Organisation of households: Shrinking households, labour market frictions and societal cultures
Phuah Eng Chye (10 March 2018)
Economies face threats not only from demographic aging and rising dependency but also from the erosion of traditional family structures which are becoming more diverse in terms of relationships, race and beliefs. This is consistent with the transition to an information society where the emergence of complex and modular family structures corresponds to the typical pattern of permutation and fragmentation in a network environment.
In this context, if large populations are associated with a low-information and low-income environment, then the startling reverse hypothesis is that large populations are incompatible with high-information and high-income societies.
Low-information and low-income societies rely on large families as a source of low-cost labour for household chores and to work on farms or small businesses. Large families act as a form of collective support, improves the ability to earn income and represents an insurance to improve resilience to misfortune.
But in a high-information and high-income society, this logic does not apply. Technology makes it possible for individuals to rely on strangers (sharing platforms, delivery services) and automation for household chores and other personal needs (e.g. relationships). For example, social introductions and the ability to search for business, employment or romantic partners by an extended circle of uncles and aunties have been replaced by social media platforms.
The replacement of tasks previously undertaken by a large extended family has huge implications. The first is that it increases the ability for individuals to be autonomous. Second, it implies that goods and services that were previously provided free by family members were being monetised by strangers and platforms. This leads to the third implication in that it increases the costs of maintaining a large family. In this context, the costs of maintaining a family are likely to be subject to Baumol’s cost disease. But if income prospects become uncertain or stagnate, it will become relatively prohibitively expensive to sustain an extended family.
There are other socio-economic ramifications from shrinking family sizes. Historically, parents had many children but few assets. With affluence and aging, the trend reverses with parents having more assets than children. The potential inheritance could be substantial due to appreciating property values while shrinking family sizes means the same amount of inheritance will be shared among fewer siblings. This is one reason why the younger generation have become less dependent on employment for income.
Yuji Genda notes in Japan, “the emergence of parasite singles (defined as “unmarried persons who live with their parents even after graduation and depend on their parents for basic living necessities”) has cast a shadow over the labour market for young people in Japan. Since parasite singles are free of financial responsibilities, they do not look for jobs with high wages, treating work as a hobby. Because they have this attitude, they immediately give up jobs that they find uncongenial. The resulting unemployment of young people is luxury unemployment; it does not involve real financial necessity. To them work is a discretionary pastime or a means of earning pocket money.”
In China, Zeng Yuli observed “in recent years, an increasing number of urban, middle-class Chinese young people have begun to identify with sang culture. Simply put, sang refers to a reduced work ethic, a lack of self-motivation, and an apathetic demeanor. “I’m just a waste of space,” “I don’t care all that much for life,” and “I’m listless to the point of despair” are typical phrases uttered by sang youths.”
He explains “fleeting joy forms the underlying context of sang culture. To be sang is not to be in a state of complete despair; instead, the term evokes the sense of disenfranchisement that certain young people feel as a result of being excluded from some of life’s supposedly greater pursuits, such as home ownership, the accumulation of personal wealth, and the attainment of social mobility. Sang culture is a first-world problem: Its adherents wallow in grievances that contrast starkly with the much more pressing problems faced in most other developing nations…In this sense, the sang mentality is a means of self-preservation. By deliberately stunting themselves, China’s young people reduce their expectations and alleviate stress. In making their plans as unambitious as possible, they never have to endure the feeling of failure.”
Apart from the impact of culture change on the motivation to seek work, Tim Fernholz points out “younger workers, faced with stagnant or declining real wages, calculate how taking a job will affect their lifetime income. If they think that work experience isn’t going to lead to higher future wages – say, a low-skilled job with little prospect for advancement – they are less likely to take just any job.” He explains that this implies youths have raised their “reservation wage – that is, the lowest pay a worker will accept for taking a job. An older worker, with more immediate need for earnings and a shorter career time horizon, may have a lower reservation wage than a younger one.”
Tim Fernholz also points out demand-side changes like falling real wages have made some jobs unattractive. “It’s also worth considering the price of other investments that lead to bigger salaries: The cost of a university-level education or a move to a high-productivity metro area can be prohibitive for low-skill workers who rely on low-wage jobs.”
The concept of a reservation wage can be used to explain the increase of frictions in the labour market or the fall in labour force participation. As an example, a decision by children to look after their parents full-time reflects an increase in reservation wages. In another example, David G. Blanchflower and Andrew J. Oswald suggest higher home-ownership will decrease labour mobility due to the higher commuting time and costs. Hence, higher house ownership and rising travelling costs can also increase reservation wages.
Hence, the changes in household size and composition has had a substantial impact on societal cultures. Jennifer M Silva observes the younger generation of the working class could no longer rely on the “the standard progress of family formation, career progress, and rising affluence” of the 1950s. The millennials instead faced “experiences of powerlessness, confusion, and betrayal within the labor market, institutions such as education and the government, and the family teach young working-class men and women that they are completely alone, responsible for their own fates and dependent on outside help only at their peril. They are learning the hard way that being an adult means trusting no one but yourself. At its core, this emerging working-class adult self is characterized by low expectations of work, wariness toward romantic commitment, widespread distrust of social institutions, profound isolation from others, and an overriding focus on their emotions and psychic health…the bleakness of this generation of young working class adults has structural causes: economic stagnation, dissolution of safety nets, loss of decent industrial-sector jobs and the rise of insecure service-sector jobs, and neoliberalism as a guiding social philosophy that systematically turns its back on under-class young people.
Overall, it is important to recognise that the onset of demographic aging have effects that extend beyond shrinking the size of the population and labour force. The changes in household structure, coupled with the transition to a high-information environment, will increase frictions in the labour market and have an indelible impact on societal cultures; particularly among the younger generation.
Daniel Little (27 June 2017) “Sociology of life expectations”. Understandingsociety.blogspot.my. http://understandingsociety.blogspot.my/2017/06/sociology-of-life-expectations.html
David G. Blanchflower, Andrew J. Oswald (May 2013) “Does high home-ownership impair the labor market?” http://www.andrewoswald.com/docs/finalmayHomeOwnershipUnemBlanchflowerOswald2013.pdf
Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information society. http://www.amazon.com/dp/B01AWRAKJG
Phuah Eng Chye (26 August 2017) “The services economy: Revisiting Baumol’s cost disease”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/the-services-economy-revisiting-baumols-cost-disease/
Phuah Eng Chye (10 March 2018) “Organisation of households: Changing household structures and dependency”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/organisation-of-households-changing-household-structures-and-dependency/
Tim Fernholz (12 July 2017) “Digital dropouts: Young men are working a lot less. It’s not just because of video games”. Quartz. https://qz.com/1025141/young-men-are-working-a-lot-less-its-not-just-because-of-video-games/
Yuji Genda (January 2003) “Who really lost jobs in Japan? Youth employment in an aging Japanese society.” Labour markets and firm market policies in Japan and the United States. University of Chicago Press. http://www.nber.org/chapters/c10304.pdf?new_window=1
Zeng Yuli (27 June 2017) “Why Chinese youth are increasingly dropping out of society.” Sixthtone.com. http://www.sixthtone.com/news/1000407/turn-off%2C-drop-out-why-young-chinese-are-abandoning-ambition
 Phuah Eng Chye “The services economy: Revisiting Baumol’s cost disease”
 Based on her book “Coming up short: Working-class adulthood in an age of uncertainty.” The comments are drawn from an article by Daniel Little.