

of Labor, Washington, pc 20212.

Monthly Labor Review May 1993 13



Spending by Older Consumers

Table 7. Income of older households from the Consumer Expenditure Interview
Survey, 1980 and 1990
1980, 1990,
Persons aged— Persons aged—
Type of income
65 and 65to 75 and 65 and to 75 and
older 74 older older 74 older
Income before taxes..... $9,615 | $10,150 $8620 | $18,842 | $21,501 $15,465
Type of income:
Wages and salaries. 1,812 2,317 880 3,562 5,439 4,133
Self-employment income. 469 586 253 640 973 215
Social Security, railroad
retirement income 415, 4,180 93,996 8,296 216 8,398
Pensions and annui 1,941 1,482 1,080 9,354 3,960 2,578
Interest and dividends. 1,484 4,181 2,042 2,539 2,400 2.716
Other income. 394 403 379 462 515 394
Percent of pretax income
Wages and salaries.... 18.8 22.8 10.2 18.9 25.3 73
Self-employment income. 49 58 29 34 45 1.4
Social Security, railroad
tetirement income 428 412 463 44.0 38.2 54.4
Pensions and annuities. 13.9 146 125 17.8 18.4 16.7
Interest and dividends 15.4 16 23.7 13.5 12 17.6
Other income... 44 40 44 25 24 2.6

twice as many of the older ones reported this
type of expenditure in 1990 than was the case
in 1980, These increases follow a national
trend reflecting the proliferation of home en-
tertainment centers and other sources of
home-based entertainment, and the rising cost
of cable services.

Travel, Travel expenditures more than
doubled between 1980 and 1990 for the youn-
ger group and for older households. In part,
rising expenditures for both groups indicate
that they are doing more traveling, at Jeast in
part because of cheaper airfares resulting from
the deregulation of the airline industry, and
cheaper gasoline. The components included in
travel expenditures are food, lodging, trans-
portation, and entertainment expenditures for
out-of-town trips. Table 6 shows the 1980
and 1990 travel expenditure levels and shares
separately for the younger and older house-
holds. For both groups and in all categories
(food, lodging, transportation, and entertain-
ment), there were increased expenditures and
greater numbers of consumer units reporting
expenditures.

Food expenditures while on out-of-town
trips increased at a slightly faster rate than did
total trip expenditures for both groups. As a
share of the total spent for food away from
home, food on trips was up slightly for both

10 Monthly Labor Review May 1993

groups.!3 Explaining much of this rise is the 5-
to 6-percentage-point increase in the propor-
tion of consumer units in both groups report-
ing such expenditures, the share of the younger
growing from 26 percent to 31 percent, and
that of the older, from 13 percent to 19 percent.
Lodging expenditures while out of town
rose as well, although as a share of the total
travel budget, they grew more for the younger
group (21 percent in 1980 to 30 percent in
1990) than for older households (26 percent to
29 percent). These increases can be attributed
to growth in the percent of consumer units in
these age groups reporting lodging while out of
town —an increase from 13 percent in 1980 to
18 percent in 1990 for the younger group, and
from 6 to 10 percent for the older group.
Over the same period, transportation expen-
ditures for travel rose 66 percent for the youn-
ger group and 76 percent for older consumer
units. The subcomponents of transportation
expenditures on trips include travel fares, ve-
hicle rental, and gasoline purchases. As indi-
cated earlier, travel by air was stimulated dur-
ing the 1980’s by special fares and induce-
ments introduced by airlines following Federal
deregulation of that industry in 1978. Average
expenditures on airline fares rose 68 percent
for all consumer units, with the age 65-to-74
group showing the largest increase— 124 per-
cent. The older group’s airfare expenditures

