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Transitions and Transformations of the American Family
From: University of Michigan
| By:
Frank P. Stafford |
EDITOR'S INTRODUCTION |
How have socioeconomic factors affected the American family, over time and through multiple generations? In this interview, Frank P. Stafford, economist and associate director of the Institute for Social Research (ISR) at the University of Michigan, recounts the changes in American family culture and behavior--such as in wealth accumulation, homeownership, dual-careers and divorce--documented by the survey research of the ISR, from the 1940s to the present day.
The Institute for Social Research is the nation's longest-standing laboratory for multidisciplinary research in the social sciences. Among its many unique long-term surveys, the Panel Study of Income Dynamics (PSID) provides multi-generational data on US individuals (men, women and children) and the family units in which they reside. |
Fathom: What relationship is there between family wealth and family health? |
Stafford: What we found that is most surprising from the PSID study and the Health and Retirement Study, which follows older people as they approach and enter retirement, is that both show that the relationship between the health of the family members and their wealth is extremely strong. |
 At one extreme, if you have both husband and wife at age 60 in good health, then they were much more likely to have a combined net worth above $500,000. At the other extreme, if you have both husband and wife in this same age group who are in poor health, they are more likely to have little or no assets. This doesn't mean there are not very rich people at this age in poor health or vice versa, but it does show that there is a tremendously strong relationship between wealth and health. |
How does this come about? We can think of many avenues. If you have poor health as a younger career person, it may affect your earnings and you might not be able to save as much. Or if you have poor income you may not be able to afford good health care. Or maybe there is even a bigger picture to examine; that is, maybe those who are planful and who are looking to protect their health as adults are also looking ahead to their retirement. They would have made plans to go to college or to have a career, so we might think of a planfulness dimension to people's lives that allows them to plan for schooling, plan for retirement, take steps looking ahead so that they have good health over a much larger part of their life course. |
Fathom: Do fluctuations in income levels affect family health? |
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| Frank Stafford talks about the link between income fluctuation and health. | |
Stafford: Looking at income variability and income transitions from good years and bad years, you can mark some trends. Taking two families who earn between $30,000-$50,000 annually, the variability of income of these families will also predict mortality, i.e., the greater a family's income variability, the greater the incident of mortality within the family. Overall, however, families that are persistently at the lowest income levels are much more likely to experience mortality. |
Fathom: Much of the Institute for Social Research's findings come out of data compiled on families that have been followed through several generations. What patterns of stability or indicators of change emerged from this type of generational research? Are families more or less economically stable--or mobile--than in years past? |
Stafford: Concerning the issue of economic mobility, one interesting difference is that if you look at a 5- or 10-year segment of a family's income history, you'll see a lot of mobility upward or downward. However if you take those same families, we've been able to also show that there are stronger generational patterns in the area of earnings, occupation, and also, interestingly, in some health domains. |
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| Stafford discusses the recent trend toward obesity. | |
For example, recently we've been looking at the issue of obesity and which family members have problems with overeating. Our data show that there has been a drift toward heavier and heavier Americans. As of 1986, the percent of adults defined as obese was 12 percent and this had risen to 22 percent in 1999. It can't be explained by the fact that there are more baby-boomers over 50, and that they have gotten a little heavier. However, in this generational context, what we have been able to show is that there is a strong correlation between overweight mothers and their mothers also being overweight. Even more interestingly, we've been able to establish, looking at a special sample of children under age 12 and at their body mass index (BMI)--their weight and height ratio--not too surprisingly, that mothers who are overweight are more likely to have children who are overweight. Following this generational theme, then, the grandmothers of overweight children tend also to be overweight. The correlation between the grandmother and grandchild's weight raises lots of intriguing questions that haven't yet been studied. Is it the case that the overweight grandmothers are sedentary in their jobs and lifestyles? Or is it a family tradition not to be too physically active (e.g., working desk jobs, lack of exercise) and does that carry over into the lifestyles of the children. We haven't really explored the causation of how this might come about, but there is certainly a pattern and it is stronger than I would have expected. |
Fathom: What has been the relationship between adult children and parents? Has there been a trend of many adult children moving back in with their parents? If so, is there an economic pattern that forces this? |
Stafford: There has been a pattern we've seen in our study that follows children as they leave and form their own homes. During the 1980s, when the job market for less-skilled workers was not as good, leaving home was almost ambiguous, e.g., leaving home today but coming back tomorrow. Our study confirms that there were higher incidences of young adults moving back in with their parents. We haven't looked at the very recent patterns, but certainly the ability of young, in particular less-educated, children to leave their parents' homes and to be self-sufficient and living above the poverty line was slowed in the 1980s. |
This happened as part of a larger context of a changing job market--the basic shift toward technology jobs--which is clearly confirmed by our study. Much economic growth from the 1970s onward has not come from traditional sources but from information technology, which is much more elusive for economists to quantify. But we do see it taking place, and we see growth dividends, both for adult female and male workers, that look like they are not connected to their schooling, especially in the 1990s. When we look closely at the detailed occupations and industries these individuals are in, these are the occupations and industries in which the US Department of Commerce has identified as being most connected to information technology. So we have quite convincing initial evidence about the important role of technology in creating a non-traditional growth period in the 1990s. I say non-traditional in two senses: first that this growth does not arise out of more schooling and more physical capital, but out of the more elusive informational capital; and secondly, very interestingly, that it has benefited women to a very large extent. |
