Business, Family, and Human Capital: Harvesting the Seeds of Economic Growth Dr. Maria Sophia Aguirre Department of Business and Economics The Catholic University of America Women of Vision Chicago, November 5, 2007
New Debate Regarding Economic Development Ø Mainstream Economics searches effective paths of sustainable development: ü Technical solutions are insufficient, need institutions. ü Necessary to develop/maintain these institutions. Ø A revaluation of aspects not included in conventional economic analysis. ü Emphasis placed on not confusing the means with the end. ü Definition of advances in society : o Progress in key economic indicators. o Progress in quality of life. o Development in people s potential.
We know from economic analysis that in Ø There is a positive correlation between ü human capital, infrastructure and economic growth economic development ü healthy institutions and economic development ü health and income per capita Ø These positive correlations reflect a causal link between human capital and ü healthy institutions (social capital) ü infrastructure and technology Ø Life expectancy is a significant indicator of economic growth
How Does the Family Fit in the Economy? Basic Activities Means Used Role of the Family Production Resources Human Capital Purpose Basic Needs Exchange Market Human, Moral, Social Capital Profit Consumption Optimization and Distribution Appropriate distribution Wellbeing (welfare)
Human Capital Ø To improve the population profile of a country is an end in itself. (Amartya Sen) Ø Improving human capital is a fundamental means of achieving: ü Productivity ü Technological progress ü Competitiveness Ø Education and healthy families make a crucial difference in the lives of people: ü How they function as individuals ü Individual productivity ü Macroeconomic results of a country
Social Capital Ø Is the economic potential embodied in social organizations and the norms of trust and reciprocity that animate them. Ø The self organization of civil society is a necessary element of successful economic development, complementing the roles played by the state and the market. Ø By their very essence, people, families, and groups constitute social and cultural capital. They transmit: ü attitudes toward cooperation ü values and traditions ü perceptions of reality that define their identity.
Family and the Economy Ø The family plays an important role in the economy ü Production of human, social, and moral capital ü Resources used, economic activity, and economic structures Ø Economic and demographic changes regarding family life and the allocation of time. ü Decline in family size ü Increase of single parent families ü Increased maternal employment ü Increase in childcare use ü Decline in traditional family activities ü Decrease in the time spent together by parents and children ü Increased concern for children s skills ü Nutritional good habits have declined
Socioeconomic Relevance Structure of the family affects: Ø The academic and social performance of a child ü important for the quality of human and social capital Ø The psychological stability and health of a child ü important for worker productivity and government finances Ø Healthy families decreases the risk of abuse, violence, or neglect in children ü important for social capital and government finances Ø Married women have a lower rate of depression, enjoy higher income and lower living costs, and have higher savings and wealth ü important for human and social capital and government finances
The breakdown of the family is a symptom of a sick and weak society ü Child abuse is 15 times more likely to occur. ü Men 3 times more likely to abuse their own wives and children. ü Children who witness violence suffer an array of emotional and behavioral disturbances. ü Abuse of women is 25 times more likely to occur ü Rates of substance abuse and teen-age pregnancy are higher. ü Women and children have a higher probability of living in poverty.
Percentage of Families that are in Poverty by Family Structure and Ethnicity, 2004 70 60 50 46.4 47.7 46 40 30 20 10 9 7.6 26.4 23.7 21.2 0 Married Single Married Single Married Single Married Single White Asian and Pacific Black Hispanic Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POVO2.
Percent of related children ages 0-17 living in poverty by family structure (1980-2004) Source: US Census Bureau, Current Population Survey, 1981-2005 Annual Social and Economic Supplements
If U.S. Family Structure Was as Strong Today as It Was in 1970, Each Year: ü 643,000 fewer children would fail a grade at school ü 1,040,000 fewer would be suspended from school ü 531,000 fewer children would need psychotherapy ü 453,000 fewer children would be involved in violence ü 515,000 fewer children would be cigarette smokers ü 179,000 fewer children would consider suicide ü 71,000 fewer children would attempt suicide Source: Paul R. Amato, The Impact of Family Formation Change on the Cognitive, Social, and Emotional Well-Being of the Next Generation, The Future of Children, Fall 2005
U.S. Facts on Working Women Ø Women owned 8.5 million small businesses in the United States, employed more than 23.8 million people and generated receipts of $3.1 trillion in sales. Ø Among people ages 27-33 who have never had a child, women s earnings approach 98 percent of men s earnings. (National Longitudinal Survey of Youth ) Ø Women s earnings are growing faster than of men. Ø The number of corporate boards with women rose from 11% in 1973 to 53% in 1998.
