Family,

economics and
society
225
International Journal of Social
Economics, Vol. 28 No. 3, 2001,
pp. 225-247. # MCB University
Press, 0306-8293
Family, economics and the
information society
How are they affecting each other?
Maria Sophia Aguirre
Dearlmenl c/ 8us/ness and Ecncm/s, The Calhc// ln/ters/lv c/
Amer/a, Tash/nglcn, DC, l5A
Keywords Ecncm/s, Iam//v ///e, ln/crmal/cn lehnc/cgv, 5c/a/ ecncm/s
Abstract ln lhe luenl/elh enlurv manv dete/ced cunlr/es mcted /rcm an agr/u/lura/
/ased /nduslr/a/ sc/elv`` lc an /n/crmal/cn sc/elv`` The secnd arl c/ lhe enlurv sau a
deler/cral/cn c/ sc/a/ cnd/l/cns /n manv /nduslr/a//.ed cunlr/es The cm//nal/cn c/ lhese luc
/alcrs has csed lc cunlr/es /clh ser/cus ha//enges and ecncm/ /urdens There /s cnern
a/cul lhe e//els c/ lhe /rea/dcun c/ lhe /am//v cn ecncm/ dete/cmenl and grculh These
rc//ems are magn///ed uhen cns/dered u/lh/n lhe cnlexl c/ dete/c/ng ecncm/es Reenl/v,
scme dete/ced cunlr/es hate hcsen lc address uhal /s al lhe hearl c/ /clh lhe sc/a/
deler/cral/cn and lhe ecncm/ rc//ems /l /r/ngs Th/s aer addresses luc uesl/cns I/rsl, hcu
an lhe /am//v /e t/eued u/lh/n ecncm/ al/t/lv 5ecnd, uhv are lhe /rea/dcun c/ lhe /am//v
and c///es lhal encurage lh/s /rea/dcun /ncmal///e u/lh susla/na//e rea/ ecncm/
dete/cmenl
I. Introduction
In the twentieth century the USA, as well as many other developed countries,
gradually moved from being mainly an ``agricultural-based industrial society''
to an ``information society'', or ``post-industrial era society''. The second part of
the century was also been marked by a serious deterioration of social
conditions in a majority of the industrialized countries. The combination of
these two factors has posed to countries both serious challenges and economic
burdens. To these challenges countries have responded in different ways. Some
have focused on welfare issues, some on financial issues, and still others have
chosen the route of ignoring this matter altogether. More recently, however,
some of the developed countries have chosen to address what is at the heart of
both the social deterioration and the economic problems it brings; that is, they
have begun to re-evaluate and promote policies that strengthen and support the
family.
Fukuyama (1999) proposes three economic structural characteristics of the
post-industrial era. First, services increasingly displace manufacturing as a
source of wealth. As a consequence, instead of working in a factory the typical
worker in the post-industrial society is employed in a bank, software firm,
hospitality carrier, university, or a social service company. Second, the role of
information and intelligence embodied in both people and computerized
machinery has replaced to some extent physical labor with mental labor. Third,
production is globalized as inexpensive information technology makes it
increasingly easier to move information across international borders. Rapid
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communication by television, radio, fax, and e-mail erodes the boundaries of
cultures and countries. People tend to associate the information age, as
Fukuyama (1999) remarks, with the introduction of the Internet in the 1990s.
The shift away from an industrial era, however, started more than a generation
earlier. This shift began with the deindustrialization of the Great Lakes in the
USA and with comparable moves away from manufacturing in other
industrialized countries.
During the period from 1960 to the early 1990s, crime and social disorder
began to rise, making inner-city areas a dangerous place to live. Fertility in
most developed countries fell below replacement levels, causing a reversal of
the age pyramid. Marriage and childbirth were less frequent while divorce
rates soared, and out-of wedlock childbearing affected many. For instance, one
out of every three children born in the USA and over half of all children in
Scandinavia are born out of wedlock (Fukuyama, 1999). Finally, trust and
confidence in institutions have significantly declined. All of these factors are
very relevant for economic growth and development in any economy, since
they hinder the most important resource: the economic agent and with it human
capital. Furthermore, trust is a basic condition for any economic activity. For
without it, any economic transaction becomes very expensive or is avoided. As
an example of the importance of trust for economic activity, one can think
about the capital flight that less developed countries experienced during the
1980s. Trust in these countries' capacities to perform was lacking and the
capital flight that followed as a consequence was very harmful for these
economies. Another example would be the problems caused for public health
plans by distrust on the part of Indian women, due to some abuses in the area of
reproductive health. This has often caused mothers to refrain from vaccinating
their children and to avoid the prenatal care necessary for healthy pregnancies.
Fukuyama (1999) claims that the accumulation of these negative social
trends is closely related to the transition from the industrial to the information
era. The relationship is established by the link that exists between technology,
economics, and culture. The changing nature of work, which substituted
mental for physical labor, propelled millions of women into the work place and
undermined the traditional understanding of family roles upon which the
family had been based for centuries. Innovations in medical technology, such
as contraceptives, distorted the role of reproduction and the family in peoples'
lives. The culture of individualism, which in the market place encourages
innovation and growth, spilled over into the realm of social life, corroding
virtually all forms of authority and weakening the bonds that hold families,
neighborhoods, and nations together. There is a bright side, however: social
order, once disrupted, tends to get remade once again, and there are many
indications that this is happening today. Families and governments are re-
evaluating the role that family plays in the economy and in society. Working
women and men are searching for alternative working arrangements to make
family and work obligations compatible. There is an overall search for moral
principles that could establish some common denominator in an ever-diverse
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multicultural society. One may ask why one could have expected this to
happen. The answer can be found in human nature. Men by nature are social
creatures, and the family is its basic unit and most important manifestation.
