Death of a Spouse: The Impact on Income for Senior Men and Women

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André Bernard,
Small Area and Administrative Data Division and
Chris Li,
Income Statistics Division

Summary
An aging population
Lost of income for widows, not for widowers
More widows than widowers in low income
More widows enter low income
Widowhood affects women at all income levels
The poorest widowers suffer loss of adjusted income
Sources of income change due to widowhood
Tables

Summary

We would like to imagine that the life of elderly people as a quiet moment to enjoy. However, the death of a spouse can be one’s most painful situations, especially for many survivors who have to face the future alone, often for the first time. At a moment they are emotonally vulnerable, they have numerous decisions to make about the future, including important financial decisions. Survivors may also be left financially vulnerable, particularly those who cannot re-enter the labour market.

This study uses data from Statistics Canada’s Longitudinal Administrative Databank for 1993 to 2003 to compare the dynamics of income during widowhood among women and men aged 65 and over.

Widowhood affected the income of women differently compared to men. Senior widows saw their median income decline continuously in the five years following the loss of the spouse. On the other hand, widowers’ median income was higher five years after the wife’s death when compared to the year before that event.

In this article, income is measured as total family income before taxes in constant 2003 dollars, adjusted for family size and composition.

Not only did widows’ adjusted income decline, but also more of them fell below the low-income threshold following widowhood. After five years of widowhood, 8.7% of widows were living in low income, compared with 5.1% of widowers.

Overall, 51% of widowers suffered a loss of adjusted income after five years of widowhood, only slightly higher than the proportion of 49% who incurred a gain. On the other hand, 72% of widows suffered a loss.

Senior women at all income levels saw declining income during widowhood—even those with the highest incomes. After five years of widowhood, the 25% of senior women with the highest family income saw their income drop 8.6%. For widows, the loss came mainly from lower pension income and earnings.

For senior widowers, differences appear when the various levels of income are analysed. Senior widowers in the lowest income groups appear to be more affected economically by widowhood. Lower earnings contributed the most to the decrease in adjusted income.

An aging population

As is the case in many developed countries, Canada’s population is aging. In 1971, the number of people aged 65 and over made up 8.0% of the population. In 2005, this proportion reached 13.1%. Demographic projections indicate this trend will accelerate, fuelled by low birth rates and gains in life expectancy.

The death of a spouse is an event that can have a big impact on a senior’s economic and social well-being. This often leaves the survivor more vulnerable financially, and it is often accompanied by a sharp decline in income.

For widows, a Statistics Canada’s study clearly established that the negative consequences of widowhood on their adjusted income worsen over time.¹

Women and men have different patterns in labour market participation and savings at all periods of their lives. Consequently, the objective of this study is to verify whether the decrease in standard of living that happens to widows also touches widowers. Is there a common trend among women and men, or a major difference?

Lost of income for widows, not for widowers

Comparing changes in adjusted family income from one year before the loss of the spouse to five years afterwards reveals important differences between widows and widowers.

In this article, total family income before taxes and expressed in constant 2003 dollars is used as a measure of income. Income is further adjusted to take into account family size and composition. An assumption is made that a drop in family size, all things being equal, should be associated with a redistribution of the family income. Therefore, the loss of a spouse may be associated with an increase in adjusted family income even if the unadjusted family income did not change. This result should not be confused with a rise in unadjusted income resulting from the loss of the spouse.

Widowers’ adjusted median family income rises immediately after the death of the spouse. It then declines gradually during the next five years to a level above where it was before the spouse’s death.

More precisely, the adjusted median income one year before widowhood amounted to $27,800 among senior men who lost their spouse. After one year of widowhood, it rose 10.1% to $30,600. Five years down the road, at $29,400, it was 5.8% higher than in the year before widowhood.

Widows walked a much different path. Adjusted income declined continuously among senior women during widowhood. In the first year following the death of their spouse, the decline was limited to 1.9%, from $25,800 to $25,300.

However, this was followed immediately by successive declines. Five years after the death of the spouse, senior women incurred a decline of more than 15%. This indicates the importance of long term follow-up to evaluate the real consequences of widowhood.

Chart 1
Adjusted median income for widowers stayed higher than its initial point, while it declined continuously for widows

More widows than widowers in low income

Widowhood creates sharp differences over time between men and women with respect to the incidence of low income and the long term effects are more important.

For this analysis, Statistics Canada’s low-income measure (LIM) was used to determine low income. It is strictly a relative measure of low income. An individual is considered to be in low income if his or her adjusted family income, before taxes, is less than half the median adjusted family income for the population as a whole. The low-income rate is the proportion of senior men or women who are part of the low-income group.

Initially, low-income profiles of senior widowed men and women were similar. One year prior to widowhood, about 1.9% were in low-income. After one year of widowhood, the low-income rates of both senior women and men rose to 2.5%.

However, in the following years, the low-income rate rose at a much faster pace for widows than widowers. After five years of widowhood, widows’ low-income rate was almost five times higher than their rate one year before the death of the spouse. The widowers’ rate was about 2.5 times higher.

As a result, five years after the death of the spouse, widows’ low-income rate had risen to 8.7%, which is much higher than widowers’ rate of 5.1%.

Although widows and widowers had different low-income rates, those that did experience low income faced similar challenges. Once these senior widows and widowers slipped into low income, it was very difficult to climb out. The decline below the low-income threshold was temporary for only one-third of widows as well as widowers, when considering the five-year period of widowhood.

