this century the United States, as well as many other developed countries have
gradually moved from being mainly an "agricultural-based industrial
society" to an "information society", or "post-industrial
era society." The second part of
this century has 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 reevaluate and promote policies
that strengthen and support the family.
(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 social service
companies. 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, the production is globalized as
inexpensive information technology makes it increasingly easier to move
information across international borders.
Rapid 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, but the shift away
from an industrial era started more than a generation earlier. This shift started with the deindustrialization
of the Great Lakes in the United States and with comparable moves away from
manufacturing in other industrialized countries.
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 United States and over half of all children in Scandinavia
are born out of wedlock. 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. One can think as an example of the
importance of trust for economic activity, on the capital flight that less
developed countries experienced during the 1980s. Trust on these countries’ capacity 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 not
vaccinate their children and to avoid prenatal care needed for healthy
(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, like contraceptives distorted the
role of reproduction and the family in people=s
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
reevaluating 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 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 the economic activity?; and 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 few conclusions. II. A View of Family and Economic
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 principal of
action and a material substance. The
principal 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.
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
Furthermore, production and spending are
neither mere 'individual' things to do nor mere 'social' things, but there 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 an end in themselves, but an instrument to
provide the family 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 therefore he is the owner of
it. Thus, he has the right to keep and
enjoy it. This justification however,
is incomplete 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.
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 carried out usually 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.
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 on
profit and selfish individualism could be successful for a period of time, but
it will 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 the economic
agent will contribute the most to society, and vice versa when the family is
being promoted by the economy in which he works.
Becker, 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
knowledge, skills, values, and habits of their children." He goes on to say "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
far we have seen that family consumption needs give rise to economic activity,
and that the families affect 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, 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 Break Down of the Family: Divorce and Illegitimacy
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 its side effects: child re-habilitation, programs to deal with crime, drug
abuse, teenage pregnancy, special education, and aging populations. For example, in the United States, 1998
family assistance expenditures were 5 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. 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 US, Netherlands, Canada and other
developed countries. Since the 1970s
however, marriage rates have been falling rapidly while divorce rates have
soared. Approximately 50% of the
marriages contracted in 1980s in the U.S. 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 US, this
increase has been fourfold in the space of thirty years, and it is the same for
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 US climbed from 5% to 35% from 1940 to 1998. However, illegitimacy ratios vary
significantly by race and ethnicity. In
1998, the ratio for whites was 23.6%, and for African Americans 68.7%. Between 1994 and 1997 the proportion of
births to single mothers in the US 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 1000 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 United States, due to the high rate of cohabitation in
Europe. For example, between 45% and
90% of people between twenty and twenty five years are cohabiting in Northern
European countries, while at the same time the marriage rate it is very low
(about 3.6 per 1000 inhabitants.)
Comparably, in the U.S. 14% of the people between twenty and twenty-five are
cohabiting. The U.S. still stands out however, for the
number of children born to mothers living alone, or to teenagers.
Center for Health Statistics of the Countries Used.
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 United States 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.
Co-habitation is more unstable than 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
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.
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% of children born to married parents in the United States in
1990s, it is estimated that 45% will see their parent divorce by the time they
are eighteen. There is considerable scientific evidence
that the psychological damage done by voluntary breakup of the family is
greater than the involuntary breakup caused by death.
on all these facts, we can clearly conclude that the nuclear family has
weakened across the board over the past forty 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 in the economy as a whole, since the family is both
the source and transmitter of human capital and economic activity.Analyzing
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.
is a well-documented fact that there is a strong correlation between broken
families, poverty, crime, distrust, drug use, low educational performance, and
low human capital. Disagreements arise
over causalities. Empirical evidence,
however, suggest that the causality does not go from economics to the family
but vice versa. Today societies are much wealthier than in
previous decades and yet they are more unequal. 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. Figure 2 shows that in the U.S. married
women, 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 have yet to solve the social problems that the breakdown of
the family brings. These programs managed to shift parental
responsibilities to individual taxpayers, consumers, and the unemployed.
past year countries such as Great Britain, France and Germany have started to
actively seek solutions to the family instability prevalent in these
countries. In the Green Paper for
example, it is stated that “the government thinks that the defense 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% 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,
and empirical evidence supports this realization.
