The Manufacturing Impacts of Global Family Change

Introduction: A Sweeping Change in the Basic Unit of Human Life
In February 2015, American Enterprise Institute demographics expert Nicholas Eberstadt published an op-ed in the Wall Street Journal that should, by all rights, be the catalyst for a wide-ranging public policy discussion. With the disarming title of “The Global Flight From the Family,” he lays out a persuasive case that the waning of the traditional family, generally consisting of two married parents and one to three children, is not just a U.S. phenomenon, but rather a global change whose dimensions and impacts are just beginning to be appreciated and understood.

Supported by an effective use of eye-opening data, Dr. Eberstadt articulates his conclusion that the shift away from what has been thought of as the nuclear family appears to transcend geography, stage of economic development, and even culture. He notes that high levels of income and educational attainment are “not pre-conditions for the new family revolution in those spots on the globe it hasn’t reached.” A peek inside homes around the world is increasingly likely to reveal single occupants, single parents, and unmarried couples.

This is a complex story. The forces that are reshaping the human family span a number of disciplines, including economics, sociology, and psychology. The research community has offered limited but nonetheless enlightening work. Economists Betsey Stevenson and Justin Wolfers, for example, write about market influences on family structures. They assert that the role of households is changing as the modern corporation has come to supplant the family in numerous economic functions. The development of social insurance has spread greater security to many and taken that safety net role away from the family.

But even Stevenson and Wolfers go beyond economics to note that rising life expectancy diminishes the centrality of children to married life, as couples now expect to live together for decades after children have left the nest. Only 41% of married couples currently have their own children present in the household, down from 75% in 1980. Such a change very likely alters the psychology of marriage. Eberstadt postulates even more fundamental explanations for changing family structures, rooted in basic human behavior. He discusses the “seemingly unstoppable quest for convenience by adults demanding ever greater autonomy” and notes that “rational choice” and “elective affinities” are playing roles in household formation.

Whatever the drivers, dramatic global family change has wide-ranging impacts, including in the economic sphere. In this article, I make the case that manufacturers need to pay close attention. The goods demand implications will likely be considerable.

Household Shifts and Manufacturing: An Analytical Framework
Household change is best analyzed in the broader context of population change. Some of the intersections between households and populations are understood; some are not. Nonetheless, a unified framework, however parsimonious, will allow for a clear interpretation of the data and a fuller understanding of their implications.

Research has firmly established that the normal demographic path for any economy is from a position of high fertility and high mortality to one of low fertility and low mortality. A declining mortality rate, generated as economic development allows for the spread of medical technology, is known to influence household fertility decisions. As confidence increases that offspring will survive into adulthood, the precautionary demand for children in developing societies, where pension systems generally remain weak and adult offspring are counted on as support systems for old age, diminishes. Further, economic development brings about higher levels of labor market opportunities for women, affording them an alternative to child-rearing. In sum, development brings about declining mortality. Development and declining mortality lead to declining fertility.

The changing structure of families should logically augment the population outcome of development-driven shifts in fertility. Increases in the number of single-parent and single-person households will influence fertility and birth rates in parallel with the evolving birth decisions of nuclear families. Unmarried couples, childless couples, and divorce also play into this broad dynamic, given their role in shaping both fertility decisions and family structure outcomes.

Two of the principal transmission channels from population shift to economic impact are labor supply and savings. These in turn affect wages, capital formation, and productivity. Falling fertility rates result in a shrinking share of the population that is in the working-age cohort, generally ages 15-59 or 15-64. A decline in the relative size of this cohort has a negative impact on labor supply and thus on potential economic growth. The savings rate is known to be age-sensitive; minors and retirees consume more than they produce, while the working-age population produces and saves more than the non-working population.

The labor supply and savings behavior of single-parent and single-person households as well as childless households and cohabitating unmarried couples are likely different from the traditional nuclear family at any stage of the demographic transition. Single-parent households, for example, are far more time-constrained than single-person households, affecting their labor force participation. Thus the growing presence of non-nuclear family arrangements is a complicating factor in modeling the relationship between demographic change and economic impact.