In this paper, I will try to address two questions. First, how can we view the
family within economic activity? Second, why are the breakdown of the family
and policies that encourage this breakdown incompatible with sustainable real
economic development? In the second part of the paper I address the first
question, and the analysis of the second question follows in the third section. In
the fourth part I refer to some of the positive initiatives being proposed in
developed countries to solve some of the present social conditions and costs.
The paper ends with a fewconclusions.
II. A view of family and economic activity
When addressing the relationship between family and economics, it is
important to consider the characteristics of the family and how the economy
relates to these characteristics. The first characteristic of the family is that it is
the first form of society. A person normally comes into the world within a
family, and it is within a family where the child first develops and matures as a
human person. If life develops within the family, then we can say that a second
characteristic of the family is that it is a ``living being'', as expressed by the
Spanish philosopher Rafael Alvira (1987). If it lives, then it has a principle of
action and a material substance. The principle of action of the family is love,
and the material substance is the economy. Two important expressions of this
love are intimacy (the key to a home atmosphere of respect, trust, and joy) and
education. Nature has given the parents not only the capacity to bring life, but
to help each child develop (that is, to help their children with what is in them at
first ``capacity'' to becomes ``actuality'', i.e. habits and therefore education). In
doing so and in providing for the right atmosphere, they are expressing their
love for their children.
The members of the family are human beings and, therefore, they are in need
of material things to develop. It is the need to obtain and to consume these
material things that explains the reason for economics and the role that the
family plays in it. In this sense, then, we can say that the family is the first and
most fundamental place where production and spending acquire their meaning.
It is precisely in the ability to foresee both the needs of families and the optimal
allocation of productive factors to satisfy those needs, which constitute an
important characteristic of a well functioning economy. Many goods cannot be
adequately produced through the work of an isolated individual, but they
require the cooperation of many people working towards a common goal.
Furthermore, production and spending are neither mere ``individual'' things
to do nor mere ``social'' things, but they are human activity and therefore must
be directed towards meeting family needs. If they do not, spending leads either
to consumerism or to controlled and planned economies. In summary,
consumption and the means necessary for production (such as private
property) are not ends in themselves, but an instrument to provide the family
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with the means of subsistence and development. It is within the family domain
that private property encounters its meaning because it is in the family that the
economic agent finds motivation to work. At the same time, it is in the family
that pure selfish motives for economic activity are overcome because the
person's work is directed to meet the needs of the other members of that family.
The ground on which capitalist theories have defended private property has
been the economic agent's work. These theorists maintain that a given economic
agent carries out work and he is therefore the owner of it. Thus, he has the right
to keep and enjoy it. This justification is incomplete, however, since no one could
have worked having not first received an education. Furthermore, no one can
work without the help of others. Thus any product or source of production to
some extent is not the economic agent's alone, but some other members of that
society have rights upon the same product. This implies that it is possible to find
support for the right to private property in an economic agent's work, but not
absolute private property. Private property encourages production and belongs
to someone, but the product of this property transcends the owner since he does
not work in isolation or for himself alone.
Another sign that confirms that the economy goes beyond the needs of a sole
individual is the need to distribute the goods produced in the economy. This
need is mainly felt in the family and it is for this reason that it is through the
family that the economy transcends the mere individual level. This is an
important idea when thinking on income distribution theory and policy as well
as on sustainable real economic development. Distribution within the family is
usually carried out through women. It is here that the most important role of
women in the economy is found: woman, because of her characteristics, has the
capacity to distribute goods in a just manner, according to the specific needs of
each member of the family.
Using the previous analysis, we can understand why several elements of the
economy degenerate if they are not ordered towards the family: how is a good
distribution possible without reference to the family? What is the point of an
economic agent saving or investing beyond retirement (i.e. future consumption)
without the family? What moderation would there be in consumption and
spending if there were no family? What is the motivation to work without a
family? What is the role of government if not to meet, at least in a subsidiary
manner, the needs of the family? An economy that is based exclusively on
profit and selfish individualism could be successful for a period of time, but it
would not last (among other things because it will not produce enough
population without which no economy is possible). It is the economic agent
man that works, and man naturally belongs to a family. Since it is also the case
that man develops within the family, then it follows that he as the economic
agent will be better fitted to contribute the most to society and vice versa when
the family is being promoted by the economy in which he works.
Becker (1991), in his theory of human capital, when considering investment
in human beings (education) and its effect on real economic growth, points out
that ``no discussion of human capital can omit the influence of families on the
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knowledge, skills, values, and habits of their children''. He goes on to say that
``parents have a large influence on the education, marital stability, and many
other dimensions of their children's lives,'' and one can add therefore on
their present and future productivity.
So far we have seen that family consumption needs give rise to economic
activity, and that the family affects the productivity and consumption of the
economy by the influence that it exercises on each of its members. At the same
time, as the members of these families contribute to the economy, private
property and other institutions and services such as health services, housing,
education, social securities, national security, etc., develop so as to complement
and meet the needs of these families. Therefore, if we are to understand any
economic issue, the way in which that given issue affects the family as a whole
or a given member of it must be evaluated carefully. This is directly and
indirectly the most important reason for economic activity.
III. The breakdown of the family institution and sustainable real
economic development
From an economic point of view, the family is very relevant for several reasons.
First, the breaking down of the family is a symptom of social weakening, which
is detrimental to the economy because of the social cost entailed, especially for
government finances. Second, children develop better within a well functioning
family; that is, with their biological parents in a stable marriage. Thirdly, a
child's academic performance is directly related to family structures, which is
an important aspect of human capital. This section of the paper will address
these points from the dimension of the cost that developed economies have
incurred as the breakdown of the family spread during the second part of this
century.
