The care crisis: Eldercare collides with childcare

The advent of GenAI and the ways it can upskill formal care providers should reduce costs and improve care.

February 5, 2025

My colleague Matthew Nestler looks at the burgeoning crisis in eldercare, which is unique in the stress it places on households�� mental and financial health. Caring for an aging loved one is stressful and often less predictable than caring for children. Men as well as women are involved in the process. It affects everything from participation in the labor force to productivity. Anyone who has had to endure the pain of a loved one in physical decline, potentially with memory issues as well, knows the heartbreak associated with this unique aspect of the care economy.

-Diane C. Swonk

Chief Economist, ��㣨Leyu�� US

As the baby boom generation ages and begins to retire, demand for eldercare is surging. Eldercare comprises a range of services that promote the health and wellbeing of those aged 65 years and older. Some eldercare is paid work in the formal economy; much is unpaid work done by family, relatives and friends.

The current systems of eldercare in the United States are failing to meet the surging demand. The lack of quality and affordable eldercare forces seniors to forego care and prevents many from living out the end of their lives with dignity.

Eldercare will grow in importance in the years ahead. It negatively affects family budgets, labor force participation rates, productivity growth and overall economic growth. This is especially the case for those in the “sandwich generation,�� who take care of children as well as aging parents.

Since 1997, the costs for nursing homes and adult daycare in the Consumer Price Index (CPI) have risen at almost twice the pace of overall inflation. (See Chart 1.) As of December 2024, nursing home prices increased 193%; while overall inflation increased 100%. That represents a nearly tripling of costs for eldercare.

Older Americans receive Social Security benefits, but few have the savings, retirement accounts or wealth to cover rising costs. Being on fixed incomes has left seniors more vulnerable to rising prices for health and care-related costs even before the pandemic inflation. The surge in costs for necessities such as food and shelter has further stressed budgets, especially for the most vulnerable households.

Nursing homes were among the hardest hit by the initial effects of the pandemic. News stories covered rising infection rates and deaths. When the economy reopened after quarantines, many workers left the sector. Employment in nursing and residential care facilities has still not recovered to its pre-pandemic peak.

Fears of contagion at the time and rising prices at nursing homes overlapped with the increasing desire among older Americans to age in place. As a result, demand for in-home care surged.

Chart 1: CPI for all items vs. nursing homes and adult daycare (January 1997 - December 2024)

Index, Dec 1996=100, SA

Source: ��㣨Leyu�� Economics, Bureau of Labor Statistics, Haver Analytics

Prices for in-home care largely grew in line with overall inflation until the pandemic (see Chart 2). From June 2022 to December 2024, prices for in-home care increased at three times the pace of overall inflation (19.5% vs. 6.5%).

The surge in demand for in-home care collided with worker shortages, which is further pushing up prices. Most workers in home healthcare services are women.¹ Those working in the sector rose to a new record but are not keeping up with burgeoning demand.

Immigrants play a key role in the healthcare and social assistance industry.² This is especially the case in the direct care sector, which includes personal care and home health aides and nursing assistants. Immigrants comprise 27% of all direct care workers; yet they are only 14% of the total US population.³

Increased immigration following the pandemic helped to fill jobs that had long been vacant. Curbs to immigration in the years ahead will exacerbate worker shortages and push up prices even further as demand is only going to increase. This is already stressing aging communities across the country.⁴

Chart 2: CPI for all items vs. in-home care (December 2006 - December 2024)

Year over year percent change

Source: ��㣨Leyu�� Economics, Bureau of Labor Statistics, Haver Analytics

The baby boom generation, defined as those born between 1946-1964, is the largest generation ever to age and retire. The number of Americans aged 65+ surged to 56 million in 2020 from 40 million in 2010.⁵ Those over 65 are expected to swell to 71 million in just five years and nearly 80 million in fifteen years.⁶

In 2023, there were 27 elderly people for every 100 working-age people in the US; that is up 50% from twenty years ago.⁷ That ratio will rise rapidly in the years ahead.

Worker shortages, price increases for formal eldercare and fear of contagion in nursing homes during the pandemic left many families scrambling to provide unpaid eldercare for their aging relatives.

According to the Bureau of Labor Statistics (BLS), 37.1 million Americans provided unpaid eldercare in 2021-2022.^8��That was 14% of the civilian noninstitutional population aged 15+. Nearly half provided care at least several times a week. Caregivers spent an average of 3.6 hours on care activities on days they provided care.