Sources: Research and Statistics on Children and
Annual Report 1997. Child Trends
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 were
wealthier nations have higher levels of family disruption than poorer countries
such as Portugal and Spain. 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 breakdown of the family
and high levels of crime tend to be the least wealthy members of society.
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-welfare level benefits and illegitimacy, which tend 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
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. Similarly, Alm et al (1999) show that the present tax structure in the U.S.
penalizes married couples more than cohabiting couples. The percentage of penalty to pre-tax income
is between 4.5% and 10.1% higher for the first group. Also the rising rate of crime is seen as the result of the
weakening of criminal sanctions that have also occurred over the past forty
years. 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, United States and other
developed countries. Yet, this last
group does not show the same 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. 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.
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. 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. A growing awareness has arisen of the
presence of women in the work place along with the consequences that this
presence has on the 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 for
children both below school-age, and 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.
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. Both facts tend to suggest that
contraceptives have 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.
In recent years, the rise of
females’ income has also been related to the breakdown of the family. 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. Fewer children mean less of what Becker
characterizes as joint capital in the marriage, and hence makes divorce more
likely. It is not clear however that working women
who divorce follow this rationale necessarily.
Perhaps it might apply to those cases where the parties enter marriage
for its pleasures. Another plausible
reason is the fact that the entering 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.
evidence links higher female earnings to both divorce and extramarital
childbearing. Figures 3 and 4 plot 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 females labor participation and low divorce rates. On the other extreme we find the United
States, Sweden, and the United Kingdom.
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% and 75% suffered a significant decline in their income. This is consistent with the povertization of
women in the last forty years, which was mentioned before and shown in figure
International Labor Organization
Sources: International Labor Organization
second graph shows an increase of female participation since the 1970s. The rate at which the increase participation
has taken place however, has leveled out since 1990. A recent study of the Families and Work Institute (1995) reports
that in the US, women 's income is becoming necessary for the sustenance of the
family. Women contribute at least 45%
of the family income of married parents.
The contribution is even higher in single parent households, mainly
headed by women, where their contribution is of 90% or more. The study also reports that only 15% of
all women would like to work full time was even if this was not necessary to
maintain the family, 33% would like to work part-time; and 31% 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
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 childcare support provided by employers have been
developed. 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.2.
Children and the importance of human Capital
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 movements of these functions outside the
family unit has had a deleterious effect seen most markedly when reproduction
was separated from marriage.
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 computers
games than their peers in other countries do. Faced with this reality, several studies
have sought causes and solutions to 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 U.S. 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.
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. Empirical evidence on the impact of school
resources on student outcomes continues to be ambiguous.
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 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. Blum (1997) has 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.
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 U.S. the breakup of the
family is primarily responsible for poor childcare. Almost 40% of children under three years old live with one
parent, more than 50% 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 folds for children living in
Childcare has shown to be a solution
with many risks, at least for the United States. A study of the National Institute of Child Health and Development
reported last year that 80% of children under one year, are habitually
supervised by an adult other than the mother for at least thirty 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% 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 the family were profitable for
business.” Johnson & Johnson
reported that for every dollar allocated to subsidize maternal leave or
childcare, it was earning $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 business. On the contrary, workers that try to attend to the needs of their
children often find their promotion is jeopardized.
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 it 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.
3. A side effect with great risks: An Aging
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 per lifetime) fell below replacement levels.
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 today in less developed
countries and to 70 in developed countries. 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% 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% 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% 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% in 1995, to an average of 85%-90% by the year 2050.
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 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 of 1.7 ‑ 1 in the EU and 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.
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 Birth Dearth, has observed that
"in the wealthiest age of history many youth 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.
