Household, in accordance with modern theoretical approaches that are present in economic science, is one of the key socio-economic actors. The dynamics of their formation largely determines the effectiveness of the state economy and the development of civil society. What is a household? What subjects can it be represented?
What is a household?
A household is, in accordance with a definition widespread in the scientific community, an institutional social unit that consists of a relatively small group of citizens living together, to one degree or another, combining their incomes and resources, and also consuming a number of goods and services.
Typically, households are run by families. Households can be not only consumers of goods and services, but also their producers - for example, if their entities carry out entrepreneurial activities.
There is another interpretation of the term in question. It is formed by economists. According to it, a household is a group of people who make collective economic decisions. For example, those related to the purchase of goods, the use of services or their production, if household members are engaged in entrepreneurial activities.
Key household attributes
A widespread point of view is that a household is a social group, characterized by the following main features:
- isolation (both legal and factual),
- accommodation of participants in the territory of one residential premises or a group of those located nearby,
- regularity of social communications - assuming that household members with varying degrees of intensity interact, communicate with each other.
As we noted above, households are most often formed by families. But it's not always the case. Possible subjects of the household are firms, public organizations, churches, non-profit structures, political parties. All of them, one way or another, will correspond to the main features of the household that we examined above.
Households have a number of economic functions. We will study them.
Economic functions of households
The main functions of households from an economic point of view are as follows:
- distribution of capital;
- control over the formation of individual consumer preferences;
- investing accumulated capital.
Of course, there are a number of other significant economic functions of households. So, the corresponding social groups form market demand - buying goods and services produced by other economic entities. Households, as we noted above, can themselves produce various products and services. It can be noted that economic relations can arise between individual participants in the household. This may be due to various legal relationships - debt, production, labor.
In the corresponding social group, local economic roles related to capital management can be formed. Thus, a financial household is being maintained. The social group in question can be an independent economic entity that interacts: with other households, with individual citizens of its country, with government bodies, with commercial banks, with various types of enterprises, with non-state structures, with foreign citizens and organizations.
We study the basic economic functions of households - distribution, control and investment, in more detail.
Distributive economic function of households
One of the key economic functions of households is the distribution of funds. These or other household entities that earn a large amount of money, one way or another, share them with others. In families - as a rule, free of charge and sufficiently active. In more fragmented social groups, such a distribution is rare.
Therefore, the larger the household, the more pronounced the distribution of capital in it. This function plays a positive role from the point of view of the entire macroeconomic system, since the presence of capital in people with different needs stimulates the release of goods and the provision of services in relevant areas. If money were concentrated in a small number of people, this would contribute to the development of fewer industries - those that are able to satisfy the needs of a particular citizen.
Household consumption generates demand, as a rule, for a significantly wider range of goods and services.
Control economic function of households
The next significant function of households is control. Its specificity lies in managing the needs of each of the participants in the corresponding social group.
The fact is that household incomes, even when it comes to associations within the same city, can vary greatly. And if one level of spending is acceptable for representatives of one social group, then participants in another household based on disposable income may not be able to rely on the same consumption structure. In this regard, the buying aspirations of individual households may be subject to control - in order to optimize the structure of their expenses.
Household investment function
The next most important function of households is investment. Household finances can be used to support the activities of various economic entities. Moreover, these communications can already be observed at the level of everyday expenses of the participants of the corresponding social group - when shopping in the store, using various services. Household expenses actually become investments in businesses that supply certain goods or services. In addition, financial investments of households can be represented by bank deposits, participation in stock trading, private investment support of any projects.
The effectiveness of conducting a financial household largely depends on the quality of managing its local budget. We will study this aspect in more detail.
Household budget
We noted above that households are an independent economic entity. Thus, household finances are autonomous from the point of view of priorities in their distribution, despite the fact that their receipt largely depends on the actions of other entities with which the corresponding social group communicates.
A household budget, like a financial plan formulated by a government or an enterprise, consists of estimated income and expenses. Its distinctive specificity is that when compiling it, as a rule, actual, rather than estimated, individual needs of each of the participants in the household are taken into account. For some, one volume of goods and services is needed, for another - completely different. In turn, budgets within the framework of larger social institutions can be drawn up on the basis of calculated indicators that are not always combined with the real individual needs of a particular citizen. This is the advantage of budgeting at the local household level, in the ability to take into account the consumer preferences of all its participants.
Of course, in many cases, the concept of “budget” in a household is considered informally. In principle, it is a rarity when someone from the family undertakes to draw up a real plan of income and expenses, reflected in a separate document. Although, when it is really needed, many people are engaged in this work - using, for example, specialized types of software, mobile applications, and this is very effective for them.
But, regardless of the way the household budget is prepared, its main feature is retained - focus on the individual needs structure. It often does not matter how much a particular household member earns. This is another feature of the economic role of the respective social groups, when the source of income and the consumer may not have mutual rights and obligations. But, it should be noted that this specificity of relationships is more typical for family households and is not very common in corporate legal relations.
What types of households are there?