Nearly 60% of caregivers were women; a little more than 40% were men. The only age group in which there were more men than women was 15- to 24-year-olds. (See Chart 3). This may explain part of the rise in younger men who remain living at home relative to women; some are caring for older family members.

Of the 37.1 million Americans who provided unpaid eldercare, some 7.8 million were also parents of children under 18 years who lived at home. Of this group, the men were much more likely to work full-time: 86% compared to 60% of women.

A 2019 survey by AARP found that 53 million adults, more than one in five in the US, were unpaid caregivers at some point over the previous 12 months.⁹ That estimate is an increase of nearly 10 million compared to a 2015 estimate.

Research has found that unpaid caregivers often suffer from higher levels of stress, anxiety, fatigue and other health issues.^10��That has spillover effects on their participation and productivity in the labor force.

Chart 3: More men than women aged 15 to 24 years were providing unpaid eldercare

Number, 2021-2022 average

Source: ��㣨Leyu�� Economics, Bureau of Labor Statistics

More and more Americans are feeling the one-two punch of both eldercare and childcare responsibilities. The BLS found that 4.4 million unpaid eldercare providers were taking care of both at least one of their own parents as well as children.¹¹

Both eldercare and childcare form part of the larger care economy, but there are key differences between the two. Childcare is relatively more predictable and time limited. Parents of infants and toddlers need specific supports for a defined period. Those change for school-aged children, but they are similarly predictable in most cases.

With eldercare, the needs are less predictable, can change rapidly and require even longer time horizons. Families often struggle to convince their aging relatives of the need for care. That is all prior to the stress that unpaid caregivers experience, emotionally and financially.

There are four million home health and personal care aides in the United States. The BLS projects nearly a million more jobs in the formal economy over the next decade alone.¹²

One estimate found that unpaid caregiving was worth $600 billion in 2021.¹³ That is more than triple the value of the estimate from 1996; the trajectory goes up as the population ages due to shifting demographics.

Though women made up the majority of unpaid eldercare providers, the costs were more evenly distributed across the population than childcare problems. Our Parental Work Disruption Index found that 90% of workers affected by childcare challenges were women.

The costs associated with the eldercare crisis represent a potential drag on the overall economy.

Potential GDP is the sum of the pace at which the labor force expands and how productive those workers are in their jobs. Any assessment of eldercare needs to include its impact on those two components of GDP growth.

A blow to labor force growth

There are three structural hurdles to the growth of the labor force:

Low and declining birth rates;
A rise in retirees due to the aging of the baby boom generation; and
Curbs to immigration.

The nonpartisan Congressional Budget Office (CBO) recently updated its population estimates; it found that lower expected birth rates have moved up the timing of when the US population will stop growing to 2033 from 2040, absent immigration. (See Chart 4.) That is less than ten years away.

Chart 4: Population growth of the United States

Percent contribution

Source: ��㣨Leyu�� Economics, Congressional Budget Office

The role that immigration plays in the labor force is often portrayed as a zero-sum game between foreign-born and US-born workers. Research on immigration reveals a different picture. Foreign-born workers tend to fill jobs that US-born will not, especially in the service sector.

Research found that areas with deportations from 2008-2014 experienced a reduction in jobs and wages for both foreign-born workers and US-born workers.¹⁴ This also happened after strict immigration controls and border closures in the 1880s and 1920s.¹⁵

That is because immigrants spend their earnings in local economies and become a vital part of their communities. Absent these workers, businesses go under; jobs for US-born workers vanish. Foreign-born workers pay taxes and are a net fiscal positive on programs such as Social Security and Medicare.¹⁶ Without them, these programs will become insolvent sooner, impacting the financial security of retirees as well as government deficits and debts.

Absent more immigration, the US will need to find ways to boost labor force participation, which increases the size of the labor force. Providing support for eldercare is one way to do that.

Research reveals that eldercare responsibilities lead many women to leave the workforce entirely or go from full-time work to part-time work.¹⁷ This hurts career progression and leads to lost work hours and earnings.¹⁸ The resulting financial instability has downstream effects on children’s development and wellbeing.

Public policies can make a difference. One study found that a Medicaid policy increasing home care use among low-income elderly adults resulted in one out of every three daughters of those adults working full-time due to less unpaid caregiving.¹⁹ That is a stunning return.