Chart 2
Low-income rate of widows rises faster than that of widowers

More widows enter low income

The proportion of senior men and women who were not in low income one year before widowhood, but who subsequently entered low income was examined. Again, the results suggest notable gender differences.

More senior widows than widowers entered low-income status in the years after losing a spouse. After one year of widowhood, 2.2% of widows and 1.9% of widowers had fallen below the low-income threshold.

However, just four years later, this proportion had more than tripled to 8.0% for widows, and it had doubled to 4.3% for widowers, again showing the importance of a long-term follow-up.²

Five years after the death of their spouse, the proportion of widows entering low-income status exceeded the proportion of widowers by 2 to 1.

Chart 3
Widows twice as likely to enter low income

Widowhood affects women at all income levels

The study evaluated whether the economic consequences of widowhood varied for men and women at different income levels. To do so, all widows and widowers were ranked on the basis of their initial adjusted family income, and then divided into four equal groups called quartiles.

Chart 4
Women at all income levels suffered a decline during widowhood

Widows in all four quartiles saw an overall and substantial decline in adjusted income. Five years after the death of the spouse, the richest widows (those in the fourth quartile) experienced an 8.6% decline, compared with a 9.8% drop among the poorest.

Adjusted income fell the most for the quartiles in the middle: it dropped by 15.7% for those in the second quartile, and 11.9% for widows the third quartile after five years of widowhood.

These results confirm once more the long-term consequences of widowhood on income for senior women.

The poorest widowers suffer loss of adjusted income

On the other hand, the consequences of widowhood at each income quartile for senior men were different compared with those of widows. The poorest widowers saw a small decline in their adjusted income five years after the death of their wife compared with one year before while all other widowers ended the period with an increase in adjusted income.

The decline was 0.6% for the poorest (first quartile), while widowers’ income of the three other quartiles rose respectively 3.8%, 4.5% and 6.8% after five years of widowhood.

Chart 5
Poorest widowers were more affected

Sources of income change due to widowhood

Overall, 51% of widowers suffered a loss in their adjusted income after five years of widowhood, only slightly higher than the 49% who incurred a gain. On the other hand, 72% of widows sustained a loss.

To get a better idea about the sources of income contributing to a rise or a decrease after the death of a spouse, total family adjusted income was divided into six components: Old Age Security, pensions, other transfer payments, earnings, asset (investment) income and ‘other income’. (‘Other income’ includes private income sources not included elsewhere such as income from partnerships.)

The decline in adjusted income for senior widows and widowers after five years of widowhood was a consequence of a decrease in almost each component, but the degree of contribution varied. The “other transfers” was the only component not to have an impact.

Loss of pension income affected widows the most among those who suffered a loss. This component contributed 28.6% of the loss in adjusted income for these women. On the other hand, pensions played a minor role for widowers, contributing only 1.1%.

For widowers, earnings contributed the most to the loss of adjusted income while it was the second most important source of decrease for widows. After five years of widowhood, earnings contributed 27.8% to the loss for widows and 37.0% to the loss for widowers.

For some individuals, the deceased spouse was still active in the labour market at the time of their death, so earnings contributed an important share of the family’s income. However, the difference between widows and widowers’ loss in income was not as striking for earnings as it was for pension income.

Despite a small rate of labour force participation among seniors—less than 10%—earnings of the spouse played an important role in the change of adjusted income for both women and men. This kind of loss in income seemed very difficult to compensate after the loss of the spouse.

Income from assets (investments) played an important role for both widows and widowers who suffered a loss of adjusted income. For widows, it accounted for one-fifth of the loss while it explained one-third of widowers’ loss.

Chart 6
Widows more affected by loss of pension income after five years of widowhood

Among the 49% of widowers and the 28% of widows whose adjusted income rose five years following the death of the spouse, three components of income played an important role.

Income from assets (investments) accounted for the lion’s share’s increase in income for widows (42.2%). Even if it was only the second most important contributor for widowers, income from assets accounted for 21.4% of the increase in income after the loss of the spouse.

The most important contributor to the increase of income for widowers was pension income. More than $2 out of every $3 gained in adjusted income after five years of widowhood came from pension income. For widows, more than $1 out of every $3 was a result of an increase in pension income.

For both widows and widowers, earnings were the third largest cause of increase in adjusted income after the death of the spouse. For widows, after five years of widowhood, earnings accounted for twice as much compared to one year before widowhood going from 6.4% to 12.3%. While for a majority of widows, earnings contributed to an important loss of income, it became an important source of income for those who saw their income rise. It confirms that despite a small rate of labour force participation among seniors, the possibility to work has important consequences for widows and widowers.

Chart 7
Pension income played an important role for both widows and widowers whose income rose five years after the death of the spouse

 

Tables

Table 1
Source of income for widows and widowers with a decline in income

Table 2
Source of income for widows and widowers with an increase in income

Footnotes

1. See Chris Li, “Widowhood: Consequences on Income for Senior Women”, Analysis in Brief, Statistics Canada, Catalogue no. 11-621-M2004015, July 2004. The values of the indicators for widows may be different in the present article for two reasons: the reference years are not the same and some definitions have been reviewed.
2. These percentages are slightly lower than those presented in the previous sections as they exclude seniors who were already in low income before widowhood.