Business, Family, and Business, Family, and Human Capital:Human Capital:

Harvesting the Seeds of Harvesting the Seeds of Economic GrowthEconomic Growth

Dr. Maria Sophia AguirreDr. Maria Sophia AguirreDepartment of Business and EconomicsDepartment of Business and Economics

The Catholic University of AmericaThe Catholic University of America

Innovative Corporate Relations and CSR: Innovative Corporate Relations and CSR: Work-Family Balance and CompetitivenessWork-Family Balance and Competitiveness

San Salvador, El SalvadorSan Salvador, El SalvadorFebruary 1, 2007February 1, 2007

New Debate Regarding Economic DevelopmentNew Debate Regarding Economic Development Mainstream Economics searches effective paths of Mainstream Economics searches effective paths of

sustainable development: sustainable development:

Technical solutions are insufficient, need institutions. Technical solutions are insufficient, need institutions.

Necessary to develop/maintain these institutions.Necessary to develop/maintain these institutions.

A revaluation of aspects not included in conventional A revaluation of aspects not included in conventional economic analysis.economic analysis.

Emphasis placed on not confusing the means with the end.Emphasis placed on not confusing the means with the end.

Definition of ‘advances in society’: Definition of ‘advances in society’: o PProgress in key economic indicators.rogress in key economic indicators.o Progress in quality of life.Progress in quality of life.o Development in people’s potential.Development in people’s potential.

There is a positive correlation between human capital, infrastructure and economic growthhealthy institutions and economic developmenthealth and income per capita

These positive correlations reflect a causal link between human capital andhealthy institutions (social capital) infrastructure and technology

Life expectancy is a significant indicator of economic growth

We know from economic analysis that in economic development

How Does the Family Fit in the Economy?How Does the Family Fit in the Economy?Basic Basic

ActivitiesActivitiesMeans UsedMeans Used Role of the Role of the

FamilyFamilyPurposePurpose

ProductionProduction ResourcesResources Human Human CapitalCapital

Basic NeedsBasic Needs

ExchangeExchange MarketMarket Human, Human, Moral, Social Moral, Social

CapitalCapital

ProfitProfit

ConsumptionConsumption Optimization Optimization and and

DistributionDistribution

Appropriate Appropriate distributiondistribution

WellbeingWellbeing(welfare)(welfare)

Human CapitalHuman Capital ““To To improve theimprove the population profilepopulation profile of a country is an of a country is an

end in itselfend in itself.” .” (Amartya Sen)(Amartya Sen)

Improving human capital is a Improving human capital is a fundamental meansfundamental means of of achieving: achieving: Productivity Productivity Technological progressTechnological progress CompetitivenessCompetitiveness

Education and healthy familiesEducation and healthy families make a crucial make a crucial differencedifference in the lives of people: in the lives of people: How they function as individualsHow they function as individuals Individual productivityIndividual productivity Macroeconomic results of a countryMacroeconomic results of a country

• Lack of income and assets to attain basic Lack of income and assets to attain basic needs:needs:Human assetsHuman assetsNatural assetsNatural assetsPhysical assetsPhysical assetsFinancial assetsFinancial assetsSocial assetsSocial assetsAging securityAging security

• Vulnerability to adverse shocks is linked to an Vulnerability to adverse shocks is linked to an inability to cope with theminability to cope with them

In the developing world many families face In the developing world many families face serious health and poverty problems:serious health and poverty problems:

Environmental Health, Welfare and Living Conditions in Environmental Health, Welfare and Living Conditions in Low Income vs. Developed CountriesLow Income vs. Developed Countries

IndicatorIndicator % access% access

House Connection: waterHouse Connection: water 48 / 9948 / 99House Connection: sewerageHouse Connection: sewerage 46 / 9946 / 99House Connection: electricity House Connection: electricity 62 / 10062 / 100Water consumption (liter per person)Water consumption (liter per person) 30 / 60030 / 600Wastewater treatedWastewater treated 29 / 9729 / 97Solid waste disposal: landfill or incineratedSolid waste disposal: landfill or incinerated 31 / 7831 / 78Solid waste disposal: other (dump,recycled,etc.)Solid waste disposal: other (dump,recycled,etc.) 66 / 2266 / 22Paved RoadPaved Road 19 / 9419 / 94LiteracyLiteracy 49 / 10049 / 100Under-five mortality (per 1000)Under-five mortality (per 1000) 107 / 6107 / 6Public Expenditures on Health (%GDP)Public Expenditures on Health (%GDP) 1.3 / 6.21.3 / 6.2

