Family Matters:The Economics of the Family and Human

Capital in the United States

Heather BousheyCenter for American Progress, Washington, DC &

Institute for Public Policy Research, London

June 20th, 2013

“If the United States had in recent years closed the gap between its educational achievement levels and those of better-performing nations such as Finland and Korea, GDP in 2008 could have been $1.3 trillion to $2.3 trillion higher. This represents 9 to 16 percent of GDP.”

Source: (McKinsey & Company 2009, 5).

Today’s talk

1. What has happened to U.S. families in terms of income and hours of paid employment?

2. What we know from the literature about how these trends affect human capital for development of human capital?

3. What do this all mean for policymakers?

Bottom fifth Second fifth Middle fifth Fourth fifth Top fifth Top 5 percent-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2.5

2.2

2.4 2.4

2.2

1.9

-0.4

0.0

0.2

0.6

1.2

1.8

Annual Rate of Income Growth, by income quintile, 1948-2010 1947-1979 1979-2011

Income quintile

Ann

ual r

ate

of in

com

e gr

owth

Note: Data are for money incomeSource: Economic Policy Institute analysis of Current Population Survey Annual Social and Economic Supplement, Historical income Tables (Table F-3, F-2, F-5), 2013.

Bottom fifth Second fifth Middle fifth Fourth fifth 80th–<95th percentile Top 5 percent

-100

0

100

200

300

400

500

600

700

Change in annual hours of paid employment, married men and women, by income quintile, 1979 to 2010

Married women Married men

Annu

al h

ours

of p

aid

empl

oym

ent

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%Share of mothers who are breadwinners or co-breadwinners,

1967 to 2011

Co-breadwinner mothersBreadwinner mothers

Perc

enta

ge

1967 2011

22.5

41.0

15.9

11.6

Source: Author and Jeff Chapman's analysis of Miriam King, Steven Ruggles, J. Trent Alexander, Sarah Flood, Katie Genadek, Matthew B. Schroeder, Brandon Trampe, and Rebecca Vick. Integrated Public Use Microdata Series, Current Population Survey: Version 3.0. [Machine-readable database]. Min -neapolis: University of Minnesota, 2010.

27.5

63.5

Bottom fifth Second fifth Middle fifth Fourth fifth Top fifth Top 5 percent

-5.0-7.5

-10.7-7.8

-5.7

-0.3

12.4

17.2

23.3

19.2 18.1

12.2

0.4

-1.4-4.5

-1.2-4.1

-1.3

-10.9-14.1

-17.0 -16.1-14.6 -15.3

Percentage point change in employment status, mothers, 1979-2007

Nonworker Full-time, year round Part-time, year round Part of the year

Source: Authors' analysis of the Current Population Survey Annual Social and Economic Supplement microdata

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

1969

1968

1967

1966

1965

1964

1963

1962

1961

1960

1959

1958

1957

1956

1955

1954

1953

1952

1951

1950

1949

1948

1947

0

50

100

150

200

250

Cum

ulati

ve p

erce

nt c

hang

e si

nce

1949

Source: Author's analysis of data from the U.S. Census Bureau, Historical Income Tables, Table F7.

For couples with a working wife, income has grown by 83 percent since 1972, but stayed the same for those without a working wife

Growth in median income for married-couple families, by whether the wife works, 1947-2010

Wife in paid labor forceTrend in married-couple

income growth, 1947-1973

Wife not in paid labor force

Bottom fifth Second fifth Middle fifth Fourth fifth Top fifth Top 5 percent0

10

20

30

40

50

60

21.3

33.6

39.7

48.7

42.941.2

14.5

38.8

52.555.2

56.7

51.2

5.5

23.8

43.6

55.954.2

50.4

Married couples with children with both spouses working 35 hours/week or more, by income quintile 1979, 2007, and 2011

1979 2007 2011

Shar

e of

mar

ried

coup

les w

ith ch

ildre

n

Income quintile

Source: Authors' analysis of the Current Population Survey Annual Social and Economic Supplement microdata

Paid Family Leave Paid Sick Days Paid Vacation Paid Personal Leave Short-term Disability Insurance

4

21

38

11 13

5

32

51

18 1610

66

84

4135

12

74

90

4346

19

8589

56 57

21

8790

58 60

Share of U.S. workers with various forms of employer-provided workplace flexibility, by average wage, 2011

Lowest 10 percent Lowest 25 percent Second 25 percentThird 25 percent Highest 25 percent Highest 10 percent

Traditional flextime

Daily flextime

Control in scheduling hours

Time off for personal matters

Supervisors accommodate them for personal business

Some paid time off for personal illness

Parents allowed days off to care for sick child without losing pay or vacation

Allowed to work some regular paid hours at home

Decide when to take breaks

Full-time employees could work part-time in same position

33

12

36

62

89

39

24

4

33

54

45

26

35

63

93

79

54

11

57

34

Share of workers with access to flexible work arrangements, by low-wage and medium- and high-wage employees, 2002

Medium- and high-wage employees Low-wage employees

Source: James T. Bond and Ellen Gallinsky, "What Workplace Flexibility Is Available to Entry-Level, Hourly Employees?," (Families and WorkInstitute, 2006), available at http://familiesandwork.org/site/research/reports/brief3.pdf.