U.S. Facts on Working Women Ø Housework time ranges from 20-30 hours in addition to a full time job. ü Creates problems with child supervision in the home ü Creates problems with the retention rates of valuable women in the work force Ø There is a link between female earnings, divorce, and long hours of work Ø Women contribute at least 45% of the family income Ø 15% of women would like to work full time. 33% would work part-time, and 31 % would prefer not to work outside their home
Global Facts on Working Women Ø In the global economy, women account for 60 percent of the world s 550 million working poor even though they make up 40 percent of the world s workforce. Ø The majority of women work ü 68 million women work in the civilian labor force ü 63% of women work ü 54% of women work full time Ø Women's incomes are necessary to support families ü 62% of working women earn half or more of their family's income ü 77% of all mothers with school age children (6-17) work ü 51% percent of women who gave birth to their first child returned to work within four months. Source: http://www.womenemployed.org
Divorce vs. Female Labor Force Participation 5 Divorce 4 3 2 Australia Netherlands Germany United States UK Sweden France 1 0 Japan Italy 0 20 40 60 80 Labor Force Participation Source: International Labor Organization.
Empirical Evidence Clearly Indicates: Ø Healthy families are key for sustainable economic growth Ø Children develop best within a functional family, i.e., with a mother and a father in a stable marriage Ø Men and women perform best within stable families Ø Work structure affects the family structure Ø When the family is disrupted, the individual and social costs are immense
An example: family dining evidence Ø The family has a reciprocal relationship with the economic environment Ø The households allocation of goods indicates: time and consumption of ü The value parents place on the attainment of certain skills and the quality of consumption ü The value placed on the context for learning Ø How families allocate their time is in part a function of ü what is possible and desired by the household ü what is possible and desired given the economic environment in which the household is located
Family Relationships and Its Relation to the Frequency of Family Dining (% of Teens) 80 70 72 69 0 to 2 Percentage 60 50 40 30 20 10 0 51 40% 48 40% 171% 5 to 7 19 7 Speak with Parents when have a Problem Believe Parents Build Children's Character Experience Tension at Home Source: National Center on Addiction and Substance Abuse, Columbia University.
Academic Performance and Its Relation to the Frequency of Family Dining Percentage 70 60 50 40 30 20 10 0 (% of Teens Obtaining Mostly A or B Grades in School) 45 38% 62 0 to 2 5 to 7 Source: National Center on Addiction and Substance Abuse, Columbia University.
Substance Abuse and Its Relation to the Frequency of Family Dining (% of Teens Who Have Tried Abuse Substances) Percetage 60 50 40 30 20 10 0 34 142% 14 52 73% 30 35 35 191% 169% 12 13 Cigarettes Alcohol Marijuana More than Half of Friends use 0 to 2 5 to 7 drugs Source:National Center on Addiction and Substance Abuse, Columbia University.
Quality of Family Dining and Its Relation to their Frequency (% of Teens) Percentage of Total Sample 50 45 40 35 30 25 20 15 10 5 0 45 29 16 1.3 2.5 3.1 34 12 5 37 14 7 0 to 2 5 to 7 Overall TV Usually On Rushed Dinners Lack of Conversation Source: National Center on Addiction and Substance Abuse, Columbia University.
Percentage of Children Whose Families have Family Dining by Family Structure (% of children) 50 45 Percetage of Total sample 40 35 30 25 20 15 10 5 45 3.5 times higher 13 0 Married Single-Parent Source: Administration for Children and Families, Department of House and Human Services
To Summarize Ø The frequency of family dining affects the quality of social and human capital generated within the family ü Strengthens family relations ü Improves academic performance ü Helps prevent substance abuse ü It is not enough for a family to eat together ü Quality and the family structure where the family dinner takes place are important as well ü Married couples eat more frequently together
Private Sector Ø Businesses need to respond to the need of strengthening the family. Ø Length of the workday as well as its structure requires immediate attention. Ø Some initiatives include: ü Systems of flexible working hours for men and women ü Work sharing ü Provision of facilities that allow parents, especially mothers, to work from their home some days of the week. ü On-site day-care or other childcare support provided by employers ü Stopping of tenure clock due to maternity
How Government Policies Can Help: Effective family-friendly policies have proven to be successful in producing economic growth while efficiently using resources: ü Legislation that supports families over other types of living styles ü Programs that support and promote healthy marriages and stable families ü Allowance for flexible parental leave ü Promotion and protection of the family as a means to eradicate poverty ü Programs directed towards fostering functional societies ü Eradication of corruption in government
Conclusions Ø There is a need to address the working structure in terms of the natural family ü Many times, this generates long-term profits rather than short-term Ø The family is a necessary good for real economic development: ü It should be adamantly promoted and protected by businesses and the private sector Ø The breakdown of the family damages the economy and society ü human and social capital is reduced and social costs increased
Ø Frequent family dining positively affects nutrition and economic activity ü Efficiency of distribution and consumption of food. Ø The frequency of family dining is higher in stable families, i.e., within marriage. ü Not enough to seek the implementation of remedial polices, i.e. attend dysfunctional situations. ü Frequency of family dinners needs to be facilitated through family-friendly policies in all sectors of society.