Family and the EconomyFamily and the Economy The family plays an important role in the economyThe family plays an important role in the economy

Production of human, social, and moral capitalProduction of human, social, and moral capital Resources used, economic activity, and economic structuresResources used, economic activity, and economic structures

Economic and demographic changes regarding family Economic and demographic changes regarding family life and the allocation of time. life and the allocation of time. Decline in family sizeDecline in family size Increase of single parent familiesIncrease of single parent families Increased maternal employmentIncreased maternal employment Increase in childcare useIncrease in childcare use Decline in traditional family activitiesDecline in traditional family activities Decrease in the time spent together by parents and children Decrease in the time spent together by parents and children Increased concern for children’s skillsIncreased concern for children’s skills Nutritional good habits have declinedNutritional good habits have declined

Several elements of the economy degenerate if Several elements of the economy degenerate if they are not ordered towards the familythey are not ordered towards the family

What is the purpose of the economy if not to meet the family’s need to What is the purpose of the economy if not to meet the family’s need to obtain and obtain and to consumeto consume??

What is the What is the motivation to workmotivation to work without a family? without a family?

Where but in the family is the need to Where but in the family is the need to distribute the goods produceddistribute the goods produced in the in the economy mainly felt? economy mainly felt?

What What moderation moderation would exist in would exist in consumption and spendingconsumption and spending if there were no if there were no family?family?

What is an individual’s What is an individual’s motivation to save or invest beyond retirementmotivation to save or invest beyond retirement without without the family?the family?

What is the What is the role of governmentrole of government if not to meet the needs of the family? if not to meet the needs of the family?

Socioeconomic RelevanceSocioeconomic RelevanceStructure of the family affects:Structure of the family affects:The academic and social performanceThe academic and social performance of a child of a child

important for the important for the quality of human and social capitalquality of human and social capital

The The psychological stability and healthpsychological stability and health of a child of a child important for important for worker productivity and government financesworker productivity and government finances

Healthy families Healthy families decreases the risk of abuse, violence, or decreases the risk of abuse, violence, or neglect neglect in children in children

important for important for social capital and government financessocial capital and government finances

Married women have Married women have a a lower rate of depression, enjoy lower rate of depression, enjoy higher income and lower living costs, and have higher higher income and lower living costs, and have higher savings and wealthsavings and wealth

important for important for human and social capital and government human and social capital and government financesfinances

Percentage of Families that are in Poverty by Family Structure and Ethnicity, 2004

Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POVO2.

9

46.4

7.6

26.4 23.7

47.7

21.2

46

0

10

20

30

40

50

60

70

Married Single Married Single Married Single Married Single

White Asian and Pacific Black Hispanic

Percentage of Women who are in Poverty by Family Structure and Ethnicity, 2004

5.9

26

9.7

38.8

16.1

40

05

1015202530354045

Married Single Married Single Married Single

White Black Hispanic

Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POVO2.

Percentage of Children who are in Poverty by Family Structure and Ethnicity, 2004

8.9

41.9

12.6

49.2

20.7

51.9

0

10

20

30

40

50

60

Married Single Married Single Married Single

White Black Hispanic

Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POV13.

Percent of Children Under Percent of Children Under 18 Living with Married 18 Living with Married

ParentsParents Declined from 77 percent in Declined from 77 percent in

1980 to 67 percent in 2005.1980 to 67 percent in 2005.

Children under 18 in 2005:Children under 18 in 2005: 23 percent lived with 23 percent lived with only their only their

mothers mothers 5 percent lived with 5 percent lived with only their only their

fathersfathers 4 percent lived with 4 percent lived with neither of neither of

their parents.their parents.