—-


Tr

Spending by Older Consumers

Table 2. Average total expenditures and t-statistics by age, Consumer Expenditure
Interview Survey, 1980
Age t-etatistic
and olde
Item Under s. Jean 65 074 va
65 an 75 and older
Total 65 to 74 older
Total consumer units
{in thousands) 85,023 17,029 10,751 6278 -
Consumer unit characteristics:
Income before taxes... $20,386 $9,615, $10,150 $8,629
Average number of person: 3.0 18 1.9 1.8 -
‘Average age of reference person 40.0 73.3 69.3 80.3 -
‘Average number in consumer unit:
Eamers .. 17 4 5 3 -
Vehicles 22 12 14 38 -
Resident children under 18 . 1.0 0 a ° -
Persons aged 65 and older.. ° 14 1.3 14 =
Percent homeowners;
With mortgage... 44 10 13 5 -
Without mortgage. 18 63 63 6t -
Percent renters 38 28 24 34
Atleast one vehicle
owned (percent)... 88 70 79 55 -
$17,779 $10,095 $10,744 $8,984 *2.31
3,364 2,168 2,363 1,895 *6.13
21540 1,745 4,881 1811 *5.10
824 424 482 323 *3,88
302 112 125 89 12.33
5,002 3,269 3,221 3,351 ~ 63
2,792 1,530 1,564 1,471 68
1,673 889 982 729 *2.40
Mortgage interest. 974 102 192 51 "2.99
Property taxe: 317 328 347 296 1.26
Maintenance, repairs,
and insurance 382 458 503 382 1.60
Rented dwellings. 863 498 421 629 *-3.93
Other lodging 257 143 161 113 1.83
Utiltes ... 1,228 990 4,049 888 *6.15
Household operations 222 375 187 748 5.98
Housefurnishings and
‘equipment 760 374 451 244 *5.18
Apparel and services 970 375 450 246 *6.70
Transportation. 3,878 1,626 4,972 1,035 74.75
Health, total... 658 992 899 4,182 *3.35
Medical services 364 487 393 647 +401
Health insurance........ 200 320 333 298 4.62
Prescription drugs,
medical supplies 95 186 173 207 “1.97
Entertainment. 808 262 322 158 4.80
Personal care.. 149 127 140 107 13.63
115, 82 89 71 12.78
233 23 27 15 82
Tobacco and smoking supplies.. 197 93 1 63 *4.75
Miscellaneou: 272 168 191 129 4.52
Cash contributions... 437 532 802 884 - 37
Pensions, retirement,
and so forth... 4,108 141 182 7m 4.48
Life and other insurance 287 124 150 a1 4.46
Note: Asterisk denotes significance at the 95- percent confidence level

share of total health expenditures expanded
from 37 percent in 1980 to 48 percent in 1990
for the younger group, and from 26 percent to
45 percent for the older group.

While increased expenditures for health in-
surance premiums are seen for all age groups
in the population over the 1980-90 period,

6 Monthly Labor Review May 1993

they are most dramatic for those over 65. In
large part, the greater expenditures indicate an
increase in participation in commercial health
insurance plans, The proportion of households
aged 65 to 74 reporting expenditures for com-
mercial supplements to medicare doubled,
from 12 percent in 1980 to 23 percent in



and older, 1980 and 1990

consumer units aged 65 to 74

Chart 1. Distribution of medical expenditures by consumer units aged 65 to 74 and aged 75

1980 average health expenditure shares, 1990 average health expenditure shares,
sumer units aged 65 to 74

1980 average health expenditure sI

consumer units aged 75 and older

1990 average health expenditures,
consumer units aged 75 and older

Medical
supplies

share of expenses that must be paid by the pa-
tient before medicare payments kick in—rose
from $180 in 1980 to $560 in 1990. Copay-
ments are the share of hospital costs that must
be born by the insured after the insurance pro-
gram has begun to pay its share. These copay-
ments for the 61st through the 90th days rose
from $45 in 1980 to $148 in 1990; copayments
after 90 days tripled as well.!°

The seeming inconsistency of a large in-
crease in price and a relatively small increase

in out-of-pocket medical service expenditures
is partially explained by the tripling of health
insurance expenditures by consumers: the in-
crease in medicare deductibles and copay-
ments, and the general rise in cost for medical
services have served as an impetus to acquire
more comprehensive health insurance cover-
age to supplement medicare. Having more
health insurance, covering a wider range of
health care needs, reduces out-of-pocket medi-
cal service expenditures. Health insurance as a