1 The /rea/dcun c/ lhe /am//v. d/tcre and ///eg/l/mav
The changes that have taken place in Western families are familiar to most
people, and are captured in statistics on fertility, marriage, divorce, and out-of-
wedlock childbearing. This is also reflected in the rise of welfare cost to support
broken families as well as their side effects: child rehabilitation, programs to
deal with crime, drug abuse, teenage pregnancy, special education, and aging
populations. For example, in the USA, 1998 family assistance expenditures
were five times higher than in 1970 in real terms, and health expenditures
increased 15 times during the same period. Also in real terms, health
expenditures increased by $225 billion between 1991 and 1996[1]. In addition to
the welfare cost incurred, there is also an immense legal cost involved. Billions
of dollars are being wasted at the courts, while these funds could be used in
more positive constructive ways. These factors affect social stability and
therefore affect the economic development of a country.
Like fertility rates, marriage rates experienced a rise in the 1960s in the USA,
The Netherlands, Canada and other developed countries. Since the 1970s
however, marriage rates have been falling rapidly while divorce rates have
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soared. Approximately 50 percent of the marriages contracted in 1980s in the
USA can be expected to end in divorce. The ratio of divorced to married
persons has increased even faster due to the decline in marriage rates. In the
case of the USA, this increase has been fourfold in the space of 30 years, and it
is the same for Europe (US Bureau of the Census, 1998).
Figure 1 shows the rate of birth to single mothers between 1950-1998.
Children born to unmarried women as a proportion of live births for the USA
climbed from 5 percent to 35 percent from 1940 to 1998. However, illegitimacy
ratios vary significantly by race and ethnicity. In 1998, the ratio for whites was
23.6 percent, and for African Americans 68.7 percent (Economic Report of the
President, 1999; Directorate of Intelligence, 1991, 1998). Between 1994 and 1997
the proportion of births to single mothers in the USA leveled out. Part of the
explanation for this phenomenon has been the decrease in teenagers' birth
rates. The number of teenagers giving birth fell from 61.2 per 1,000 women to
54.7 in 1991, but significantly increased thereafter. It is important to notice that
the significance of illegitimacy is different in Europe than it is in the USA, due
to the high rate of cohabitation in Europe. For example, between 45 percent and
80 percent of people between 20 and 25 years are cohabiting in Northern
European countries, while at the same time the marriage rate is very low (about
3.6 per 1,000 inhabitants (McLanahan and Sanderfur, 1994)) Comparably, in the
USA 14 percent of the people between 20 and 25 are cohabiting (US Department
of Health and Human Services, 1995). The USA still stands out however, for the
number of children born to mothers living alone or to teenagers (Jones, 1986).
The number of children living in single-parent families in any given year is
the product of several factors: the rates of out-of wedlock births, cohabitation,
divorce, dissolution of cohabitation arrangements, and the re-marriage and re-
cohabitation rates. The USA has the highest rate of single-parent families
because it has a high illegitimacy rate, a high divorce rate, and a low
cohabitation rate relatively speaking. Cohabitation is more unstable than
Figure 1.
Births to single mothers,
1950-1998
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marriage. Bumpass and Sweet (1986) find that unions that began by
cohabitation are twice as likely to dissolve after ten years than unions that do
not. Also, they report that marriages entered into after a period of cohabitation
are less stable than marriages without prior cohabitation. More recently,
Popenoe and Whitehead (1997), Wu (1998), Hoen (1997) and others confirmed
these findings. This contradicts popular assumptions that premarital
cohabitation is good for marriage because couples are able to get to know each
other better.
Neither the divorce rate, nor the illegitimacy rate, nor the single parent
family rate alone captures the extent to which children will experience family
breakdown and life in a single or no parent household. Of the 67 percent of
children born to married parents in the USA in the 1990s, it is estimated that 45
percent will see their parents divorce by the time they are 18 (McLanahan and
Sanderfur, 1994). There is considerable scientific evidence that the
psychological damage done by the voluntary breakup of the family is greater
than the involuntary breakup caused by death[2].
Based on all these facts, we can clearly conclude that the nuclear family has
weakened across the board over the past 40 years, and that the functions that
these broken families still perform, like reproduction, are not being performed
well. This has an evident impact on human capital and on the economy as a
whole, since the family is both the source and transmitter of human capital and
economic activity.
Ana/v./ng lhe auses At least four arguments have been proposed to explain
why the economic developments of the past 40 years have been accompanied
by the breakdown of the family. Some point to the increase of poverty and/or
the increase of income inequality. Others blame its opposite, i.e. the increase in
wealth as its cause. Another group charges the welfare state. Finally, others see
the cause not in economic variables, but in a broad change in society brought
about by a decline in religion and the promotion of individualistic self-
gratification over community obligations.
It is a well-documented fact that there is a strong correlation between broken
families, poverty, crime, distrust, drug use, loweducational performance, and low
human capital. Disagreements arise over causalities. Empirical evidence,
however, suggests that the causality does not go from economics to the family
but vice versa[3]. Today societies are much wealthier than in previous decades
and yet they are more unequal (Wolff, 1998). In addition, the povertization of
women in most cases is linked to divorce or single motherhood and not to
discrimination, as radical feminists have claimed in the past. In fact, Furchtgott-
Roth and Stolba (1999) in a study based on the Nal/cna/ Lcng/lud/na/ 5urtev c/
Yculh, report that when earnings comparisons are restricted to men and women
more similar in their experience and life situations, the measured earnings
differentials are typically quite small. Among people aged 20 and 33 who have
never had a child, women's earnings approach 98 percent of men's earnings.
They also report that between 1960 and 1994, women's wages in the USA grew
ten times as fast as men's wage. Figure 2 shows that in the USA married women,
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independent of their ethnic background, are better off than single mothers. It is
true, however, that the European countries which have various family support
and income maintenance programs in place, show a less damaging povertization
of women as a consequence of family breakdown. This indicates the
effectiveness of these programs to lighten the effect of povertization of women
and children, but they have yet to solve the social problems that the breakdown
of the family brings[4]. These programs managed to shift parental
responsibilities to individual taxpayers, consumers, and the unemployed.
This past year countries such as the UK, France and Germany have started
to actively seek solutions to the family instability prevalent in these countries.
