The “Sandwich Generation” Feels the Squeeze

November 21, 2016

A Dependent Care Assistance Program and home care industries can help increase productivity.

By Bill McPherson

At a time in their lives when they probably expected to be raking in the highest paychecks of their lives as they slide toward retirement, a surprising number of workers are being forced to take time away from work — not to take care of their kids or grandkids, but to care for their elderly loved ones. People are living longer these days. The situation has created what’s become known as the “sandwich generation,” which includes employees who have already brought up their children but now are also responsible for their aging elders. Today’s workers miss more time from work taking care of their parents (6.6 days per year) than for their children (4 days per year). For American businesses, that adds up quickly to losses of between $17.1 billion and $33.6 billion per year.

Multitasking has its limits

Deciding between doing it all, reducing hours, leaving work, or getting professional help can be difficult. Those who stay in the workforce and try and balance responsibilities tend to experience lack of focus, absenteeism, fatigue and poorer health. Having one individual in the household leave the workforce can be a big financial hit as well. The American Association for Retired Persons estimates that women who left the labor force early because of caregiving responsibilities experienced a total individual amount of lost wages and social security benefits totaling $324,044. For men, the impact was a total of $283,716.

To put that number in perspective, a 2013 study by Fidelity Investments estimated that a retiring couple, age 65, will need $220,000 out-of-pocket to pay for medical expenses alone. That assumes that this couple is using Medicare and that there are no long-term care costs. For cultural and financial reasons, people are working later in life, shaping second and third careers and finding new and challenging ways to contribute to society. In fact, the National Study for the Changing Workforce found that 75 percent of people age 50-plus expect to work past age 65. We tend to think of age 65 as the finish line that we run toward; however, when Social Security began and 65 was set as the retirement age, the average life expectancy was only 62.

We are living and working longer, and it’s important to keep and support a robust workforce as we face a silver tsunami of aging adults.

The Squeeze comes from all sides

The sandwich generation is feeling the squeeze in a number of ways. Financially, because of lost income and even job security as they are forced to take more time from work and even give up their careers. And caregivers are also suffering from declining health of their own because of the stress of caregiving — which also results in costs by the billions to their employers.

According to an AARP study, 42 percent of U.S. workers have provided care for an aging relative or friend in the past five years, and nearly half the workforce — 49 percent — expects to be providing elder care in the coming five years.

Home health companies help shoulder the burden

Home health companies are growing at an astounding rate, among the biggest growing industries in the nation. They offer a wide range of services, from light housekeeping to cooking meals to running errands and a multitude of others. The services can help family caregivers breathe easier. But that costs money that probably wasn’t budgeted earlier in life.

Employers now have the option to invest in helping workers care for their dependents by implementing a Dependent Care Assistance Program. This reimbursement package allows employees to have a portion of their pay put aside to be used for dependent adults. A DCAP allows employees to pay for these expenses while reaping an important tax break.

A DCAP serves as an alternative to the Dependent Care Tax Credit. DCAP reduces the amount of the federal withholding and social security taxes taken from your paycheck.

Having this money available can make a huge difference in the quality of life both for the senior adult and the caregiver. That helps businesses because workers stay at work, rather than taking time off for elder care. It’s a tool that franchisors and franchisees can use to keep their businesses productive and their employees healthy. And that is a win for both.

Home health is booming

Because of all this, the home health industry is booming. Currently there are more than 35,000 home care companies in the United States with 12 million patients and more than 428 million patient visits each year. Most of those people — as many as 80 percent — choose to live at home, which means they need in-home care.

Combine that with the fact that hospitals are releasing people earlier, and more conditions are treated at home, and it’s obvious that the home health industry is only going to grow, quickly and significantly.

And the industry is expected to only keep growing as the population ages. In the coming 30 years, the American population over 65 years of age will double to 70 million. The demand for home health workers will grow, creating an excellent investment proposition for anyone interesting in franchising.

$37 million in out-of-pocket informal care

About 44 million Americans provide $37 billion in unpaid “informal” care each year for adult family members and friends with chronic illnesses that prevent them from handling daily activities or earning an income.

For many franchise businesses and employees, the DCAP is a solution. Employees have the comfort of knowing the money is there when it’s needed, and they might be able to hire a home health service when that option would not otherwise be available. That being said, as more employers offer DCAPs as a benefit, home care businesses partner with DCAPs making this industry an attractive option to invest in.

Bill McPherson is Executive Director of Franchise Development at FirstLight HomeCare. He can be reached at [email protected].