Introduction
Twenty-first-century families in the United States are charged with tremendous economic responsibilities. They make up the current US labor force, which is undergoing rapid structural and technological change, and is responsible for 60–70% of the productive output of the economy. While they work, families are bearing, raising, and educating the children who must be prepared to fill their roles in the newly-termed knowledge economy . They are also looking after a growing population of elderly family members. Families are expected to juggle these roles while managing uncertainty across many aspects of their economic lives. The tradeoffs facing them as they attempt to allocate their scarce resources to educational investments, rising healthcare costs and retirement savings, for example, seem to have increasingly high stakes—make a wrong decision in one of these areas and someone in the family could end up in poverty, or at least facing a much diminished standard of living. As they make these decisions, families are aware of increasing inequality around them and the sharp distinctions between the haves and the have-nots. And as they face these responsibilities, the public policy environment that makes up one part of the context for their lives can seem indifferent, can seem demanding, or can seem oppressive depending upon the type of family they are living in, where they fall on the income distribution and the color of their skin.
Substitute the term industrial economy for knowledge economy and the paragraph above could have been written about nineteenth-century families.
This book describes the evolution of the American family over the last two centuries using the lens of family economic decision-making, focusing particularly on the interplay between families and the government. The economic roles played by families have been remarkably consistent across time, but families themselves have changed and the public policies they face have changed from the 1800s to the 2000s. Acknowledging that families’ decisions regarding how they spend their money and care for their members are influenced by the government provokes a reaction of discomfort in many people. The government seems impersonal, with hard, bureaucratic edges that do not fit nicely with our image of family. Families are intensely personal, and family decisions are, in theory, based on a family’s values and the best interests of each of its members. Yet, every family exists in the context of a political and economic system which in some cases nudges them (for example, providing subsidized student loans for college), and in other cases commands them (for example, mandating schooling for children ages 5 to 16 or older) to allocate their scarce resources of money and time in ways that affect the overall US economy.
Of course, family members vote for the politicians who ultimately direct the public policies they are subject to and, perhaps, derive advantage from. The creation of policies starts with the voters in a democracy, although it frequently ends with the appointed judges of a state or federal Supreme Court, as exemplified by landmark Supreme Court rulings regarding segregation and same-sex marriage. As this book explores the relationship between family economic decision-making and government policy in US history, it will reveal how families have responded to the incentives and the constraints established by diverse federal and state laws, ranging from the regulation of marriage, to labor regulations, to education policies, to retirement programs, and many others. It will examine how families allocate their resources and how decisions are made that determine each household’s participation in the labor market and in other aspects of the market economy. Most importantly, it will highlight how the interplay of public policy and family economic decision-making drives the US economy to be innovative and prosperous while at the same time shockingly unequal. Throughout, there will be suggestions for how policies could be developed that help families succeed economically, and better fulfill their crucial roles in a US economy that must be prepared for twenty-first-century challenges including demographic change, climate change, challenges from rising economies in Asia and Latin America and the rapid development of new technologies.
First, let’s start with a few historical examples.
Child Labor Laws and Compulsory Schooling—Imposing Constraints on Families
In the early nineteenth century, the mills of New England were filled with workers who until recently had participated little in the formally-employed industrial workforce: children. The industrial revolution, which had started almost three-quarters of a century earlier in England, had changed methods of manufacturing in textile and other industries from small-scale reliance on skilled workers, to large-scale reliance on machinery tended by less-skilled workers. The fast-moving rivers of New England were ideal locations for the waterwheels that powered the mills of Lowell, Fall River, Springfield and Providence. But even though this region of the United States was the most densely populated, adult male labor was unable to meet the growing demands of industrialization. The mills initially employed women and girls, and then increasingly recruited young children through the 1820s and 1830s. The relatively low physical demands of industrialized manufacturing made children adequate, if less than ideal, workforce members. Some mill machinery was even adapted to the proportions of child-sized operators. Children were not well paid, but the opportunity cost of their work—the value of the next best use of their time—was not economically rewarding either. They could participate with relatively low productivity in farm work, assist with housework, or possibly be hired out to another family.
Schooling was an option, but barely so for lower- to middle-class families. The common public school system provided literacy and numeracy, but it was not a path to significant increases in earnings potential for those whose families were not already established in commercial enterprises. Very few secondary schools existed outside of large urban areas, so schooling beyond age 13 was uncommon, and in most cases did not result in higher earnings as adults. 1 Many New England farming and urban families appreciated the extra income resulting from sending their children to a factory or mill town to work, and in many cases, the children themselves appreciated the increased independence that came with earnings. 2 Compared to the dangers of farming, for example, the mills seemed relatively safe, and many children worked side-by-side with their mothers and older sisters. Stories of exploitation and drudgery had not yet appeared, immigrants who would compete with child labor had not yet arrived in large numbers, and advances in technology had not yet driven industrial machinery to speeds that made factories much more dangerous places for children. A child laborer’s work in the mills was not easy, but neither was farm work, and at least mill work paid.
How public policy would treat this new population of industrial workers was a crucial question facing first the states, and eventually the federal government as well. The well-being of children, family income, labor availability, company profits, and the transformation of the US economy from agrarian to industrial—all these issues were at stake. The decision to allow, or not allow, the use of child labor affected families at the microeconomic level—determining the well-being of their children as well as their household income. It also affected the United States at a macroeconomic level—impacting the ability of the country to compete in world markets with nations like Britain.
On the labor-demand side of manufacturing were the new industrialists, such as the textile manufacturers of New England. They needed workers. Access to cheap southern cotton gave New England mills a source of competitive advantage in the textiles trade over England in the early 1800s, but without cheap mill labor, this advantage was wiped out by the high wages required to lure male workers. To restore this competitive advantage, manufacturers turned to women—mostly unmarried—and children, at wages less than half those of men. 3 In 1820, children under the age of 15 made up about 50% of the textile mill labor force, and about a quarter of all manufacturing labor in the Northeast. 4 While this percentage decreased through the nineteenth century for a variety of reasons—such as increased competition from immigrant labor—putting children to work in fields, wealthy people’s homes, shops, or factories was the norm for many families and contributed a large percentage of family income through the early parts of the twentieth century. 5
Regulating commerce and, at times, family life, was the government in a variety of forms, but mostly state and local at this time in US history. Prior to the 1850s, the legislatures and the regulatory agencies of New England states did little to restrain the employment of children in manufacturing. Children were under the economic and legal control of their parents, and it was usually a father’s choice whether his child was to be educated, employed, or apprenticed to a tradesperson. The state had relatively little interest in the welfare of...