The caregiving crisis: solving for the sandwich generation

By Chantal Cox and Tanya Yankova

A decade from now, US Census Bureau projections tell us, adults aged 65 and over will outnumber children under 18 for the first time in US history. The States isn’t unique in this. Around the world, structural demographic trends are re-ordering societies. What follows is a new crisis in family caregiving – and a corresponding, latent demand for innovation.

In the US, the size of the potential caregiver population is shrinking relative to the number of older adults at risk for needing long-term care, and a significant labour supply gap is opening. The Global Coalition on Aging reports that, ‘Across OECD countries, the number of elder care workers will need to increase by 60% by 2040 to maintain the current ratio of caregivers to older people’. In practice, this means that 13.5 million new care workers will be required by 2040 [1]. As these trends intensify, individuals will have to balance the demands of employment against increased caregiving responsibilities.

In this blog we’re going to unpack some of the nuances of this demographic shift, and ask how innovation stands to relieve this growing, global burden.

Source: https://globalcoalitiononaging.com/wp-content/uploads/2021/06/GCOA_HI_Building-the-Caregiving-Workforce-Our-Aging-World-Needs_REPORT-FINAL_July-2021.pdf

The sandwich problem

We’re talking about a global challenge, one that doesn’t stop at elderly care. Almost one in four adults in the US fall into the category of the ‘sandwich generation’ – middle-aged adults sandwiched between the dual responsibilities of raising children and providing care for elderly family members. The latest State of Caregiving Survey [2], published earlier this month, states that in the UK, 27% of sandwich caregivers have ‘bad or very bad mental health’. As if that wasn’t enough responsibility to manage, 60% of these family caregivers are also employed in the workforce [3]. In fact, workers with caregiving responsibilities now represent the fastest-growing category of employee identity groups [4].

Employees balancing their workload with caregiving face a challenging juggling act as they provide care hours equivalent to a second full-time job [5]. Working caregivers also face workplace disruptions their non-caregiving colleagues don’t: 70% report the need to leave work early or take time off; an inability to take on additional responsibilities or opportunities at work; having to decline promotions because of their non-workplace responsibilities [6]. According to research carried out by BCG, from 2030 onwards this care crisis is expected to cost the US approximately $290 billion in GDP a year thanks to i) the lost wages from unfulfilled care jobs, and ii) the effect of reduced labour force participation because of care shortages [7].

Source: https://www.bcg.com/publications/2022/solving-the-care-crisis

Stephanie Leung, Founder and CEO of KareHero, describes a strikingly similar picture in the UK, and highlights the fact that much of the caregiving burden falls on women. When we spoke to her, Stephanie told us:

‘The burden of caregiving often falls on family members, particularly spouses, adult children, or other close relatives. According to Carers UK, there are approximately 10.6 million unpaid family caregivers in the UK; more than half are juggling a job and caregiving responsibilities every day. A significant proportion of informal caregivers are women, with almost 60% of caregivers being female (Census 2021). This burden disproportionately affects women who tend to become the “default” caregiver in the family, including taking on caregiving responsibilities for their spouse etc. However, it’s important to note that still a significant portion, 40% of caregivers, are men who may be looking after their ailing spouse or parents (the latter especially if they are either divorced or did not marry).’

Opportunities for innovation

As the scale of the problem grows, so does the size of the opportunity – and we’re not the only ones who’ve seen it. In recent years multiple businesses have formed around different aspects of the caregiving ecosystem. We have split them into four broad categories:

1. Elderly care – Maybe the most crowded category, with a plethora of companies providing direct care and auxiliary services. Notable players include Papa, Elder, Cera, and Lifted.
2. Childcare – There are some emerging players in the space (e.g. Bubble, Koru Kids, Grandnanny), but traditional childcare options, like nurseries, still dominate.
3. Chronic care – Chronic/clinical care coordination is a growing space, and solutions here are vertical specific (e.g. Jasper, Thyme, Perci Health).
4. Care for all – includes solutions that help caregivers with logistics and admin (Wellthy and Cariloop), care organisation and coordination (Ianacare and Lottie) and holistic care coordination platforms encompassing all of the above areas (Grayce, Karehero). Another interesting approach is to tackle inefficiencies in the care provider market with vertical platform plays such as Birdie.

Building employer awareness

Employees are under growing pressure to balance their work and care responsibilities. While changing demographics play a major part, it’s not the whole story – post-pandemic shifts to more flexible working models (including working from home) also play a role. But in spite of all the evidence that the caregiving burden impacts productivity and GDP growth, it’s an easy truth to overlook, for economists, investors and corporate leaders alike. This is because it is an often stigmatised (and less visible) aspect of the informal economy.