We study what types of households are. The classification of relevant social groups based on the number of subjects is widespread. So, households can be single or group. The former are formed by individual citizens or families. The second - by several groups of people.
Other common household classification criteria:
- territorial affiliation (it is assumed to correlate the location of the corresponding social group with the city, region, state);
- solvency (in this sense, households can have high, medium or low income);
- property characteristics (determined based on the type of housing and property owned by household members).
Researchers can determine other criteria - for example, related to the social status of household members, the labor potential of the corresponding social group, the level of education and qualifications of citizens who are members of the household.
Household structure
Let us examine what constitutes a household structure. This term may mean:
- the composition of the household;
- distribution of functional roles in the corresponding social group.
Regarding the composition of the household: it may correspond to the family status of each of its participants. These may be parents and their children, other relatives. Regarding functional roles in the household: those can be represented by participants who generate capital, working, developing a business, distribute household income and expenses, make decisions regarding the management of resources available in the household — real estate, household tools, and play a passive economic role within the household but active - in collaboration with other business entities.
Depending on the size of the household, the socio-economic characteristics of other social groups of the corresponding type that have developed in a particular city or region, the functional roles of household members can be represented in a much wider spectrum.
Households and the state
An ambiguous assessment of the role of the state in the formation of households has developed among researchers. On the one hand, the corresponding social group in the general case is independent of the activities of any government agencies. On the other hand, the state can play a crucial role in terms of maintaining the sustainability of households.
First of all, in an economic sense. This may be a matter of providing working household members with opportunities to earn money in the state’s financial system - for example, through employment in budgetary structures, in the civil service, and in providing direct assistance to citizens in the form of transfers of funds in the form of subsidies, allowances, distribution in favor of those or other household entities targeted support measures.
In turn, the household also performs significant functions for the state - both social and economic. As we noted above, the relevant associations are formed, as a rule, by families whose education is the most important factor in the development of civil society. Households generate demand in many segments of the economy - this helps to increase the economic stability of the state, increase its GDP.
Household income
Let us examine what can be used to generate household incomes. The main sources of capital to be distributed in the relevant social groups are:
- the salary;
- compensation in the framework of civil law relations;
- entrepreneurial activity;
- lease of certain assets;
- receipt of dividends as a result of investments in the assets of certain enterprises;
- profit from securities trading;
- use of natural resources;
- obtaining bank interest on deposits.
Individual household members can derive one or more of these types of income. As a rule, the corresponding cash receipts are reduced by the amount of obligatory payments - in the form of taxes, commissions, other deductions stipulated by law and the terms of contracts.
Household expenses
Expenses, in turn, of households can be represented:
- costs associated with the maintenance of disposable resources (for example, payment of utilities, when it comes to real estate);
- with the acquisition of basic types of goods - food, household chemicals, electronics;
- with the use of everyday services - transport, banking, communication;
- long-term acquisitions - the purchase of new real estate, cars and other equipment.
Household expenses can be supplemented by the use of legal, medical, educational services - based on the structure of needs that is formed in a particular social group. Let's consider this aspect in more detail.
Household needs structure
Households are independent economic entities, the composition of which, at the same time, can be represented by participants with different needs. For some, the acquisition of basic goods and services is sufficient; for others, access to additional services and the purchase of more expensive products are necessary.
The main factor determining the structure of needs in the respective social groups is the disposable income of households. The more it is and the more actively its distribution is carried out, the more likely is the increase in personal requests of farm participants in terms of consumer preferences. In some cases, they may be replaced by social priorities. For example, it may be preferable for a person to spend the available funds not to purchase any expensive goods, but to provide sponsorship financial support to other people or organizations. In many ways, the appearance of such preferences depends on such factors as the level of education, upbringing of a particular person, and the circle of his communication.
Household Factors
Let us now consider under the influence of what factors a household can form. Above we studied the main types of households and the criteria for their classification. Each of them will correspond to a separate group of factors in question. So, if we are talking about a single household, most likely, it will be represented by a separate family. The factors of its formation are, as you know, human relationships. People come together, create families and begin to conduct a common household. The economic factor in this case can play an important role, but it is usually secondary.
In turn, the formation of group households can be primarily determined by economic necessity. Social groups of the corresponding type involve the unification of several families into a common household - due to the fact that in such a format each of them will be much easier to fulfill their needs, optimize the cost structure.
The territorial affiliation of potential household members, the level of their income, and the types of property they own can also play a significant role in the formation of the associations in question. So, for example, in conditions of open terrain of the Far North, indigenous peoples living in the corresponding territories, having relatively low incomes and not the most liquid property, will probably make sense to unite in households.
Summary
Home improvement is a socio-economic unit that plays a crucial role in the development of society and the state. By uniting into households, people contribute to enhancing the intensity of mutual communications, more efficient distribution of capital, and the formation of an optimal structure of consumer preferences in terms of disposable income.
The subjects of the household are usually families. But it is quite possible the formation of appropriate social groups and organizations. The structure of a household can be determined by its composition and distribution of functions among participants, depending on the economic and cultural characteristics of the community, within which a corresponding type of social group is formed.