In the Green Paper, 5ucrl/ng Iam///es (1998) for example, it is stated that ``the
government thinks that the defence of marriage and the family will end the
illnesses present in British Society. In particular, it hopes to reduce the divorce
rate four of every ten marriages the high proportion of illegitimate births
(34 percent in 1995), and the damage that divorce causes in the children of
divorced couples.'' This seems to suggest that developed countries have come
to the realization that the breakdown of the family has more than public finance
effects in their country[5], and empirical evidence supports this realization[6].
The argument that growing individualism and the social problems resulting
from it are the consequence of prosperity is on its surface much more plausible
than the opposite argument. Family breakdown and crime increased over an
extended period of time, during which the wealth of developed countries
increased steadily. Moreover, there is a broad correlation between value change
and income levels within the OECD where wealthier nations have higher levels
of family disruption than poorer countries such as Portugal and Spain[7]. It
makes sense to think that as income levels rise, the bonds of interdependence
that tie people together in families and communities will weaken, because they
are now better able to get along without one another. But although there is a
great deal of truth in this train of thought, the answer is neither completely
satisfactory nor is there enough empirical evidence supporting this position. If
anything, evidence points to a different direction. Those most afflicted by the
Figure 2.
Percentage of women
who are in poverty by
family structure and
ethnicity
Family,
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breakdown of the family and high levels of crime tend to be the least wealthy
members of society (Rosenzweig and Wolpin, 1994).
Not much support is found regarding the charges being made against the
influence of the welfare state on the family either. Developed countries show no
positive correlation between levels of welfare benefits and family stability.
Indeed there is a weak correlation never mind causality between high-level
welfare benefits and illegitimacy, which tends to support the argument that the
welfare state is not the cure for family breakdown. Furthermore, the highest
levels of illegitimacy are found in the Scandinavian countries of Sweden and
Denmark, where redistribution of income is quite high due to their socialist
economic structure. In the face of such a social problem coupled with an aging
population, it is not an accident that European welfare states have run into
serious economic problems in the 1990s, producing high levels of
unemployment and financial instability.
Those who have set the responsibility for family breakdown in mistaken
government policies maintain that perverse incentives created by the welfare
state itself explain present family problems. For example, the Aid to Families
with Dependent Children, the primary American welfare program targeted at
poor women, provided welfare programs only to single mothers and thereby
penalized women who married the fathers of their children[8]. Similarly, Alm el
a/ (1999) show that the present tax structure in the USA penalizes married
couples more than cohabiting couples. The percentage of penalty to pre-tax
income is between 4.5 percent and 10.1 percent higher for the first group. Also,
the rising rate of crime is seen as the result of the weakening of criminal
sanctions that have occurred over the past 40 years (Becker and Landes, 1997).
The empirical evidence supporting this position is not very conclusive,
however. While it is true that the percentage of illegitimate children is higher in
countries where the welfare state is far reaching, as is the case in Europe, and
low where benefits are low as in the case of Japan, not all countries show the
same pattern. The USA and other developed countries do not show this
behavior. In fact, econometric studies indicate that while welfare benefits have
stabilized and even deteriorated in real terms during the 1980s in some
countries, family breakdown has continued increasing through the 1990s[9]. In
addition, it has to be taken into account that illegitimacy is only one of the
elements in the weakening of the family. Others include divorce, declining
fertility, and cohabitation, all of which are more prevalent among middle and
upper class individuals.
Tcr//ng ucmen In the past three decades, many have declared that with the
advent of two-income families the work of the home is something of the
past[10]. In fact, housework continues to consume a substantial amount of time
for working mothers. While estimates vary widely depending on the sample
examined and on the methods used to generate this information, housework
time ranges from 20-30 hours of work at home in addition to a full time job
(Waldfogel, 1998). Agrowing awareness has arisen of the presence of women in
the work place along with the consequences that this presence has on the
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parental obligations shared by both men and women. Among the problems
germane to this issue, two have been a matter of particular concern: the
problem of supervision both for children below school-age, and for school-age
children who are dismissed from school before their parents finish work
(``latchkey children''); and also the difficulty of employer retention of valuable
working women.
It is clear that the family as an institution exists to give legal protection to
the mother-child unit, and to ensure that adequate economic resources are
passed from the parents to allow the children to grow up to be viable adults.
Fukuyama (1999) proposes two causes that contribute to the breakdown of the
family. First, the development of contraceptives, and second the movement of
women into the paid labor force. It is important to note that the significance of
contraceptives cannot be reduced to the decline in fertility. Fertility had already
fallen in some societies before the pill's invention. In addition, an explosion in
illegitimacy and a rise in the rate of abortions have accompanied the spread of
contraceptives since the 1970s (US Department of Health and Human Services,
1995). Both facts tend to suggest that the use of contraceptives has effects other
than the decline of fertility; it also influences the stability of the relationship
between men and women within marriage and outside marriage by
encouraging promiscuity[11].
In recent years, the rise of females' income has also been related to the
breakdown of the family (Becker, 1991). The assumption behind this
relationship is that many marriage contracts are entered into with imperfect
information: husbands and wives discover that once married, life is not a
perpetual honeymoon, and that their spouse's behavior changes from what it
was before marriage. As some economists suggest, trading one husband for
another when they have discovered this reality was impossible for women
before because they depended on their husbands economically. As female
earning began to rise, however, women became better able to support
themselves and to raise children without husbands. At the same time these
economists argue that rising female income also increases the opportunity cost
of having children and therefore lowers fertility[12]. Fewer children mean less
of what Becker characterizes as joint capital in the marriage, and hence makes
divorce more likely (Becker, 1991). It is not clear, however, that working women
who divorce necessarily follow this rationale. Perhaps it might apply to those
cases where the parties enter marriage for its pleasures. Another plausible
reason is the fact that the entry of women into the labor force puts on them an
additional burden when it comes to meeting the needs of both work and family.