Fathom: Has your research found that more families are purchasing homes as opposed to renting? |
Stafford: I think the percent of families who own their own home or condominium is running at 66 percent (which is also mirrored in the 2000 census data). One of the things we are going to be looking more closely at--just as with holding stocks and bank accounts--is intergenerational matters. For example, if you grew up in a rural area and your parents owned a home and you moved to the city, does that encourage you to want to own a home? |
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| Stafford discusses homeownership and patterns of stability. | |
There is also a very strong correlation between home ownership and being a good financial manager in other ways. If you are a renter and you are going to turn over a rent check to a landlord, life is a lot less complicated than having to keep track of mortgage payments and deduct the interest. Putting yourself into home ownership status means that in some sense you become a financial manager. Maybe the same skills in financial management of the home are the ones that allow people to do much better in the stock market. It is like the health/wealth connection. Here is a strong pattern: people in good health have more wealth. People who are homeowners have more wealth. It is too strong to say that this is just correlated with income, because there are people with high income who do not own a home and do not have wealth accumulation. So there is an interesting question about whether home ownership is a context in which people learn how to manage finances, maybe even early in their lives. |
Another fascinating aspect of home ownership is that it is a key part of monetary policy in the United States. For homeowners, we know that when interest rates fall, people refinance their mortgages. Our data show tremendous refinancing activity in the mid-1990s when the Federal Reserve was getting us out of the Gulf War recession with a series of lower interest rates. Almost a third of mortgage holders refinanced in the early 1990s with the majority of the activity in 1999 and 1994. And many refinanced to precariously high levels of mortgage debt relative to the home value. Beyond that, we've been able to show how refinancing works. |
There are basically two groups of refinancers: grasshoppers and ants. The ants are people who say they are going to exercise a financial option, such as to liquidate a mortgage and refinance at a lower rate. These are the financial planners who are trying to make some money. The grasshoppers would have liked to have borrowed earlier and may not have had much equity in their house, and they might jump into a 90-100 percent equity loan (e.g., their house is worth $100,000 and so they get a mortgage for $100,000). These are the people who are responding, creating a stimulus (e.g., buying a car, going on vacation), which in turn stimulates the economy. However, what happens is that they are then in a financially precarious position. If any further recession comes along, and the house value drops to $80,000, they will still have a $100,000 mortgage. The bank will not be happy, the owners will not be happy, and they certainly will be really constrained from spending. |
Fathom: Are separations and divorces on the rise, and if so how has this affected wealth stability especially in dual-career families? |
Stafford: We have seen strong change in the career aspirations of women. Ever since the mid-1970s, we have seen an upward occupational migration of women to better jobs, better earnings, and into more highly paid industries and occupation. This shift has created autonomy for these women, and one of the results is that the family is more likely to break apart if you have a dual-career couple and the careers go in different directions. The couple is certainly now more able to live financially separate from one another. There is some evidence to suggest that the career path and success of adults allows them to separate if things don't work out in the marriage. |
At the lower end of the economic scale, there has been skills-biased technology that has made the job prospects of lower-income adults poor, and this has meant that the resources to support a family have also not been available. You have marriages dissolving in part because the adults cannot support the family, which creates stress and pressure, for which they blame each other, leaving the children in very difficult circumstances in many times. The feedback between technology, the family, and the job market is enormously complex. |
We have done work in our studies on the extent to which financial autonomy of the spouse offers bargaining power within the family, and our evidence supports that. If the wife has a good job, she is more likely to have a say in many aspects of family life, including finances and how income is spent. It is also the case that women with good pensions and other measures of financial independence are likely to have more bargaining power in the family and are also more likely to go on their own if the marriage has troubles. In those cases, as opposed to low-income divorces, children are often in far-better shape than when there are no resources that are driving the dissolution. |
Fathom: Has divorce become more socially acceptable? |
Stafford: There certainly has been a shift, and it is not a result of having more women in certain age-ranges where there is more divorce; rather, there is a wider social phenomenon of acceptability of family separations. |
We see this in other areas where social belief and values are changing economic behavior. We did some work on bankruptcy and discovered that if you go back to the 1980s when bankruptcy had a greater stigma attached to it, adults were much less likely then to go bankrupt than they were in the 1990s. We are able to show that, when presented with a given real-dollar gain from bankruptcy as in the 1990s, people were more likely to file for bankruptcy, resulting in a greater acceptability of bankruptcy. To tie this with divorce, one common thread is that once enough of a certain event takes place--either divorce or bankruptcy--then it creates acceptability. Once there are more divorces, more unmarried people are available and this creates what social scientists call a "marriage market." This in turn creates a willingness to divorce. On the practical side, this means there are more single people to meet, and certainly we see the social acceptability of divorce increasing. |
Fathom: With both parents working, how do children adapt to their parent's schedules? |
