Expert Witness: Valuing the loss of household services: 101 (part two)

By Dr. John F. Sase with Gerard J. Senick

“Fewer than 25 percent of American households are made up of a married man and woman with their children. So what do families look like now? The year 2000 marked the first time that less than 25 percent of American households were made up of a married man and woman and one or more of their children – a drop from 45 percent in 1960. This number is expected to fall to 20 percent by 2010. In real life, in big cities and in smaller towns, families are single moms, they’re stepfamilies, they’re boyfriends and girlfriends not getting married at the moment, they’re foster parents, they’re two dads or two moms, they’re a village. In real life...families are richly diverse.”
–Cris Beam, “The Changing American Family,” American Baby Magazine, May 2005

In last month’s column, we presented a broad overview of the valuation of Lost Household Services, economic losses that stem from personal injury, wrongful death, and other types of litigation. Lost Household Services have changed as the structure of the American family has changed. Therefore, in this month’s column, we will provide some historical background on the evolution of family structure, a basic institution of humanity that continues to impact our way of life.

When Forensic Economists consider the hours worked and the dollar value of Household Services, generally we look at family structure as one of the key determinants.

Currently, our economy is undergoing a radical transformation. Therefore, the structure of the American household that exists today is changing – or, shall we say, morphing – into a greater variety of predominant permutations.

Nothing New Under the Sun.
Similar changes have occurred throughout the centuries. These changes have impacted the structure of families and everyday life as we know it. Perhaps because familial households and the economy remain inextricably linked, household structure and the economy co-evolve continuously. To untangle this ball of yarn, let us consider that, at any given time and in any corresponding economic condition, an optimal household structure exists. Over the past one hundred years, the optimal American household has vacillated among the multi-generational, bi-generational, and mono-generational structures.

To put this into common terms, wealthy, middle-income, and poor families have included a parent or parents in the primary labor force. Along with them, children, grandparents, aunts, uncles, and other extended-family members reside under the same roof. This multi-generational structure sometimes is considered traditional. It remains prevalent in parts of the U.S. and in other countries around the world.

The change toward alternate family structures usually depends upon a combination of economic, political, and social conditions. Given the point of time in the aging of any baby boom, a phenomenon that often occurs during prosperous years in the wake of a major war that delayed family formation, single persons or pairs, with or without dependent children, may constitute the predominant household structure.

To illustrate this point, let us consider the changes that have occurred in family structure over the past century. The most marked changes have happened since the end of the First World War during a decade when we witnessed rapid urbanization throughout the country.

In 1900, approximately 80% of Americans grew their own food to a significant extent. In an America that generally was rural, some families maintained large farms.

However, it had become more common throughout the late nineteenth and early twentieth centuries for households to have the proverbial small family farm of forty to eighty acres (one-sixteenth to one-eighth of a square mile subdivision under the standard system of township measurement attributed to Thomas Jefferson). Throughout these decades, the United States remained mostly agricultural. However, industrialization and its accompanying urbanization had begun to take hold rapidly during the quarter-century following the American War Between the States.

As the U.S. population grew, families found it increasingly difficult to support their brood on limited farm acreage, which lacked the inherent economies of scale enjoyed by larger, more mechanized farms. Meanwhile the bright lights, high-button shoes, and economic opportunities of the cities began to lure many younger family members away from the bucolic rural life. This sequence of events started to erode the structure of the more traditional multi-generational household.

How Can You Keep Them Down on the Farm after They’ve Seen Paree?
A couple of critical events occurred during the Great War, which lasted from 1914 through 1918. For the first time, more than a million young Americans traveled (on the dime of the War Department) and saw some of the great cities of Europe. As the battlefront focused in Eastern France, many doughboys passed through Paris, the City of Lights. They were mesmerized by everything urbane. When they returned home, this younger generation was drawn to the excitement and economic opportunities that New York, Chicago, Detroit, St. Louis, and other burgeoning cities held forth.

The other side of the coin presented a harsher reality that drove Americans away from the rural life and into the industrial cities. During the conflict, the war effort placed great demands upon farmers to supply food, not only for Americans at home, but for the Allied countries that we would join in 1917. Many rural families increased their production by acquiring and tilling marginal land. During normal times and economic conditions, farming such land would not have made economic sense due to its low productivity. However, increased demand during the war years supported the higher prices that made this agricultural expansion feasible. Many small farms doubled their acreage during this time.

The downfall of the small family farm and its traditional way of life became evident during the harvest of 1919. Agricultural forecasts and the general consensus stated that European agriculture upon the former battlefields would not recover for at least another year. In response to this anticipated demand, American farmers planted more.

Fortunately for Europe (though unfortunate for America) swords were beaten into plowshares: the European harvest of 1919 far exceeded expectations.

In America, agricultural surpluses intended for the European market drove food prices downward. Farmers racked up huge losses and had great difficulty repaying seed and equipment loans or even making mortgage payments on the family farm. These events marked the beginning of the agricultural depression that served as the specter for the economy-wide Crash of 1929. Given the consolidation of small farms, careless mechanized agricultural practices, and natural disasters, the agricultural depression culminated with the Dust Bowl of the early 1930s.

Meanwhile, in post-war America, which enjoyed urban prosperity during the 1920s, family household structure changed markedly. The multi-generational household and close-knit community of rural America broke down as the younger generation left the farm behind and migrated toward the major cities. Finding high-paying jobs in the manufacturing and service industries located in the urban centers, many Americans began a new way of life as they sent money home to the folks back on the farm.

Simultaneously, many families who could not keep their farms moved lock, stock, and barrel to the industrialized cities. In their efforts to keep body, soul, and family together, they searched for any available work. These events initiated a new wave, a paradigm shift in American society.

In virtually two decades, our country went from agrarian to urban as the predominant household structures changed significantly for a vast number of families. However, events of the following two decades would determine further changes in the structure of American households. Next month, we will explore what happened during the 1930s and 40s.

At this time of year, I (Dr. Sase) and my collaborator Mr. Senick would like to extend our best wishes and blessings of the season to all members of the legal community. In addition, Mr. Senick and I would like to wish all of our readers a happy and safe holiday. May 2011 bring happiness, hope, and prosperity to you and your loved ones.

Dr. John F. Sase of SASE Associates, Economic Consulting and Research, earned his MBA at the University of Detroit and his Ph.D. in Economics at Wayne State University. He is a graduated of the University of Detroit Jesuit High School. Dr. Sase can be reached at (248) 569-5228 and by e-mail at drjohn@saseassociates.com.
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a Supervisory Editor at Gale Research Company (now Cengage) for more than 20 years. Currently, he edits books for publication and gives seminars on writing. Mr. Senick can be reached at (313) 342-4048 and by e-mail at gary@senick-editing.com.