50%55%60%65%70%75%80%

1980 1990 2000 2005

U.S. Department of HHS, 2005

If U.S. Family Structure Was as Strong If U.S. Family Structure Was as Strong Today as It Was in 1970, Each Year:Today as It Was in 1970, Each Year:

643,000643,000 fewer children would fewer children would fail a gradefail a grade at school at school 1,040,0001,040,000 fewer would be fewer would be suspendedsuspended from school from school 531,000531,000 fewer children would fewer children would need psychotherapyneed psychotherapy 453,000453,000 fewer children would be fewer children would be involved in violenceinvolved in violence 515,000515,000 fewer children would be fewer children would be cigarette smokerscigarette smokers 179,000179,000 fewer children would fewer children would consider suicideconsider suicide 71,00071,000 fewer children would fewer children would attempt suicideattempt 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

Divorce vs. Female Labor Force Participation

0

1

2

3

4

5

0 20 40 60 80

Labor Force Participation

Div

orce

United StatesUK Sweden

Japan

Australia

FranceNetherlands

Italy

Germany

Source: International Labor Organization.

Hours Worked by Men and Women Hours Worked by Men and Women Manufacturing and Commercial IndustriesManufacturing and Commercial Industries

0

10

20

30

40

50

60

Supervisors Workers Supervisors Workers

Manufacturing Commercial

Hou

rs P

er W

eek

MenWomenLabor Department, El Salvador

Hours Worked by Men and WomenHours Worked by Men and Women Manufacturing and Commercial IndustriesManufacturing and Commercial Industries

0

20000

40000

60000

80000

100000

120000

140000

Supervisors Workers Total Supervisors Workers Total

Manufacturing Commercial

Num

ber o

f Wor

kers

MenWomen

Labor Department, El Salvador

FAMILY REMITANCESFAMILY REMITANCES (Millions of Dollars)(Millions of Dollars)

Source: Central Bank of El Salvador, 2007.

Developed Countries Welfare Expenditures vs. Developing Countries Debt in 2003

Source: CIA World Handbook, 2005.

1700

867

561

433221

23570140

1634

0 500 1000 1500 2000

Millions of Dollars

US

Germany

France

UK

Brazil

Mexico

NigeriaWE FD

Empirical Evidence Clearly Indicates:Empirical Evidence Clearly Indicates: Healthy families are key for sustainable economic Healthy families are key for sustainable economic

growthgrowth

Children develop best within a functional family, i.e., Children develop best within a functional family, i.e., with a mother and a father in a stable marriagewith a mother and a father in a stable marriage

Men and women perform best within stable familiesMen and women perform best within stable families

Work structure affects the family structureWork structure affects the family structure

When the family is disrupted, the individual and social When the family is disrupted, the individual and social costs are immensecosts are immense

An example: family dining evidenceAn example: family dining evidence The family has a reciprocal relationship with the economic The family has a reciprocal relationship with the economic

environmentenvironment

The households allocation of time and consumption of The households allocation of time and consumption of goods indicates:goods indicates: The value parents place on the attainment of certain skills and the The value parents place on the attainment of certain skills and the

quality of consumptionquality of consumption The value placed on the context for learningThe value placed on the context for learning

How families allocate their time is in part a function ofHow families allocate their time is in part a function of what is possible and desired by the householdwhat is possible and desired by the household what is possible and desired given the economic environment in what is possible and desired given the economic environment in

which the household is locatedwhich the household is located

Family Relationships and Its Relation to Family Relationships and Its Relation to the Frequency of Family Diningthe Frequency of Family Dining

(% of Teens)(% of Teens)

Source: National Center on Addiction and Substance Abuse, Columbia University.

  

51 48

19

72 69

7

01020304050607080

Speak with Parents whenhave a Problem

Believe Parents BuildChildren's Character

Experience Tension atHome

Perc

enta

ge

0 to 25 to 7

40%40%

171%

Academic Performance and Its Relation Academic Performance and Its Relation to the Frequency of Family Diningto the Frequency of Family Dining

(% of Teens Obtaining Mostly A or B Grades in School)(% of Teens Obtaining Mostly A or B Grades in School)

4 5

6 2

0

1 0

2 0

3 0

4 0

5 0

6 0

7 0

0 t o 2 5 t o 7

Pe

rce

nta

ge

Source: National Center on Addiction and Substance Abuse, Columbia University.

