Why Care Work Needs To Be Integrated Into Macro-economic Models

“Care Work and the Economy” is not only the name of an international research cooperation consisting of 30 scholars, but also the title of a symposium hosted by the Friedrich-Ebert-Stiftung in October 2018. The research network called CWE-GAM discussed the results of the first project year, such as the development of macro-economic tools to facilitate a more comprehensive understanding of the political effects of care work on growth, wealth distribution and gender equity. The project intends to further examine how policy areas like fiscal policy, spending policy, trade, taxation, monetary policy and immigration are interlinked and what effect they have on the care industry. Furthermore, gender-sensitive framework conditions and recommendations for policy makers are going to be developed to initiate and implement gender equality in the care industry.

What does the concept of “care” mean?

Erich Wittenberg summarizes:

The concept of care work summarizes various types of nursing and supporting activities. Both paid labor in the nursing professions and unpaid home care are overwhelmingly performed by women. Therefore, care work is intimately intertwined with the concept of gender equity.

Unpaid care work encompasses caring for relatives, children and the elderly, among others. Even though strict gender roles are increasingly dissolving, private care work is still primarily carried out by women. Unpaid care work frequently necessitates interrupting a career, negatively impacting professional opportunities and pension benefits in the future.

In most countries, women strive for professional fulfillment or are financially dependent to work full-time. As a result, nursing staff from abroad are hired who often suffer from poor wages and poor working conditions.

Paid work in the care sector, with the notable exception of medical professionals, is still  poorly remunerated and often conceived of as an additional income. Therefore, the contribution care workers provide to society as a whole is still insufficiently recognized.

The event included a panel discussion during which the panelists discussed how macro-economic research could positively impact policymaking in the area of care work.

The importance of care work remains underestimated

The panel was opened by Professor Uta Meier-Gräwe of Justus Liebig University in Gießen. Prof. Gräwe took criticized that the importance of care work remains underestimated:

I can’t help but notice that care work – at least in Germany – still does  not enjoy the relevant status it rightfully deserves in an aging society.

The average woman with partner and child: Twice as much unpaid as paid work

Meier-Gräwe points out that a significant problem is the unequal distribution between paid and unpaid care work with the major share performed by women.

By comparing the ratio of women to men, it turned out that women perform one and a half times more unpaid care work every day, meaning that the gender care gap is 52%. Even more interesting is that when looking at household types couples with children, the gender care gap rises to over 83%.This means: women perform almost twice as much unpaid care work than paid work.

This high percentage of unpaid care work has a negative impact on the professional careers of affected women. Political measures such as the German system of matrimonial tax splitting are false incentives that cement the status quo rather than remedying it, Meier-Gräwe states. The focus instead should be on eliminating inconsistencies. According to Gräwe, this could be accomplished by giving women access to good quality education while at the same time avoiding a return to traditional gender roles after the birth of a first child. What is the situation in other countries?

Japan and South Korea: Progressive measures, massive Gender Pay Gap

Japan and South Korea likewise grapple with the problem of unpaid care work done by women. To counter this, comprehensive measures were taken, as Professor Ito Peng from the University of Toronto reports:

Japan and South Korea have both introduced some seemingly quite progressive policies in an effort to encourage women to participate in paid employment. So in both countries, the government has introduced a significantly expanded public childcare or publicly funded childcare and as well introduced long-term care insurance to provide publicly funded and/or publicly provided long-term care for the older people.

However, women in these countries still earn significantly less than men.

Despite these progressive policies, women’s labor market participation has really increased only a tiny bit, but if you look at the gender pay gap, there continues to be very, very large, I think both in South Korea and Japan, gender pay gap is still something like 70% women on average earns only about 70% of male wage.

Budget cuts and austerity measures foster even more unpaid care work

Professor James Heintz from the University of Massachusetts assesses the fiscal implications of the gender pay gap and points out that the budget and fiscal policies of a country have a direct effect on state-subsidized nursing services.

So we see this happening with a lot of austerity programs when you have cuts to social services that then shift the responsibility from the public sector into the household and it increases women’s care burden.

Budget cuts, however, do not resolve, but exacerbate the problem, James Heintz continues:

So when you actually have a contraction in household resources, it actually increases women’s labor force participation, increases their effort to participate in paid employment at a time where employment opportunities are deteriorating, and this contributes to kind of the ongoing segmentation of the labor force. And so you get this double time burden that’s happening in terms of women’s both paid and unpaid work that really has a dramatic effect on the care economy.

Care work is an important economic factor

According to Professor Elissa Braunstein of Colorado State University, care work as an important economic factor is often overlooked. For money is not only invested in humans and their education, but also into a service industry with a direct effect on human coexistence. Plus: economic activity in the care industry has no negative footprint on the environment, in stark contrast to industries such as coal, steel, or automotive.