Monthly Labor Review May 1993 5

rs af


rc

Spending by Older Consumers

Table 1. The older population as a share of the total U.S.
population, 1900-1990, and projected to 2050
{In thousands]
651074 75 years
re and older
Year Total yen
Number | Percent | Number | Percent
75,995 | 2,187 29 894 1.2
150,697 | 8,415 5.6 3,854 28
203,302 | 12,447 6.1 7,533 37
226,548 | 15,581 8.9 9,969 44
248,710 | 18,045 7.3 13,033 52
268,268 | 18,243 68 16,639 62
282,575 | 21,039 74 18,323 65
294,364 30,973 10.6 21,094 7.2
300,629 | 35,988 12.0 29,618 98
301,807 | 30,808 10.2 37,901 | 12.4
299,849 | 31,590 10.5 36,942 | 124

Source: Cynthia Taeuber, Sixty-Five Plus in America, Current Population Reports,
Special Studies P23-178 (Bureau of the Census, 1992). Data for 1900 to 1990 are April 1
census figures, Data from 2000 to 2050 are projections to July 1 of each year. Projections
are based on middle (moderate) ferility, mortality, and immigration assumptions.

during which demand was high, mortgages
were obtainable at low interest rates, and tax
incentives and other Federal policies designed
to promote homeownership were in effect.
During the 1960’s and 1970’s, the highest rate
of increase in homeownership was among the
group aged 45 through 64.’ Mortgage interest
rates hovered around 6 percent through the
mid-1960’s, remained below 9 percent until
the late 1970’s, and then rose sharply, reaching
a high of 15 percent in 1982.8 The low interest
tates and home prices of the 1960’s and 1970’s
are reflected in the currently large number of
homeowners aged 65 and older who have paid
off their mortgages (81 percent).

In the last 10 years, the homeownership rate
has continued to increase among both the old-
er and younger groups. It rose from 76 percent
in 1980 to 82 percent in 1990 for the younger
group, and from 66 percent to 72 percent for
older households. As homeownership in-
creased, so did the proportion of those home-
owners aged 65 to 74 with mortgages — 18 per-
cent in 1980, compared with 27 percent in
1990. The proportion of those aged 75 and old-
er with a mortgage was unchanged, at 8 per-
cent, between 1980 and 1990. Consistent with
higher rates of homeownership and higher in-
terest rates are higher mortgage interest expen-
ditures. The younger group spent 4 times more
on mortgage interest in 1990 than they did in
1980, and the older group spent twice as much

4 Monthly Labor Review May 1993

as in the earlier year. Even though mortgage
interest payments have increased dramatical-
ly, particularly for the younger group, they are
still a small proportion of the average total
housing budget because of the large number of
older consumer units who own homes without
mortgages. Utilities (80 percent), property
taxes (18 percent), and maintenance, repairs,
and insurance (11 percent) still consume the
bulk of their housing budgets.

Another component of housing expendi-
tures that grew substantially among the two
groups is “other lodging.” The younger
group’s expenditures on other lodging more
than tripled since 1980; the older group’s more
than doubled. Other lodging includes two ma-
jor components: owned second homes and out-
of-town lodging, such as costs for hotels, mo-
tels, cottages, and so forth. Most of this in-
crease is included in “lodging while out of
town,” the largest component of other lodging,
which will be discussed below under travel.

Health care. More of the total budget of those
aged 65 and older now is consumed by out-of-
pocket health care expenditures than was the
case in the early 1980’s. As health care costs
rise, older persons are paying higher health
plan premiums, deductibles, and copayments,
and more older persons are buying commer-
cial supplements to medicare, which is causing
a shift in health expenditure shares from medi-
cal services to health insurance for both age
groups. Table 4 shows detailed out-of-pocket
health care expenditures and shares for older
households in 1980 and 1990.

During the 1980’s, out-of-pocket medical
service expenditures increased 67 percent for
the younger group and 4 percent for the older
group, and the medical services component of
the Consumer Price index for All Urban Con-
sumers rose more than 115 percent.? However,
while both the level of expenditures and the
Consumer Price Index increased, the share of
medical service expenditures in the total health
care budget dropped from 44 percent in 1980
to 31 percent in 1990 for those consumer units
with heads aged 65 to 74, and from 57 percent
to 32 percent for those in the older group. (See
chart 1.)

Contributing to trends in medical costs were
the large increases over the last decade in
medicare deductibles and copayments re-
quired for hospital stays of more than 60 days.
Medicare inpatient hospital deductibles—the