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Economic conditions and the living arrangements of young adults: 1960 to 2011

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Abstract

The recent economic downturn in the USA has coincided with stories of young men and women choosing to remain at home, or to move back in with their parents since they cannot afford to live independently. This paper first describes changes in parental coresidence over the last half-century, and then assesses the causal link between economic conditions and living arrangements among young adults using data on more than 15 million individuals from 1960 to 2011. Comparing changes in economic conditions across US states to changes in living arrangements, I find that fewer jobs, low wages, and high rental costs all lead to increases in the numbers of men and women living with their parents. The magnitudes of the effects are quite large: for men, I estimate that changes in economic factors alone are large enough to have caused the observed changes in parental coresidence between 1970 and 2011.

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Notes

  1. These figures are taken from Edwards and Hertel-Fernandez (2010), who also document a large decline in labor force participation among young adults during the recent recession.

  2. See for example, Wang and Morin (2009), Ruiz (2010), and Roberts (2010).

  3. All figures are based on calculations from the 1960 to 2000 Decennial Censuses, and the 2001 to 2011 American Community Surveys, unless otherwise noted (Ruggles et al. 2008).

  4. See for example Cox (1990).

  5. For example, Kaplan (2012) finds that the ability to move back home allows poorer adults to better smooth consumption during economic downturns by economizing on household expenses.

  6. For other theoretical treatments of the link between economic factors and living arrangements, also see McElroy (1985) and Rosenzweig and Wolpin (1993). While the model presented here is based on parents’ altruism toward their children, others have modeled parental transfers motivated by exchange (Cox 1987) or family constitutions (Cigno et al. 2006). Since these models have the same predictions for changes in coresidence due to changes in economic conditions, no attempt is made to empirically distinguish which model better explains the data.

  7. See for example McLaughlin and Lichter (1997), Olsen and Farkas (1990), and Carlson et al. (2004).

  8. For example, see Hughes (2003).

  9. See Haurin et al. (1993) for an analysis modeling this simultaneous decision explicitly.

  10. All dollar values are converted to real 2007 dollars using the CPI-U deflator.

  11. While Table 1 does not show the living arrangements for young adults between 17 and 19, 21, and 23, etc., in any given year, the fraction of young adults living with parents is smoothly declining in age, as shown in Figs. 1 and 2. Thus, the patterns in Table 1 would be quite similar if living arrangements were reported within 4-year age groups (i.e., 16–19, 20–23, etc.).

  12. I focus on the 20 to 30 age range only because the changes in parental coresidence are concentrated in this age group in all regions.

  13. Changes in living arrangements for Hispanics (not shown) were similar to those for Whites.

  14. See for example, Roberts (2010).

  15. I have also estimated models that control for the employment-population ratio and wages of women. These controls attenuate the coefficients on the own-gender economic variables somewhat, but they remain significant with similar signs. The reduced coefficients are consistent with an explanation that part of the impact of the economy is working through the marriage/cohabitation market, but it might also be that the female wage and employment variables are correlated with different aspects of the strength of the labor market for men that also affect living arrangements.

  16. Some exceptions include Kaplan (2012) and Bitler et al. (2004).

  17. For example, Danziger et al. (1982) find that increases in welfare benefits produce only small declines in female household headship. See Moffitt (1992) for an overview, who recommends studying the phenomena using the research design employed in this paper.

  18. For example, Wozniak 2010 shows that migration caused by relative changes in local labor market conditions explains only a small fraction of the migration of 21 to 30 year olds—the age group with the highest migration rates. Due to differences in the migration data available in the Census and American Community Survey (the former records 5-year migration information, whereas the latter records 1-year migration status), I re-estimated the specifications in Tables 2 and 3 adding a control for inter-state migrant status separately for 1970–2000 using Census data and for 2001–2011 using ACS data. The qualitative results were unchanged, with the estimated impact of both employment and wages being slightly more positive.

  19. Spurred by the work of Becker (1981), many scholars have linked economic factors to the probability of marriage, and investigated difference in this relationship between men and women. For examples, see Bitler et al. (2004), Hughes (2003), Smock and Manning (1997), and Sweeney (2002).

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Acknowledgments

I thank the editor, two anonymous referees, and Sheldon Danziger, Susan Dynarski, Steven Raphael, Daniel Lichter, Kelly Musick, Sharon Sassler, and participants at a MacArthur network discussion group for helpful comments and suggestions. Comments are welcome at jdm296@cornell.edu.

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  1. Department of Policy Analysis and Management, Cornell University, 133 MVR Hall, Ithaca, NY, 14850, USA

    Jordan D. Matsudaira

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Correspondence to Jordan D. Matsudaira.

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Matsudaira, J.D. Economic conditions and the living arrangements of young adults: 1960 to 2011. J Popul Econ 29, 167–195 (2016). https://doi.org/10.1007/s00148-015-0555-y

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