Public investment is also important in this area in particular because we could think about care both of the elderly and of children as sort of a public good, right? In a sense that the person receiving the care benefits directly, certainly. But the people around that person also benefit. Employers benefit, the children of elder parents that are being taken care of benefit, in a sense of not having to worry so much about their parents so they themselves can show up for work and be productive.

"Care deficits" are an international issue with regional differences

Economic strategists who now argue that the free market settles everything are sorely mistaken. The free market won’t be able to supply the needed forward-looking investments into nursing services, Braunstein continues. The State is called to the task here. According to Braunstein, the problems all over the world are similar:

So even though many countries are facing similar kinds of care deficits, right? as women’s roles continue to change and the demographics change, right? the age structures change. I think we’re also facing the prevailing economic incentives and structures are not really poised to deal with it and I think that that is the biggest macro-economic problem.

James Heintz reminded us that traditionally, care work rests on an implied old social contract according to which parents invest money and work for the benefit their children who in return, once they’ve reached an employable age, support the older generation. This social contract is now in danger. Uta Meier-Gräwe agreed and added that an aging population must be ready to invest not only in the economy, but also in nursing services. It is not sufficient to be the world champion in exports– the infrastructure of personal care also needs to be well-organized. And we must be prepared to invest a greater share of the gross national product in the care industry.

Professor Maria Floro from the American University in Washington DC points out the different conditions in industrialized and emerging countries. Of course, according to Floro, one cannot make generalized assumptions for all countries in the Global South; however, many countries there have problems with unregulated working conditions:

My impression of the global South: A lot of the workers are informal. There’s a general resistance for families to use institutionalized care because they don’t trust them. But it’s also being encouraged by the government because they don’t want to deal with this problem. If the family can take care of them, so much the better, we don’t have to spend any money. But there’s also a problem with the informal caregivers. Many of them are domestic workers working in middle-income and upper-income households. They are not in the purview of labor regulations, there’s no condition as to how long are the working days.

Bad pay for care work fosters shortage of skilled professionals

Ito Peng adds another aspect to the discussion, namely the appreciation of care work.

Often what happens is that with a low valuation of care work means that the wages of care workers are low, the working conditions of care workers are pretty bad and the occupational and social status of care workers are pretty low. And as a result a lot of people, even if they are available to work as care workers would not want to work as care workers.

In many countries, a shortage of care workers is compensated through labour migration. However, according to Peng, this does not solve, but just shifts the problem.

Overcoming outdated understandings of what kind of work generates value

In fact, the state and the economy could benefit; for if unpaid care work in Germany was measured based on a housekeeper’s salary, its unused economic potential would become clear. But care services are more than just an expense factor, Uta Meier-Gräwe continues:

The idea that only industry, trade and craft generate value and social services and service professions such as care work are merely a huge source of expenses is economically blindfolded. And we urgently have to offer a counterargument because this mindset is still very prevalent.

James Heintz develops this idea further and again underscores the huge economic potential hidden in care services.

If Germany’s estimating care work at 40% of GDP, and Korea has estimates at 30% of GDP, 40% of GDP, 30% of GDP, that’s bigger than the entire public sector of almost any economy! It is huge! And if we’re talking about professionalizing that, you know, let’s just say half of it gets professionalized, we’re talking about expenditures of, you know, 10% of GDP, 20% of GDP, and so when we’re talking about the role of the state and we’re imagining this other system, professionalized care provision, I don’t think we’re talking about marginal changes in the role of the state. I think we’re talking about a fundamental reorganization of the role of the state at a level that’s just gigantic.

This won’t be accomplished without a debate on wealth distribution, for some stakeholders who up to now had only gained will have to pay more. The discussions around climate protection make it amply clear how hard it will be to establish this. After all, this discussion is also about the human condition and its environment.

Integrating all kinds of care work into macro-economic models

But if the integration of care services into the macro-economic system can be accomplished, this will lead to further economic growth and greater equality. Maria Floro is optimistic in this regard:

The way we’re viewing how we’re going to integrate care is by the following: first we’ll make that unpaid care visible and part of the macro-economic measuring (of) the entire economy. Second, we want to show the link between the market where you produce goods and services that you pay for, and the unpaid care that women in particular do inside the household and, in developing countries, in the communities. And third, to illustrate that what you predict with your model when you integrate care economy into it is going to be different than when that care economy is absent. And that will have an impact on growth, it will also have an impact on inequality and definitely directly impact the goal of achieving gender equality.

In summary, the integration of care work into economic considerations will be an important step toward gender equality. The question remains what kind of society we’d like  to live in. For social justice also means caring for the welfare of other people and taking responsibility for society at large. This responsibility rests first and foremost upon society itself. But there also has to be a framework of rules. And these rules must be set by the state and the political executive.

Care work needs better support, fair payment, and more appreciation.