38%

Substance Abuse and Its Relation to the Substance Abuse and Its Relation to the Frequency of Family DiningFrequency of Family Dining

(% of Teens Who Have Tried Abuse Substances)(% of Teens Who Have Tried Abuse Substances)

3 4

5 2

3 5

1 4

3 0

1 2 1 3

3 5

0

1 0

2 0

3 0

4 0

5 0

6 0

C i g a r e t t e s A l c o h o l M a r i j u a n a M o r e t h a nH a l f o f

F r i e n d s u s ed r u g s

Pe

rce

tag

e

0 t o 2 5 t o 7

Source:National Center on Addiction and Substance Abuse, Columbia University.

142%

73%

191% 169%

Quality of Family Dining and Its Quality of Family Dining and Its Relation to their FrequencyRelation to their Frequency

(% of Teens)(% of Teens)

45

3437

29

12 1416

5 7

05

101520253035404550

0 to 2 5 to 7 Overall

Perc

enta

ge o

f Tot

al S

ampl

e

TV Usually On Rushed Dinners Lack of Conversation

Source: National Center on Addiction and Substance Abuse, Columbia University.

1.3

2.5

3.1

Percentage of Children Whose Families Percentage of Children Whose Families have Family Dining by Family Structurehave Family Dining by Family Structure

(% of children)(% of children)

45

13

05

1015

202530

3540

4550

Married Single-Parent

Perc

etag

e of

Tot

al s

ampl

e

Source: Administration for Children and Families, Department of House and Human Services

3.5 timeshigher

To Summarize The frequency of family dining affects the

quality of social and human capital generated within the family Strengthens family relations Improves academic performance Helps prevent substance abuse

It is not enough for a family to eat together Quality and the family structure where the family

dinner takes place are important as well

Married couples eat more frequently together

Private SectorPrivate Sector Businesses need to respond to the need of Businesses need to respond to the need of

strengthening the family.strengthening the family.

Length of the workday as well as its structure requires Length of the workday as well as its structure requires immediate attention.immediate attention.

Some initiatives include:Some initiatives include: Systems of flexible working hours for men and womenSystems of flexible working hours for men and women Work sharingWork sharing Provision of facilities that allow parents, especially mothers, to Provision of facilities that allow parents, especially mothers, to

work from their home some days of the week.work from their home some days of the week. On-site day-care or other childcare support provided by On-site day-care or other childcare support provided by

employers employers Stopping of tenure clock due to maternityStopping of tenure clock due to maternity

How Government Policies Can Help:How Government Policies Can Help:Effective family-friendly policies have proven to Effective family-friendly policies have proven to be successful in producing economic growth while be successful in producing economic growth while efficiently using resources:efficiently using resources: Legislation that supports families over other types of living Legislation that supports families over other types of living

stylesstyles

Programs that support and promote healthy marriages and Programs that support and promote healthy marriages and stable familiesstable families

Allowance for flexible parental leaveAllowance for flexible parental leave

Promotion and protection of the family as a means to Promotion and protection of the family as a means to eradicate povertyeradicate poverty

Programs directed towards fostering functional societies Programs directed towards fostering functional societies

Eradication of corruption in governmentEradication of corruption in government

There is a need to address the working structure in There is a need to address the working structure in terms of the natural familyterms of the natural family Many times, this Many times, this generates long-term profits rather than generates long-term profits rather than

short-termshort-term The family is a The family is a necessary goodnecessary good for real economic for real economic

development:development: It should be adamantly promoted and protected by It should be adamantly promoted and protected by

businesses and the private sectorbusinesses and the private sector The The breakdown of the family damagesbreakdown of the family damages the economy the economy

and societyand society human and social capital is reduced and social costs human and social capital is reduced and social costs

increasedincreased

ConclusionsConclusions

Frequent family dining positively affects nutrition Frequent family dining positively affects nutrition and economic activityand economic activity Efficiency of distribution and consumption of food.Efficiency of distribution and consumption of food.

The frequency of family dining is higher in stable The frequency of family dining is higher in stable families, i.e., within marriage.families, i.e., within marriage.

Not enough to seek the implementation of remedial polices, Not enough to seek the implementation of remedial polices, i.e. attend dysfunctional situations. i.e. attend dysfunctional situations.

Frequency of family dinners needs to be facilitated through Frequency of family dinners needs to be facilitated through family-friendly policies in all sectors of society.family-friendly policies in all sectors of society.