It is empirically proven that the work structure is male oriented and that it does
not provide the flexibility that mothers of families need to meet their family
obligations. Therefore, their work becomes a source of tension in the marital
relationship, and it affects their work performance as well as the care of their
husband and children.
Empirical evidence links higher female earnings to both divorce and
extramarital childbearing (Becker and Landes, 1997). Figures 3 and 4 plot
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235
divorce versus female participation in the labor force and female participation
in the labor force respectively. The first graph supports a positive relationship
between divorce and female participation in the labor force in most cases. Japan
and Italy have both low female labor participation and low divorce rates. At the
other extreme we find the USA, Sweden, and the UK. Notwithstanding, in a
study on divorce undertaken by Sullerot (1997), she reports that in Europe, of
the number of divorces initiated by women, between 33 percent and 75 percent
suffered a significant decline in their income. This is consistent with the
povertization of women in the last 40 years, which was mentioned before and
shown in Figure 2.
The second graph shows an increase of female participation since the 1970s.
The rate at which the increased participation has taken place, however, has
leveled out since 1990. A recent study by the Families and Work Institute
(1997) reports that in the USA, women's income is becoming necessary for the
sustenance of the family. Women contribute at least 45 percent of the family
Figure 3.
Divorce versus female
labor participation
Figure 4.
Female participation
in the labor force,
ages 20-39, 1950-2000
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income of married parents. The contribution is even higher in single parent
households, mainly headed by women, where their contribution is of 90 percent
or more (Aceprensa, 1995). The study also reports that only 15 percent of all
women would like to work full time even if this was not necessary to maintain
the family, 33 percent would like to work part-time, and 31 percent would
prefer not to work outside their homes. Therefore it is not surprising that in
more recent years we have seen an explosion of innovations in this front,
ranging from flextime working hours to job-sharing positions, or companies
that professional women support so they are able to work from their homes[13].
In fact, the small business administration found that in 1997 women owned 8.5
million small businesses in the USA, employed more than 23.8 million people,
and generated receipts of $3.1 trillion in sales (Furchtgott-Roth and Stolba,
1999).
So far, the solutions proposed to meet parental responsibilities regarding
supervision have included child care oriented policies and income tax credits at
the governmental level. Private initiatives, such as a system of flexible working
hours and more recently, on-site day-care or other child-care support provided
by employers have been developed[14]. As was previously mentioned,
governments, especially in Europe, are introducing more incentives for women
to continue working while having a family. Developed countries are now
concerned not only with the effect on children and the family, but also with
their current low fertility rates.
? Ch//dren and lhe /mcrlane c/ human a/la/
There is a strong relationship between family and human capital. Families
constitute the most basic cooperative social unit, one in which husband and
wife meet to work together to socialize, to beget, and to educate their children.
The family in the past typically educated its children at home, took care of the
elderly, and in view of the physical isolation and/or lack of transportation as it
occurred with families working in farms for instance, was also its own main
source of entertainment. Today, these functions have been separated from the
family. As men and women started working outside the home, children were
sent to public schools for education, grandparents moved to retirement or
nursing homes, and entertainment was provided by TV and other means of
mass communication. The movement of these functions outside the family unit
has had a deleterious effect seen most markedly when reproduction was
separated frommarriage.
A growing concern of the past decade has been a decline in the academic
performance of American students at large who have done poorly on
standardized tests compared with their peers abroad, especially in Asia. On
average, American students read less, have weaker analytical skills, a declining
command of their language, and in general are less well rounded. They tend to
watch more television and videos, and spend more time playing computer
games than their peers in other countries do (Schwartz and Stevenson, 1990).
Faced with this reality, several studies have sought causes and solutions to
Family,
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these growing educational problems. Both school and family input as well as
social conditions are relevant in this area. The 1966 Coleman report
commissioned by the US Department of Health, Education and Welfare, found
that after controlling for family background in student achievement, there is
little evidence that the level of school resources has a statistically significant
effect on student test scores[15]. Furthermore, the report emphasized that
family and peers have a much greater impact on educational outcomes than the
inputs over which public policy has control. Lack of parental support and
involvement, as well as the absence of early stimulation, together with the
breakdown of the family structure, have been found to be important factors
affecting children's performances[16]. Empirical evidence on the impact of
school resources on student outcomes continues to be ambiguous.
Divorce, out-of-wedlock birth, and single-parenthood are shown to be very
detrimental to the affected children's development. Children that come from
broken families or who are raised by single mothers tend to have more
problems related to drug abuse, alcoholism, violence, and academic
performance. They also have more health problems, depression, and higher
suicide rates than those proceeding from stable families. These results are
independent of the income level of these children, thus suggesting that income
is not the major variable in children's development health (Bethke, 1995). Blum
el a/. (1997) have shown that the closer the relationship and the trust between
parents and children, the better is their academic performance and the lower is
the risk of their getting involved in unhealthy activities. Finally, studies show
that it is important that parents be present at key times during the day, for
instance after school and at dinnertime (Blumel a/, 1997).
Not only parents, but employees and society as a whole are concerned with a
widespread lack of child supervision that result in poor academic performance,
as well as the needs of working parents. In a 1994 study, the Carnegie
Foundation reported that in the USA the breakup of the family is primarily
responsible for poor child care. Almost 40 percent of children under three years
old live with one parent, and more than 50 percent of women with children
under one year work full time outside the home in most cases due to economic
needs and are either single mothers or divorced. Malkin and Lamb (1994)
report that child abuse in single parents' homes is four times higher than child
abuse in households with both parents. This risk increases to six-fold for
children living in cohabitational households.