The link from family structure change to consumption behavior should be considered in the context of evolving demographic trends. It is reasonable to postulate that the growing presence of one-person families in the household population, for example, will likely influence the balance between urban and suburban living and thus between home ownership and renting. This alone will have profound impacts on the volume and distribution of the demand for manufactured goods.

An Empirical Picture of Worldwide Family Change
Data for both industrialized and emerging economies show definitive shifts in household status. Figure 1 shows the generally rising share of single, never-married men in the 45-49 age cohort, the group that is just at or beyond the stage of life during which child-rearing would normally occur. The growth of the single male share in the sample’s advanced economies—the U.S., Germany, and Japan—is remarkable, averaging 12.1 percentage points between the 1990s and the 2009-2011 period. The shift is less dramatic for the emerging economies. During this period, there was a 5.5 percentage point increase in the single male share in South Africa and a 2.7 percentage point increase in Mexico. The 2 percentage point decrease in China might be partially the result of the haphazard enforcement of the one-child policy, favoritism toward male children, and the apparent slowdown in the economically induced migration from the rural areas to the cities.

The rising share of single, never-married women in the 45-49 age cohort across advanced and developing economies is shown in Figure 2. The rise is lower than for men, averaging 7.8 percentage points in the U.S., Germany, and Japan. But the story is just as clear.

Figure 1 – Share of Never-Married Men in the 45-49 Age Cohort

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Figure 2 – Share of Never-Married Women in the 45-49 Age Cohort

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Figure 3 shows the generally falling share of married men in the 45-49 age group. The most sweeping change is in Germany, which experienced a 20.3 percentage point decline between the 1990s and the 2009-2011 period. Significant declines were also seen in Mexico and South Africa, at 13.1 and 14.4 percentage points, respectively.

The global increase in the mean age of marriage for men is well evidenced in Figure 4. As of the latest data for the 2009-2011 period, three of the sample countries—Germany, Japan, and South Africa—have mean marriage ages for men above 30. The U.S. is close, at nearly 29.

Figure 3 – Share of Married Men in the 45-49 Age Cohort

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Figure 4 – Mean Age at Marriage for Men

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

The generally declining share of married women in the 45-49 cohort is shown in Figure 5 for the six sample countries. As with the data for men, Germany’s decline is the largest, with a drop of nearly 15 percentage points. Significant declines are registered in Mexico and South Africa, at 10.9 percentage points and 10.4 percentage points, respectively. Given cultural norms, it is certainly interesting to see a nearly 9 percentage point decline in the share of married women in Japan. As shown in Figure 6, the mean age of marriage for women is now above 30 in Germany and South Africa and just shy of 30 in Japan.

Figure 5 – Share of Married Women in the 45-49 Age Cohort

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Figure 6 – Mean Age at Marriage for Women

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Divorce is clearly playing a role in the reshaping of the global family. As shown in Figure 7, the share of men in the 45-49 age cohort who are divorced and not remarried rose in five of the six sample countries, with South Africa being the notable exception. The U.S. and Germany appear to dominate the divorce picture, with 14.1% and 15.2% of the 45-49 age group accounted for by divorced men who are not remarried, respectively, well above 5.8% in Japan and the sub-3% shares in China, Mexico, and South Africa. In a qualitative sense, Figure 8 shows the same story for the share of divorced, non-remarried women, with South Africa being the one country in the sample showing a decline between the 1990s and the 2009-2011 period.

