Business, Family, and Human Capital: Harvesting the Seeds of Economic Growth

1. 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 Innovative Corporate Relations and CSR: Work-Family Balance and Competitiveness San Salvador, El Salvador February 1, 2007

2. New Debate Regarding Economic Development • Mainstream Economics searches effective paths of sustainable development: • Technical solutions are insufficient, need institutions. • Necessary to develop/maintain these institutions. • A revaluation of aspects not included in conventional economic analysis. • Emphasis placed on not confusing the means with the end. • Definition of ‘advances in society’: • Progress in key economic indicators. • Progress in quality of life. • Development in people’s potential.

3. We know from economic analysis that in economic development • There is a positive correlation between • human capital, infrastructure and economic growth • healthy institutions and economic development • health and income per capita • These positive correlations reflect a causal link between human capital and • healthy institutions (social capital) • infrastructure and technology • Life expectancy is a significant indicator of economic growth

4. How Does the Family Fit in the Economy?

5. Human Capital • “To improve thepopulation profile of a country is an end in itself.” (Amartya Sen) • Improving human capital is a fundamental means of achieving: • Productivity • Technological progress • Competitiveness • Education and healthy familiesmake a crucial difference in the lives of people: • How they function as individuals • Individual productivity • Macroeconomic results of a country

6. In the developing world many families face serious health and poverty problems: • Lack of income and assets to attain basic needs: • Human assets • Natural assets • Physical assets • Financial assets • Social assets • Aging security • Vulnerability to adverse shocks is linked to an inability to cope with them

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

8. Family and the Economy • The family plays an important role in the economy • Production of human, social, and moral capital • Resources used, economic activity, and economic structures • Economic and demographic changes regarding family life and the allocation of time. • Decline in family size • Increase of single parent families • Increased maternal employment • Increase in childcare use • Decline in traditional family activities • Decrease in the time spent together by parents and children • Increased concern for children’s skills • Nutritional good habits have declined

9. Several elements of the economy degenerate if they are not ordered towards the family • What is the purpose of the economy if not to meet the family’s need to obtain and to consume? • What is the motivation to work without a family? • Where but in the family is the need to distribute the goods produced in the economy mainly felt? • What moderation would exist in consumption and spending if there were no family? • What is an individual’s motivation to save or invest beyond retirement without the family? • What is the role of government if not to meet the needs of the family?

10. Socioeconomic Relevance Structure of the family affects: • The academic and social performance of a child • important for the quality of human and social capital • The psychological stability and health of a child • important for worker productivity and government finances • Healthy families decreases the risk of abuse, violence, or neglect in children • important for social capital and government finances • Married women have a lower rate of depression, enjoy higher income and lower living costs, and have higher savings and wealth • important for human and social capital and government finances

11. 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.

12. Percentage of Women who 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.

13. Percentage of Children who are in Poverty by Family Structure and Ethnicity, 2004 Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POV13.

14. Percent of Children Under 18 Living with Married Parents • Declined from 77 percent in 1980 to 67 percent in 2005. • Children under 18 in 2005: • 23 percent lived with only their mothers • 5 percent lived with only their fathers • 4 percent lived with neither of their parents. U.S. Department of HHS, 2005

15. If U.S. Family Structure Was as Strong Today as It Was in 1970, Each Year: • 643,000 fewer children would fail a grade at school • 1,040,000 fewer would be suspended from school • 531,000 fewer children would need psychotherapy • 453,000 fewer children would be involved in violence • 515,000 fewer children would be cigarette smokers • 179,000 fewer children would consider suicide • 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

16. Divorce vs. Female Labor Force Participation United States Australia Sweden UK Netherlands Germany France Italy Japan Source: International Labor Organization.

17. Hours Worked by Men and Women Manufacturing and Commercial Industries Labor Department, El Salvador

18. Hours Worked by Men and WomenManufacturing and Commercial Industries Labor Department, El Salvador

19. FAMILY REMITANCES(Millions of Dollars) Source: Central Bank of El Salvador, 2007.

20. Developed Countries Welfare Expenditures vs. Developing Countries Debt in 2003 Source: CIA World Handbook, 2005.

21. Empirical Evidence Clearly Indicates: • Healthy families are key for sustainable economic growth • Children develop best within a functional family, i.e., with a mother and a father in a stable marriage • Men and women perform best within stable families • Work structure affects the family structure • When the family is disrupted, the individual and social costs are immense

22. An example: family dining evidence • The family has a reciprocal relationship with the economic environment • The households allocation of time and consumption of goods indicates: • The value parents place on the attainment of certain skills and the quality of consumption • The value placed on the context for learning • How families allocate their time is in part a function of • what is possible and desired by the household • what is possible and desired given the economic environment in which the household is located

23. Family Relationships and Its Relation to the Frequency of Family Dining(% of Teens) 40% 40% 171% Source: National Center on Addiction and Substance Abuse, Columbia University.

24. Academic Performance and Its Relation to the Frequency of Family Dining(% of Teens Obtaining Mostly A or B Grades in School) 38% Source: National Center on Addiction and Substance Abuse, Columbia University.

25. Substance Abuse and Its Relation to the Frequency of Family Dining(% of Teens Who Have Tried Abuse Substances) 73% 142% 191% 169% Source:National Center on Addiction and Substance Abuse, Columbia University.

26. Quality of Family Dining and Its Relation to their Frequency(% of Teens) 1.3 2.5 3.1 Source: National Center on Addiction and Substance Abuse, Columbia University.

27. Percentage of Children Whose Families have Family Dining by Family Structure(% of children) 3.5 times higher Source: Administration for Children and Families, Department of House and Human Services

28. 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

29. Private Sector • Businesses need to respond to the need of strengthening the family. • Length of the workday as well as its structure requires immediate attention. • Some initiatives include: • Systems of flexible working hours for men and women • Work sharing • Provision of facilities that allow parents, especially mothers, to work from their home some days of the week. • On-site day-care or other childcare support provided by employers • Stopping of tenure clock due to maternity

30. How Government Policies Can Help: Effective family-friendly policies have proven to be successful in producing economic growth while efficiently using resources: • Legislation that supports families over other types of living styles • Programs that support and promote healthy marriages and stable families • Allowance for flexible parental leave • Promotion and protection of the family as a means to eradicate poverty • Programs directed towards fostering functional societies • Eradication of corruption in government

31. Conclusions • There is a need to address the working structure in terms of the natural family • Many times, this generates long-term profits rather than short-term • The family is a necessary good for real economic development: • It should be adamantly promoted and protected by businesses and the private sector • The breakdown of the family damagesthe economy and society • human and social capital is reduced and social costs increased

32. Frequent family dining positively affects nutrition and economic activity • Efficiency of distribution and consumption of food. • The frequency of family dining is higher in stable families, i.e., within marriage. • Not enough to seek the implementation of remedial polices, i.e. attend dysfunctional situations. • Frequency of family dinners needs to be facilitated through family-friendly policies in all sectors of society.