Child care has been shown to be a solution with many risks, at least for the
USA. A study of the National Institute of Child Health and Development
reported last year that 80 percent of children under one year, are habitually
supervised by an adult other than the mother for at least 30 hours a week. The
same report points out that child care facilities do not provide the quality of
service required by the child to develop well, and between 15-20 percent of
these services are detrimental to children. In response to this report, the US
government created a committee of private businesses to seek solutions to
these problems. The conclusions of their study were that ``policies that favor
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the family were profitable for business.'' Johnson & Johnson reported that for
every dollar allocated to subsidize maternal leave or child care, it was earning
US$4 in increased productivity. Eli Lilly reported that granting leave of
absence to parents to take care of children's needs or family illnesses was
facilitating the motivation and retention of more dedicated, innovative, and
productive workers. The same parental support is not found in small or mid
size businesses. On the contrary, workers that try to attend to the needs of their
children often find their promotion is jeopardized (Ecncm/sl, 1998).
The development of human capital requires close involvement of parents,
especially during the child's early years. This has been overlooked until
recently by the information society, and consequently has imposed additional
social costs to society as a whole and has hampered economic development.
The introduction of innovative ways to facilitate making family responsibilities
compatible with work outside the home has increased worker performance,
productivity and profitability.
S A s/de e//el u/lh greal r/s/s. an ag/ng sc/elv
Human capital, as was previously mentioned, could not exist without people.
The generation that grew during the 1960s and 1970s continually heard of the
population explosion and the global environmental crisis. By the 1980s all
developed countries had undergone a demographic transition in which the total
fertility rate (average number of children per women of child bearing age) fell
belowreplacement levels.
The decline in fertility follows an aging society. A growing proportion of the
retired to active population characterizes an aging society. Unlike other issues
such as the effects of population growth on the environment or resources, there
can be little debate over if or when an aging population will manifest itself.
These predictions are not based on hypotheses but on facts. This is the case for
two reasons. First, the population we are referring to are living people who are
already here, and whose average life expectancy has increased between 1950
and today from 46 to 66 years old in less developed countries and up to 70 in
developed countries[17]. The second reason is that the increase of life
expectancy is happening while there is a reduction in the number of young
people because of the fall in fertility rates. The UN defines an aging society as
having 7 percent or more of the population at 65+ years. From 2000 to 2025, the
number of people above 65 will double while the number of youngsters under
15 will increase by 6 percent only. The reversal of the age pyramid affects
virtually all societies today, and more markedly affects the industrialized
countries. In Europe it is estimated that by 2025, 31.2 percent of the population
will be 65+. In addition, the dependency ratio (typically defined as the
percentage of the population aged 65+ over the percentage of the population
aged 15-64) is expected to increase from an average of 50 percent in 1995, to an
average of 85-90 percent by the year 2050.
The causes of the aging of population are complex. Some factors are found in
the living conditions and socio-cultural changes which countries have faced in
Family,
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the past 30 years. The infant mortality rate has decreased while the fertility
rate (the number of children born to each woman) has fallen below the
replacement levels, 1.7-1 in the EU, Eastern Europe, and most East Asian
countries. Moreover, the marriage rate has declined in an environment that is
hostile to matrimony. This is coupled with a sharp increase in the mean age at
which women first give birth. This phenomenon is exacerbated by labor codes
that do not facilitate women's desire to harmoniously integrate their family life
and professional activity. Some developed countries are trying to reverse the
trend in fertility rates by implementing policies that facilitate child-bearing
through flexible hours arrangements, work sharing, and alternative leaves of
absence. These symptoms suggest that the lack of supportive family policies in
the past decades have not allowed families to have the number of children they
prefer.
Another important factor, especially in developed economies, is the
widespread belief that keeping a certain quality of life is more important than
having several children. People assume that population control is a necessary
antecedent to development. Ben Wattenberg, in his book The 8/rlh Dearlh
(1989), has observed that ``in the wealthiest age of history many youths say that
they cannot afford to have more than two children.'' Such a rationale holds that
if there are fewer children, better investments can be made for each one and
greater savings will take place, thus leading to an overall increase in the
standard of living. Ironically, studies show that despite the higher standard of
living, wealthier populations experience a greater amount of pessimism. In an
age of many comforts, depression and a general loss of a sense of meaning in
life (remarkably manifested by youth violence and suicide) have increased.
Despite the sharp fall in fertility rates, overall savings are very low, and in
those countries where savings are positive, it tends to be highly concentrated at
the highest income levels. Many economists contend that private saving rates
are affected by a society's age structure, mirroring the change in an individual's
saving rate over the life cycle. This being the case, in an aging population
context one can expect even a greater deterioration of national saving rates.
Heller (1997) estimates that by 2010, Europe and East Asia will experience a
near 10 percent decline of their GDP and a 13 percent decline by 2025. These
numbers, however, are sensitive to the econometric estimates used and should
be taken as lower bounds; in fact, the deterioration might be greater.
In the face of this reality, governments and international organizations have
become concerned because implosion and the consequent aging population
have serious consequences for countries. One of the clearly predictable burdens
will be presented by social security systems. A smaller population will need to
support an aging population that is less active and has a greater need of health
care and medical services. If one adds to this the fact that most social security
systems are predominantly of the pay-as-you-go type, the absence of younger
generations endangers the possibility of supporting the older population.
Many of the solutions proposed include tax increases of different forms.
Other solutions advanced include radical reforms of the retirement benefit
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systems such as tight limits on public health spending, modest pension benefits
formulas, and new personally owned savings programs that allow future
public benefits to shrink as a share of average wages. Of course, this requires
that governments undertake serious budgetary adjustments and find solutions
that might not be optimal to meet the needs of the elderly. However, there are
other issues related to meeting the needs of the elderly. Heller points out that
``there are other concomitant effects of epidemiological developments, changes
in prevailing medical technologies, upgrading of educational systems, and
social pressures to provide broader social safety net coverage for elderly
persons living outside the formal urban sector. Each of these developments
may result in important national policy developments (. . .) [which] will create
significant fiscal pressures. Furthermore, the security of elderly retirement
becomes ever more necessary as traditional extended family support systems
weaken'' (Heller, 1997).