Delivering tomorrow’s human capital (i.e., child development)

1. Income matters for child development2. What happens before children enter school

matters—maybe even more than what happens later in life

3. Family matters – but what does this mean for economics?

1. Money matters• Achievement gap between high and low income groups is

30 to 40 percent larger for children born in 2001 than among those born twenty-five years earlier (Reardon 2011)

• $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run (Dahl, Gordon B. and Lochner, Lance 2012)

• College and mobility (Bailey and Dynarski 2012; Fox, Connolly, and Snyder)

• Money may mediate negative effects of employment, especially for low-income families

Low Income Middle Income High Income0

10

20

30

40

50

60

70

80

37

30

8

21

51

29

47

74

College Completion by Income Status and 8th Grade Test Scores, 2005

Low Score Middle Score High Score

Shar

e co

mpl

eting

colle

ge

Note: Low income is defined as the bottom 25%, middle income middle 50%, and high income is top 25%.Source: Mary Ann Fox, Brooke A. Connolly, and Thomas D. Snyder, "Youth Indicators 2005: Trends in the Well-Being of AmericanYouth," (Washington, DC: U.S. Department of Education, 2005); See also .Elise Gould, “High-scoring, low-income students no more likely to complete college than low-scoring, rich students,” The Economic Policy Institute Blog, March 9, 2012, available athttp://www.epi.org/blog/college-graduation-scores-income-levels/.

Lowest quartile 2nd quartile 3rd quartile Top quartile0

10

20

30

40

50

60

70

9

21

32

54

5

1417

36

Share of students completing college, by income quartile and birth year

1979 to 1982 birth cohorts 1961 to 1964 birth cohorts

Shar

e Co

mpl

eting

Col

lege

Income quartile

Source: Martha Bailey and Susan Dynarski, "Gains and Gaps: Changing Inequality in U.S. College Entry and Completion" (2012).

2. The pre-kindergarten years matter

• High/Scope Perry Preschool –123 African American children in pre-school in the late 1960s (Schweinhart et al. 2005)

• Project STAR – 11,571 kindergarten to third graders in Tennessee from 1985-89 (Chetty et al. 2011)

• Carolina Abecedarian Study – 112 “at-risk” children in 1972 (Masse and Barnett 2002)

“It may seem counterintuitive, but schools don’t seem to produce much of the disparity in test scores between high- and low-income students. We know this because children from rich and poor families score very differently on school readiness tests when they enter kindergarten, and this gap grows by less than 10 percent between kindergarten and high school. (Reardon 2013).

Source: Ramey & Ramey (2010). Estimates from time use surveys; means are for ages 25 to 34.

Source: Ramey & Ramey (2010). Estimates from time use surveys; means are for ages 25 to 34.

3. Family matters“The conventional wisdom espoused by most politicians, educated laypersons and even many academics places formal educational institutions in a central role as the main producers of the skills required by the modern economy. It neglects the crucial role of families and firms in fostering skill and the variety of abilities required to succeed in the modern economy. Popular discussions of skill formation almost always focus on expenditures in schools or on educational reforms and neglect important non-institutional sources of skill formation, which are equally important, if not more important, producers of the varieties of skills that are useful in a modern economy” (Heckman 1999, 2). [emphasis added]

“high quality early childhood interventions foster abilities and that inequality can be attacked at its source. Early interventions also boost the productivity of the economy.“ (Heckman 2008, 5)

“Large bodies of research have shown how poor health and nutrition inhibit child development and learning and, conversely, how high-quality early childhood and preschool education programs can enhance them. We understand the importance of early exposure to rich language on future cognitive development. We know that low-income students experience greater learning loss during the summer when their more privileged peers are enjoying travel and other enriching activities. Since they can’t take on poverty itself, education policy makers should try to provide poor students with the social support and experiences that middle-class students enjoy as a matter of course.”

-- Helen F. Ladd and Edward B. Fiske, New York Times, 2011