Stafford: Social scientists use measures called time diaries that give accurate indications of what people have been doing with their time. This turns out to be very important. If you ask people how much time they spend taking care of their children, they will tell you that they spend many hours doing so, since this is obviously a socially desirable activity. In contrast, if you ask parents what they were doing starting at midnight, going through a non-directed chronology of the most recent 24-hour day, and then quote episodes of childcare--if you use that statistical method--you will find much less childcare than in self reports. The respondent reports of childcare are shown to be on average three times as great as those measured from time diaries. |
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| Stafford explains the family time-squeeze. | |
One of the main findings regarding time use is that from the 1950s through the 1980s, in the US and many other industrialized countries, there has been a drift toward more free time. Though we think we are more stressed today, the fact is that typical work hours by men have fallen from the 1950s and 1960s. But as we noted, women spend more time in the job market and the number of two-income families has increased. This creates a "time-squeeze"--a situation where market work, housework and childcare combine to leave little for free time and rest--which we have actually observed in the United States as early as the 1970s and more recently. Where both adults in a family have a career, you can't expect one to leave the labor market for 10 years and then reappear as a surgeon. You have to stay with your career, and this creates the time squeeze. |
What we have been able to observe through these time diary studies is that people literally sleep less. Dual-career couples with children, particularly mothers, have less free time to watch TV, for example, and sleep less. The time squeeze also carries over to create stress for the children. |
The other side of this is that the care of children has shifted to institutions outside the family: high and low quality day care. There is an interesting question here about how effective these out-of-home institutions are as caregivers, and at what ages and what circumstances are they effective. This is a large research area, but all we know from the evidence to date suggests that there are good ones and that there are poor ones. Out-of-home care, given this time-squeeze context for parents, can be very effective; if it is done well, the child will do well. Effective parents know how to use these out-of-home settings. There are limits. The out-of-home setting will not provide the family warmth that will be very important to the child's stability and development. It is a tricky balance. |
The time squeeze has also shaped a lot of school activities. In addition to the increasing popularity of preschool, school systems are responding with after-hours school activities with sports and clubs. The school hours are longer, so children spend more time in school, which we also know about through a very intensive time diary that looks at time-on-task in the school system. |
One of our goals as social scientists would be to not just write research papers but to advise people on what kinds of situations are not good for children. We certainly know that lots of instability, income problems, turmoil, all sorts of family stress, clearly are costly to children. We are about at a point where we can actually suggest things we know are good to do or better and things to avoid in terms of child development. For example, early reading to and playing with preschool children does boost their grade school performance. |
Fathom: What differences or similarities have been found in comparative studies of families of different races, ethnicities, and socioeconomic backgrounds? |
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| Stafford examines African-American wealth ownership patterns. | |
Stafford: The Panel Study of Income Dynamics was originally designed to study income dynamics, essentially problems of income. Our sample has an added sample of African-American lower-income families. On the income side, generally there has been improvement in African-American income and educational attainment since the 1970s. The income gap between African-American and other families is still substantial, but narrowing. The wealth gap is still very large, on the order of nine to one at the median--that is, $9,000 versus $81,500 in household net worth--and a lot of it is generational. African-American families were far less likely to have parents who trusted financial institutions: banks, the stock market, brokers, etc. These were not things that African-American families were traditionally exposed to. So in the 1980s and 1990s when the stock market took off, there were very low rates of ownership of stock by African Americans, although they might have benefited if their pensions held stock. As of 1999, the percent ownership of stocks directly or as an individual retirement account was 17 percent for African-American families but was 61 percent for all others. |
We did a study of the ownership patterns across generations and looked at African-American families from 1984 to see whether these families had savings and other bank accounts. Ownership rates of bank accounts among African-American families were under 50 percent until just recently when it has moved up to about 55 percent. This is a stark fact. Our data support the fact that African-American families are not participating in the financial system, which is surprising. If you look at parental ownership patterns in African-American families in 1984, and then look at their young adult children in 1994, we do see a movement toward more ownership, particularly for more educated African Americans. Those who have gone on to college are also more likely to own stocks and bonds. |
However, there still is a family effect, which is not differential by race. If the family is not putting money in the bank, but instead uses check-cashing places or credit cards, and paying and dealing with financial affairs outside the banking system, these habits carry over into the perspectives of the children. In one of our current projects--our child supplement--we are looking at the financial behavior of young children, particularly teenagers, to see how they actually learn this. We know the financial behavior of the parents (e.g., their portfolio choices and participation in financial markets), and so then we can ask how this gets translated to environments where children get different signals about saving, earning, or taking on part-time work. Parents that are in financial markets tend to have children who later participate in these same financial markets. To illustrate, in 1994, of those young adults whose parents held stocks, 44 percent were equity owners; for those whose parents did not own stocks, only 24 percent held equities. The whole issue of learning financial and economic behavior from your parents as a young child is something that we want to examine more closely, because there certainly is a connection. |
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