Often overlooked are other economic burdens such as the effect on the
education of youth, and the competition between the younger and older people as
the latter try to protect their jobs while younger generations enter into reduced
job markets. At times, people are forced to retire from active employment while
they still have great inner resources and are still able to contribute to the common
good. Initially, the increase of early retirement as well as the reduction of young
people forming the labor force can seem to alleviate unemployment especially
in European countries where unemployment has become a chronic problem.
Later on, the reduction of the labor force favors immigration. In fact, immigration
has increased. It is calculated that about 120 million persons about 2 percent of
the world's population have emigrated to other countries. An increase of
urbanization is also expected. Since 1967, the number of people that live in urban
areas has increased by 40 percent, but this urbanization is often not accompanied
by the expansion of infrastructures needed, thus opening the way to poor and ill-
equipped living conditions.
In the area of education, one can predict another conflict. In order to provide
for the economic needs of the elderly, there is a great temptation to cut down on
money allocated for the training of new generations. Consequently, the
transmission of cultural, scientific, technical, artistic, moral and religious goods
is endangered. This poses the danger of ``moroseness;'' that is, the lack of
intellectual, economic, scientific, and social dynamism with the attendant
reduction of creativity. Population growth expands the market and facilitates
creativity and dynamism.
Thus an important question arises as to whether it is possible to maintain
economic growth with implosion. Some economists argue that economic
growth can be sustained even under a declining population, if it is supported by
an endogenously induced technological progress in the market (i.e. if tightening
labor-market conditions stimulate better utilization of resources). The rationale
is that accumulation of human capital and decline in the labor force would raise
real wages faster than societies are aging. It would also increase the return
from utilizing human capital and would thereby stimulate innovation. This line
Family,
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241
of argument ignores precisely the last two problems mentioned. Thus, Malthus
and his followers are mistaken on both the demand and the supply side. On the
demand side, because population does not follow a geometric growth as
Malthus (1824) predicted. On the supply side, because the resources are not
easily extinguished since they are created and expanded by the people who are
born, live, and work. Population growth is one of the most dynamic variables in
the process of economic development.
In summary, population growth expands markets and facilitates creativity
and dynamism. It is impossible to maintain economic growth with population
implosion and the need to support an aging population. Population control
policies rather than facilitating economic development hamper it in several
ways. They weaken the family structure, which in turn leads to the
povertization of women and children as well as to the reduction of human
capital. Both of these elements are essential for a lasting real economic
development. They also invert the population pyramid, leading to an aging
population problemand to the countries' public finances burden that follows.
IV. Towards the protection of the family: an economic sound choice
The breakdown of the family social cost has been very high. Figure 5 shows social
welfare cost as a percentage of GDP between 1972 and 1998 of major developed
countries. It is clear that for all countries, the family breakdown has been
accompanied by a significant increase of social welfare costs during the 1970s,
which continued until 1992. At this time, the social welfare cost rate of growth
slowed down with the exception of Germany. The anomaly observed in 1992 for
this country corresponds to its unification and thus is not very significant.
It is interesting to consider that the combination of social security plus
family and health welfare expenditures for developed countries were on the
order of $1,216 billion dollars for the USA, $354 billion for France, $258 billion
for the UK, and $266 billion for Germany in 1996. These numbers are bigger
than any of the less developed countries' foreign debts. For example, as shown
Figure 5.
Social welfare
government expenditure
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in Figure 6, the US expenditures are seven times the debt of Brazil, the largest
debtor, and in 1996 it was 20 percent bigger than Brazil's GDP. It is also 12
times the debt of Argentina, the second largest member of MERCOSUR. By
contrast, if we take Nigeria as an example of a sub-Sahara country, we find that
US social welfare expenditures in 1996 were 40 times Nigeria's foreign debt and
about ten times its GDP. Even UK social welfare expenditures, which are the
lowest of all the countries included in Figure 5, were 8.6 times Nigeria's debt
and double its GDP for the same year.
Even after adjusting for the difference in population sizes, the combination of
social security plus family and health welfare expenditures for developed
countries remain much higher than the debt of these developed countries.
Population in the USA(268 million) is only 1.59 times that of Brazil (167.7 million),
7.49 times that of Argentina (35.8 million), and 2.5 times the population of Nigeria
(107.3 million). The population in the UK (57.6 million), France (58.6 million), and
Germany (82.1 million) is roughly half of the size of the population of Brazil and
Nigeria, and Sweden's population is only 8.9 million. These numbers underlined
why it is very important for developing countries to protect their family and their
population. Their present economic situation does not allow for the same
mistakes that developed countries made and are now trying to repair. If these
countries are to experience real economic growth, both their family and their
population ought to be protected frombreakdown and implosion respectively.
Developed countries seem to be realizing the consequences that the
breakdown of the family has had in their society. Therefore, they are seeking
out policies that will help reverse this trend. They seem to know that
redistribution of income towards the victims of such disruption is not enough.
The UK for example, in the report entitled Supporting Families (Green Paper,
1998), has advanced a proposal to create an Institute for Family and
Parenthood to advise parents in matters regarding the education of children. It
also proposes the elimination of 24-hour-noticed civil marriages and the
introduction of preparatory classes, so as to encourage couples to become
aware of their rights and duties in marriage.
Figure 6.
Developed countries
welfare expenditure vs
developing countries
debt: 1996
Family,
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243
France in the last year has also shown a significant shift in family policies, which
are directed to reinforcing family supports. For example and among others, as of
1999, once again all families with at least two children receive family subsidies
independently of their income level. The family subsidies had been cut in 1997 for
high-income families. It also extends child-support for parents to 19 years old, or
20 if the dependent is a student, and it expands credits and subsidies for family
housing. The Netherlands and the USA have introduced as a labor right, parental
leave for family needs, thus giving rise to ``family days'' benefits. The goal is to
facilitate parents meeting their family as well as their work obligations. Child care
has been the focus of some family policies. The extent of this last benefit varies
from country to country. Germany provides 100 percent coverage, while Finland
and Sweden cover between 80 and 90 percent.