Figure 7 – Share of Men in the 45-49 Age Cohort Who Are Divorced and Not Remarried

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

Figure 8 – Share of Women in the 45-49 Age Cohort Who Are Divorced and Not Remarried

Source(s): United Nations, World Marriage Data 2012

Source(s): United Nations, World Marriage Data 2012

For the U.S., Census Bureau data highlight a shift to smaller households. As shown in Figure 9, the share of one- and two-person households in the total U.S. household population rose between 2000 and 2010, while there was a fall in the share of three-, four-, and five-person households, although the latter fell just 0.1 percentage points. Figure 10 shows a rise in the share of U.S. households that are occupied by women living alone and by men living alone. The share of U.S. households with women living alone rose from 11.5% in 1970 to 15.3% in 2005 before falling modestly to 15.2% by 2012. The growth in the share of U.S. households with men living alone has been more definitive, albeit from a lower base. As a result, the gap between the share of U.S. households with women living alone and men living alone fell steadily from 5.9 percentage points in 1970 to 2.9 percentage points for 2010 and 2012.

Figures 11 and 12 show shifts in the share of single-parent and single-person households for five advanced and developing countries. The data present a mixed picture. As shown in Figure 11, the share of single-parent households in Japan, Mexico, and Poland appears to be on the increase, while being basically steady in Canada and Australia. Figure 12 shows that the share of single-person households is on a modest upswing in Canada and Mexico and a more dramatic upswing in Japan, the latter undoubtedly influenced by the rapid aging of the population. Australia is essentially holding steady, while Poland has seen a modest decline in the share of one-person households.

Figure 9 – U.S. Household Size Shares

Source(s): U.S. Census Bureau and MAPI Foundation

Source(s): U.S. Census Bureau and MAPI Foundation

Figure 10 – Share of U.S. Households With Men and Women Living Alone

Source(s): U.S. Census Bureau, Current Population Survey Annual Social and Economic Supplement

Source(s): U.S. Census Bureau, Current Population Survey Annual Social and Economic Supplement

Figure 11 – Share of Single-Parent Households

*Canada: 2006, 2011; Australia: 2006, 2011; Japan: 2000, 2010; Mexico: 2000, 2010; Poland: 2002, 2011 Source(s): UN Demographic Yearbook and MAPI Foundation

*Canada: 2006, 2011; Australia: 2006, 2011; Japan: 2000, 2010; Mexico: 2000, 2010; Poland: 2002, 2011
Source(s): UN Demographic Yearbook and MAPI Foundation

Figure 12 – Share of One-Person Households

*Canada: 2006, 2011; Australia: 2006, 2011; Japan: 2000, 2010; Mexico: 2000, 2010; Poland: 2002, 2011 Source(s): UN Demographic Yearbook and MAPI Foundation

*Canada: 2006, 2011; Australia: 2006, 2011; Japan: 2000, 2010; Mexico: 2000, 2010; Poland: 2002, 2011
Source(s): UN Demographic Yearbook and MAPI Foundation

Implications for Global Economic Growth, Labor Supply, and Goods Demand
Increases in the single, never-married population and the divorced population will likely be among many factors driving the worldwide move toward smaller families that do not consist of two married parents and one to three children. These household shifts will exacerbate the labor supply stresses brought about by the natural decline in fertility that has been seen in both advanced and developing economies, negatively affecting potential global economic growth.

It seems reasonable to postulate that the rising share of single, never-married men and women contributes to a worldwide urbanization phenomenon, whose dimensions were documented in a 2014 MAPI Foundation paper. Urbanization has significant implications for housing, likely adding to the population share living in apartments. This in turn shapes demand for a wide range of manufactured goods, most notably automobiles. Both single apartment dwellers and single homeowners are not likely to consume automobiles at the rate of the typical nuclear family. With autos having powerful supply chains, this demand-altering phenomenon will affect a range of manufacturing industry sectors, including fabricated metals and plastics.

The volume and distribution of food consumption will be influenced by smaller and more single-oriented families. The consumption of meals outside of the home could very well increase, while the bulk consumption of food that the market has afforded to a family-oriented economy might diminish.

On a company level, the growing share of singles in the workforce presents both opportunities and challenges. The issues, of course, are very different for single parents and single people without children. Corporate personnel policy is only going to grow more complex.

We are just beginning to understand the social, cultural, and political implications of the changing family structure. As the world economy struggles to push past the financial crisis, we must also worry about the economic impacts of such a dramatic change in the way humans live.