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. 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% decline of their GDP and 13% 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.
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
healthcare 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.
of the solutions proposed include tax increases of different forms. Other solutions advanced include radical
reforms of the retirement benefit 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."
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% 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%, but this urbanization is
often not accompanied by the expansion of infrastructures needed, thus opening the
way to poor and ill-equipped living conditions.
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
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 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 predicted and 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.
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
more than facilitating economic development hampers it in several ways. It weakens 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. It also inverts the population pyramid
leading to an aging population problem and 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 significantly
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.
World Development Report, 1991,
1994, and 1998. The World Bank
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 US,
$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 debt. For example, US expenditures are seven times the debt of Brazil,
the largest debtor, and in 1996 it was 20% bigger than Brazil's GDP. 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 10 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. These numbers underlined why
it is very important for developing countries to protect its family and its
population. Their present economic
situation does not allow for the same mistakes that developed countries made
and now are trying to repair. If these
countries are to experience real economic growth, both their family and their
population ought to be protected from its breakdown and its implosion respectively.
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. Great Britain for example, in
the report entitled Supporting Families,
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 right and duties in marriage.
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 to parents to 19 years old or 20 if the dependent is a
student, and it expands credits and subsidies for family housing. Holland and the United States 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% coverage while Finland
and Sweden cover between 80 and 90%.
In summary, we can say that
industrialized economies have experience 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, these
group of countries would not be able to afford them. It would, instead further hamper their efforts to develop. In addition, population control policies as
those being implemented in developed countries do not contribute to their real
economic development but on the contrary, it 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.
is important at the same time, to keep in mind that macroeconomic policy making
(such as health care, taxes, minimum wage, population policies, etc.), 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, many times are more sensitive to
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(1991), p. 55.
. These numbers have been obtained from the Economic
Report of the President of 1999 and
Handbook of International Economic Statistics of 1991 and 1998.
Abstract of the United Sates (1998).
and Sanderfur (1994).
Department of Health and Human Services (1995).
and Sanderfur (1994).
. Wallerstein (1993) and Popenoe, (1996) provide a
review and analysis of this evidence.
. See Putman (1995), Garasky (1995),
and Grissmer et all (1994) for views
on this matter.
. Farley (1995) presents detailed
. This realization varies from country
to country however. Some countries such
as Australia, do not refer to marriage per see, 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.
. See Fukuyama (1999) for an analysis
and review of the literature on this subject.
. See Aaron and Mann (1994) for a
review of this position and some empirical support.
. Rosenzweig and Wolpin (1994).
. For a description of the welfare
reform measure see Black (1996).
. See Becker (1997).
. Murray (1993) and Moffitt (1990)
present interesting evidence.
. Ehrenreich(1993), Friedan (1963), and Green
(1989) are some examples of this position.
. U.S. Department of Health and Human
Services (1995), p.72.
. 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
. For an example of this view see the
early works of Becker and Lundberg and Pollak (1996).
. Becker and Landes (1977).
. 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: a. Maternity leaves and benefits. b.
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. c. Other
family supports such as childcare, elderly assistance, moving expenses,
direct or indirect subsidies for housing, etc.
d. Alternative models to the linear professional carrier and e. Mentoring
in the area of professional development.
. See Halcrow (1986) and Marler and Enz
(1993) for more details on these initiatives.
. Schwartz and Stevenson (1990).
. 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 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, Greenwald (1994),
Datcher-Loury (1988), and Card and Krueger (1992) present some reviews of the
opposing side of the discussion.
. Fuerst and Petty (1996), US
Department of Education (1994, 1996), and Grissmer et al (1994) are some studies dealing with these factors.
. The Economist, 1998.
 . The data has
been taken from 6 Tousand Million. Is time to Contribute, a UN Report
published with the Occasion of the 6 billion people mark to be celebrated on
October 12, 1999 and the 1998 Human
Development Report published by the United Nations Fund for Population
. Heller (1997), p. 15.