In summary, we can say that industrialized economies have experienced
significant increases in welfare cost expenditures as their family institution has
undergone a serious crisis. As a consequence, new efforts are being taken to
reverse this effect and reinforce this basic unit of society.
V. Conclusion
A family's consumption needs give rise to economic activity. In educating its
children it influences what is produced in the economy. As the members of
these families contribute to the economy, private property and other
institutions and services such as health services, housing, education, social
securities, national security, etc. develop so as to complement and meet the
needs of these families. If we are to understand any economic issue, the way in
which the given issue affects the family as a whole or a given member of it
must be evaluated carefully. For this is directly and indirectly the most
important reason for economic activity the good of the family. We cannot
forget that any task carried out for mainly selfish motives (i.e. individualistic)
still cannot be obtained without someone else serving that economic agent or
institution. In this case ``someone'' is being used. This utilitarian approach
eventually destroys the motivation to work and thus affects directly or
indirectly the family.
The disruption of the family has had serious and high social welfare costs
for societies, as we have seen occur in developed countries. Furthermore, the
size of such costs indicate that were this to happen in less developed countries,
this group of countries would not be able to afford them. It would instead
further hamper their efforts to develop. In addition, population control policies
such as those being implemented in developed countries do not contribute to
their real economic development. On the contrary, they contributes to the
deterioration of the family. The results therefore suggest by contrast, that when
family is considered as a fundamental good and defended, sound economic
policy is developed and real economic growth is possible. This is so because a
well functioning family is essential for economic activity.
It is important at the same time to keep in mind that macroeconomic policy
making (such as health care, taxes, minimum wage, population policies, etc.),
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although important because of the extent of its impact, is not the only aspect to
be considered in economic activity. Policies at state and local levels, such as
education programs, sanitation, property taxes, sale taxes, and at the private
corporation level, such as maternity leave, stock share, flexible hours, family
benefits, etc. are extremely important as well and often are more sensitive to
individual family decision making.
Notes
1. These numbers have been obtained from the Ecncm/ Recrl c/ lhe lres/denl c/ 1999 and
Hand/cc/ c/ lnlernal/cna/ Ecncm/ 5lal/sl/s c/ 1991 and 1998.
2. Wallerstein (1993) and Popenoe (1996) provide a review and analysis of this evidence.
3. See Putman (1995), Garasky (1995) and Grissmer el a/ (1994) for views on this matter.
4. Farley (1995) presents detailed data.
5. This realization varies from country to country however. Some countries such as
Australia, do not refer to marriage er se, but to the stability of couples in general, others
make clear the differentiation between marriage and other unions, supporting clearly the
first one. I am grateful to Wade Horn for bringing this point to my attention.
6. See Fukuyama (1999) for an analysis and review of the literature on this subject.
7. See Aaron and Mann (1995) for a review of this position and some empirical support.
8. For a description of the welfare reform measure see Black (1997).
9. Murray (1993) and Moffitt (1990) present interesting evidence.
10. Ehrenreich (1993), Friedan (1963) and Greer (1989) are some examples of this position.
11. It is interesting to notice that the very same Malthus had warned of this danger. In his
1824 essay he states: ``Moral restraint, in application to the present subject, may be defined
to be abstinence from marriage, either for a time or permanently, from prudential
considerations, with a strictly moral conduct towards sex in the interval. And this is the
only mode of keeping population on a level with the means of subsistence which is
perfectly consistent with virtue and happiness. All other checks, whether of the preventive
or the positive kind, though they greatly vary in degree, resolve themselves into some form
of vice or misery (p. 38)''.
12. For an example of this view see the early works of Becker (1991) and Lundberg and Pollak
(1996).
13. Alvarez (1996) points out five key areas that firms need to address to help women
overcome the tension between family and professional life. These are:
.
Maternity leaves and benefits.
.
Flexibility, which will allow to address varied family circumstances which often
contrast the rigidity of the corporate organization. Most corporate jobs are set in terms
of fixed schedules and place of work. A mother of a family often needs flexibility in
these two fronts.
.
Other family supports such as childcare, elderly assistance, moving expenses, direct or
indirect subsidies for housing, etc.
.
Alternative models to the linear professional career.
.
Mentoring in the area of professional development.
14. See Halcrow (1986) and Marler and Enz (1993) for more details on these initiatives.
15. After this report, a debate originated. As the original Coleman report noted, if researches
do not control for family background, then, when analyzing a data set in which children
from wealthier families attend schools with smaller class size and better-paid teachers, the
Family,
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245
results will find a positive correlation between student outcomes and school resources. But
this correlation might simply mean that students from better families are primed to do
better in school. Conversely, the extent to which students from poor families are more
likely to be assigned to remedial schools with higher resources per students supports the
result that, with greater school resources, reduced students outcomes will be found. A good
review of the first debate is contained in Hanushek (1986). Hedges, Line el a/ (1994),
Datcher-Loury (1988) and Card and Krueger (1996) present some reviews of the opposing
side of the discussion.
16. Fuerst and Petty (1996), US Department of Education (1994, 1996) and Grissmer el a/
(1994) are some studies dealing with these factors.
17. The data has been taken from 5/x Thcusand M////cn. ls l/me lc Ccnlr//ule, a UN Report
published with the Occasion of the 6 billion people mark to be celebrated on October 12,
1999 and the 1998 Human Dete/cmenl Recrl published by the United Nations Fund for
Population Activities (UNFPA).
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Alvarez, J.L. (1996), Emresa v V/da Iam///ar, Estudios y Ediciones IESE, Barcelona.
Alvira, R. (1987), ``Elementos Configuradores de la Familia'', in La Iam///a v e/ Iulurc de Eurca,
Fundacion Ferran Valls I Taberner, Barcelona.
Becker, G. (1968), ``Crime and punishment: an economic approach'', }curna/ c/ lc//l/a/ Ecncmv,
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Becker, G. (1991), Treal/se cn lhe Iam//v, Harvard University Press, Cambridge, MA.
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