This issue is only perpetuated by the cost of care. Sarah Hesz, Chief Commercial Officer at Bubble, explained to us how this impacts workforce diversity. ‘The cost of childcare is insane,’ she said. ‘There are lots of people who can’t afford it and so we lose a lot of talent from the workforce…particularly senior women’. It’s here that employers who want to retain talent have to step up. While it’s promising to see research showing that approximately 35% and 27% of employers offer paid maternity and paternity leave respectively, those figures have actually dropped from the pre-COVID rates of 53% and 44%. [8]

In challenging macroeconomic environments, it can be tempting to dismiss policies like these as ‘discretionary’ costs. We don’t believe that health and social care is discretionary, we believe that it’s a necessity. Still, founders building companies in the caregiving space are under increasing pressure to evidence the need for employers to pay.

But it’s not all bad news. In the UK, the Spring Statement 2023 shone a light on the importance of childcare support, while the Carer’s Leave Act 2023 comes into effect from next year, providing workers with one week of unpaid leave for their loved ones. More employers are recognising that caregiving struggles affect employee performance, with large employers leading the way in offering a wider range of care-related benefits. Many of these go beyond traditional childcare subsidies, ranging from support for back-up childcare to long-term caregiver support for their employees’ ageing parents.

We’re still only seeing ~1% of overall employee benefit spend on care-related services, but with 42% of employers planning to expand or add care as part of their employee benefits,[9] there is plenty of opportunity for the companies innovating in this space to enter the market.

Any healthtech company (not just those focused on caregiving) hoping to win in the employer channel will need to demonstrate three things:

1. Prove that there’s a business case for the solution based on employee data, usually based on retention.
2. Demonstrate to the employer that the problem that they’re solving for is a top priority relative to all other employee concerns/issues.
3. Differentiate the solution from competitors, showing integrations with the wider care ecosystem. This is particularly pertinent when there are competitors who have been around for much longer and have greater brand awareness.

Conversations with senior salespeople in the US suggest that third-party validation of any return on investment (ROI) modelling is fast becoming table-stakes in the US employee benefits market, and that any sophisticated customer will ask for it. External validation is just as important on this side of the Atlantic. We like Grayce’s ROI calculator, a tool which is freely available on their website and makes it easy to prove the financial benefit of their solution to potential customers.

Conclusion

The struggles the sandwich generation faces are not a passing trend. Instead, they reflect a systemic shift that is likely to persist and flow through to younger generations. The number of professional caregivers is unlikely to keep pace with the proportion of the population requiring care, which is why we must look to technology to assist with the ever-growing burden of care provision.

Technology-driven innovations have the potential to disrupt certain elements of this market. Companies like Cera, for example, are integrating digital technology into traditional healthcare provision, aiming to increase caregiver productivity and improve caregiver experience, shifting complex care provision from the hospital to the home.

We expect other tech-enabled solutions aimed at addressing the challenges faced by family caregivers to scale rapidly in the coming years. The social care landscape is incredibly complex. As more people in full-time employment find themselves responsible for elderly relations, virtual care coordination platforms will have a major role to play in ensuring both the individuals and those dependents on them have access to the support they need.

These demographic changes are already underway. Businesses solving for the challenges that accompany them, relieving the burden on working people and affording the generations that need it top-quality care, will shape our social future. If you’re building a world-changing solution that addresses the challenges we’ve discussed, we want to hear from you.

You can reach us on [email protected] and [email protected]

Chantal Cox

Investor

Chantal sits in the Health team, where she’s motivated by an interest in leveraging tech to drive health equity, and a passion for backing diverse and underrepresented founders.

She started her career in the NHS, working as a junior doctor in one of London’s busiest major trauma centres where she witnessed the disparities that exist in healthcare first-hand, and the potential for innovation and entrepreneurship to improve health outcomes. Chantal joined Octopus Ventures in July 2022 from McKinsey & Company, where she led projects, supporting clients from across the private, public and social sector on a range of topics, including strategy, operations and culture.

Chantal graduated from the University of Bristol with degrees in Medicine and Bioethics. Outside work, you can find her on a spin bike, hosting dinner parties or planning her next holiday.

“I’m proud to have a seat at the table with a team that’s intentional about backing diverse, disruptive founders in Health and beyond”
-Chantal Cox