Impacts of the presence of disability on expenditure patterns of older Australian households

The true cost-of-living pressures on Australian seniors (those aged 50 or more) are likely to be underestimated if the levels of household expenditure do not take into account that many older Australians have disabilities and chronic illnesses that require additional care and support in the home. In 2011, more than 560 000 seniors with severe or profound disability needed assistance with a core activity (defined as self-care, mobility or communication) to live in a private dwelling.

The majority of these individuals lived in one family couples (either with or without children) or single-parent households and received care from a family co-resident.

This report addresses the key issue of the financial burden placed on older households through out-of-pocket expenditure on care needs in the home. The costs of care tend to be hidden in the day-to-day spending patterns of older households. In particular, the study focuses on how household expenditure on different goods and services is impacted by the presence within the household of a person who needs care because of a disability. This is known as consumption expenditure.

Data and methods

The data used in the analysis is drawn from the unit-record data from the Household Expenditure Survey (2009–2010) (HES) that was conducted by the Australian Bureau of Statistics (ABS). A descriptive analysis using cross-tabulation of the data was conducted. Using regression modelling techniques, the impacts of the presence of people with severe or profound disability on the consumption pattern of older Australian households was then investigated further. This enabled the impacts of disability to be disentangled from those of other factors such as family structure, life cycle, or regional geography. These issues were investigated by studying the relationship between the ‘consumption shares’ of various commodities/services and total consumption, where consumption shares are defined as the proportion (share) of the household budget spent on a particular good or service. The regression model used was a standard Engel Curve model which examines how expenditure on a given good or service varies with income.

Key findings

Approximately 21% of the households included in this study (where the survey reference person in the family was 50 years or over) had at least one family member (either an adult or child) with a severe or profound disability. In 2009–2010, the per capita budgets of couple households ($536 per week) were larger than those of single-parent households ($449 per week). The differences were much larger between households with and without a person with a severe or profound disability. Among couple and single-parent households, those with seniors who needed assistance with a core activity spent more than $100 per person per week less than those households that did not have seniors who needed assistance.

The presence of a household member with severe or profound disability also affected the patterns of consumption. Households with a person who needed assistance with their core activities spent more on food and health (direct out-of-pocket costs) but less on recreation and other goods and services, including transport, household services, superannuation and life insurance, and miscellaneous goods and services. For example, couple families with a member with a disability spent approximately 26% of their total consumption on food. This is approximately 3.5 percentage points more than families without members with a severe or profound disability. At the same time, couple families with a member with a disability spent approximately 11% of their consumption on recreational activities, which is approximately 2.5 percentage points less than that of households that did not have a person with a disability.

For older couple households, at any given per capita total expenditure level, the presence of a family member with severe or profound disability significantly increased the proportion (share) spent on food and health items and services (defined as necessities) by 1% for each category.

On the other hand, the expenditure on recreational activities (recreation being a luxury good) decreased by 1%. This finding suggested that older families with members needing assistance had to allocate more of their household budget to meet their basic needs and sacrifice the consumption of luxury goods and services. In addition, the proportion of health expenditure increased immediately after retirement.

For older single-parent households where the parent or a child needed assistance with core activities, the disability only seemed to affect the share of health expenditure. These households spent an additional 2% of their consumption budget on health goods and services compared with single-parent households where a family member did not have a disability.

Conclusion

This study found that the household budget and the composition of the spending changed as people aged, with the level of expenditure related to family type. However, the differences were quite stark between families with or without family members with a disability and need for care in terms of the size of per capita household budgets and the patterns of consumption.

The results from the regression analysis revealed that for older Australian households, recreation, clothing, and other goods and services were seen, in economic terms, as luxury items. This meant that as income increased, households consumed relatively more of these items. Food and housing were found to be necessities, which meant that households consumed proportionally less as their income increased. Households with a member with a severe or profound disability spent relatively more on food and health and, at least for the couple households, less on recreational activities. These findings suggested that families with members with a severe or profound disability had to spend more on necessities at the expense of spending on luxury items such as recreation. Thus, when considering the standard of living of these households, the change of lifestyle as a result of the presence of disability should be taken into account.

Consistent with findings from the recent literature, this study also found that consumption patterns varied with the life stage. In particular, after retirement, the change in lifestyle and income led to a change in family consumption patterns. For example, couple households spent relatively: more on recreation after retirement (possibly because of more spare time); less on housing (possibly because of downsizing); and less on alcohol and tobacco products and other goods and services, many of which were likely to be associated with working. More importantly, couple households spent more on health, most probably reflecting the deterioration in health associated with ageing. The increased spending on health as the people in the household aged was again evidence that health exerts a significant impact on household consumption patterns and the living standards of Australian seniors.