The Program of All-Inclusive Care for the Elderly (PACE), active in over 30 states, is a community-based model of care. Research found that the program improves seniors�� mental health and reduces costly healthcare utilization, including emergency room visits.²⁰

In the WA Cares Fund, Washington state created a long-term care insurance program by levying a 0.58% payroll tax on workers. Eligible workers in the state can access a benefit up to $36,500 to pay for care needs.

The other side of the equation for potential GDP growth is productivity. Productivity growth has picked up in recent years after languishing during much of the 2010s. After a few strong quarters in 2023, the gains in 2024 are still below the pace of the 1990s and 2000s. (See Chart 5.)

Productivity improved post-pandemic as recessions tend to overlap with productivity surges.²¹ The pivot online led to workers deepening their use and understanding of existing technologies. Tight labor markets improved worker mobility and the matching between skills and jobs.²²

Remote work opportunities helped employers reach a larger and more productive talent pool.²³ A surge in new business formation also contributed. New firms tend to be more productive and add to the dynamism in the broader workforce.²⁴

Generative AI (GenAI) holds immense promise to increase productivity in the healthcare space, especially in eldercare. GenAI tools can help seniors manage daily tasks, schedule doctor’s appointments, provide reminders to take medications and even reduce loneliness.²⁵ They can also effectively upskill care workers by answering medical questions and predicting health complications; this could reduce costly emergency care and other stresses on the overall care economy.

The recent gains in productivity mask the drag due to care-related disruptions, which are often a hidden but very real cost for employers and the US economy.

Eldercare responsibilities stress caregivers�� ability to balance caregiving and work, resulting in increases in absenteeism, when employees miss work, and presenteeism, when employees are at work but not operating at full capacity.²⁶ This hits turnover and productivity, which costs employers over $30 billion each year.²⁷ That hurts the overall economy.

Chart 5: Productivity growth in 2024 below 1990s and 2000s average

Nonfarm business sector labor productivity, percent change from previous quarter at annual rate

Source: ��㣨Leyu�� Economics, Bureau of Labor Statistics

There is no federal paid family and medical leave policy in the United States. Thirteen states and Washington, DC provide mandatory paid leave, while another eight states have approved voluntary systems through private insurance. The Family and Medical Leave Act (FMLA) offers unpaid leave to eligible workers but nearly half of American workers are not eligible.

More states and local governments are enacting paid leave programs, often working in concert with businesses, which are increasingly offering benefits. Flexible work arrangements and flexible scheduling are foundational benefits when it comes to eldercare. These include fully remote or hybrid work arrangements and nontraditional schedules.

Eldercare responsibilities do not always align with 9-5 working hours. Flexibility helps reduce absenteeism and presenteeism.

Other employer-provided eldercare benefits include backup dependent care; paid time off (PTO); specific leave for caregiving; dependent care flexible spending accounts (FSAs); subsidies for eldercare costs; and access to platforms and care concierges that help manage what is often a dizzying process involving resources and referrals.

Many caregivers are wary about disclosing their caregiving status in the workplace due to fears of discrimination. Companies can counteract this by fostering a supportive work culture around caregiving. This includes training managers to support caregivers.

Company leaders can share their caregiving experiences to help destigmatize the topic. Promoting employee support groups helps workers find community support.

Companies can evaluate hiring practices. Many caregivers are overlooked because they have gaps in their professional experience. Companies can gain an edge over competitors by unlocking a group of highly motivated workers that this economy has often left behind.

Eldercare is part of the larger care crisis in the US. Men and women are curbing their hours worked, suffering higher stress levels and lowering their participation in the labor force to care for aging loved ones.

The eldercare crisis poses a hidden but ongoing cost for employers and the overall US economy. Some states are enacting paid family and medical leave, and leading businesses are providing a range of benefits to better attract and retain workers.

The advent of GenAI and the ways it can upskill formal care providers should reduce costs and improve care. However, it is not a panacea. The US still needs people to care for the most vulnerable populations. The crisis will likely get worse before it gets better given the aging baby boom generation and shifts in immigration policy.

Footnote

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Matthew Nestler, PhD

Senior Economist, ��㣨Leyu�� Economics, ��㣨Leyu�� US

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Matthew Nestler, PhD

Senior Economist, ��㣨Leyu�� Economics, ��㣨Leyu�� US

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The care crisis: Eldercare collides with childcare