The Women’s Budget Group Commission on a Gender-Equal Economy, launched in February 2019, is an expert-led project aimed at developing economic policies that promote gender equality across the United Kingdom. The Commission utilizes a number of avenues and tools to achieve this objective, one of which is the recent release of the report “Spirals of Inequality: How Unpaid Care is at the Heart of Gender Inequalities.”
This first report released by the Commission seeks to trace the problem of how gender inequalities in the UK are produced and maintained by observing the problem through the following perspectives:
Unpaid Work: Women Continue to do the Lion’s Share
The unequal division of labor within unpaid care work is at the heart of gender inequality in the UK, with women taking on 60% of the unpaid work on average. This includes care work, cooking, and cleaning among other tasks.
This proportion of unpaid work has increased between 2000 and 2015. Seeing that unpaid work is indispensable to both the function of society and the economy, feminist economists have argued for unpaid work to have recognition in systems of national accounting. These campaigns have led to the UK Office for National Statistics to develop estimates; the most recent from 2014 valuing unpaid care work £1.01 trillion.
Limiting Opportunities for Paid Work: Women More Likely to Work Part-Time and Earn Less
This phenomenon puts a disproportionate strain on women and contributes to gender inequality. Mothers with young children are 3-4 times more likely to work part-time, and women, in general, are far more likely to be in precarious forms of employment such as temporary work. This is especially true for women of color. The part-time work conundrum is driving the gender gap, and on average women earn 43% less than men. Furthermore, a pay gap of 8.9% persists, further exacerbating this issue. Again, this being more predominate with women of color.
Despite women becoming increasingly educated, they persist in being overrepresented in low-wage sectors of the economy such as health and social work. Feminist economists have argued that a reason behind this is such sectors are viewed as an extension of a women’s “natural” work.
These issues create a perpetual cycle that allows for the inequality between men and women to continue.
Life Course Implications: Benefits Make Up a Larger Portion of Income and Austerity Hits Harder
Among single households living in poverty, those led by women make up for 86%. Furthermore, pensioners living alone are far more likely to be at the poverty level if that individual is a woman. Since tax reforms began in 2010 throughout the UK, women have also been hit hardest. These benefits make up a large portion of women’s incomes and cuts to these benefits and tax giveaways benefit those fitting into a higher wealth bracket.
Public Services: Women Hit Hardest by Cutbacks
Cuts to public spending throughout the UK have also hit women disproportionately hard, as women are most likely to utilize public services. The poorest families and especially those in poverty-level households led by women have taken a particularly bad hit; many single mothers have had to cut living standards by up to 10% as a result of a cut to public services between 2010 and 2017.
Furthermore, these cuts have put a greater burden on family members to provide care for the elderly members of their family, much of this falling onto female members. This often comes at the expense of their own employment.
Violence Against Women: “Cause and Consequence” of Women’s Economic Equality
All of the factors that lead to the economic disparity between men and women also make it increasingly difficult for women to leave abusive partners. Furthermore, poorer households have higher rates of domestic abuse, and this perpetuating poverty limits women’s options while increasing their vulnerability.
Moving Forward: Next Steps for the Commission
The WBG Commission on a Gender-Equal Economy is striving to develop an alternative economic approach aimed at addressing these issues. Through this initiative, they aim to build an economy that is desirable, economically feasible, and necessary for fairness, sustainability, and resilience. To learn more about the Commission and its work, sign up to attend the upcoming webinar “Creating a Caring Economy: A Call to Action” on September 30, 2020.
OECD Health Policy Studies has released a 2020 report “Who Cares? Attracting and Retaining Care Workers for the Elderly.” This report addresses a number of important issues while acknowledging the tremendous impact that COVID 19 has had on elderly people and their caretakers. Across OECD countries, more than one out of every six individuals is above the age of 65, and of those roughly 60% live with multiple chronic conditions, making them even more susceptible to the potentially deadly impacts of the virus. Furthermore, many elderly individuals struggle with sufficient access to social support and lack the ability to properly deal with the mental strain of living in a world being affected by a global pandemic.
Beyond these strains, there is a crisis in workforce shortcomings of the Long Term Care (LTC) Sector, which becomes even more problematic in light of the fact that an estimated 50% of COVID 19 related deaths are occurring in LTC facilities. This OECD report begins by addressing many of these shortfalls within the LTC sector, and policies that have the potential to address them.
Within three-quarters of OECD countries, the aging population has outpaced the workforce within the sector since 2011. This is the case even in the countries that have a higher workforce supply than the OECD average such as Japan and the U.S. Within the sector, women make up 90% of the LTC workforce. Attracting a younger workforce has been particularly difficult, and on top of that maintaining workers over the age of 50 is also a challenge. This is even more concerning given that the median age of LTC workers is currently 45.
Many OECD nations have made moves toward relocating their elderly out of facilities and back into the community. This is provoked by the desire to match the preferences of their elderly populations with home-based care, in addition to containing LTC spending. However, a lack of home-based workers has made this challenging, and LTC institution-based workers remain representative of the sector’s workforce across the OECD. This is in large part due to the fact that these institutions cater to the most disabled, which requires a larger workforce. Furthermore, many community-based solutions are not yet equipped to take in these types of complex cases.
The aging of the postwar “baby boom” generation is a factor that will contribute to the increased need for LTC workforce. This also contributes to the predicted increase in labor shortages in the sector to meet the needs of this population going forward. Further, unpaid informal care workers, like that of family members that would care for this aging population, have seen an increase in their own professional workload burdens. When the workload of professional life and caretaking becomes too great, LTC facilities are a means in which to relieve some of that strain. Additionally, as birth rates decline, families become smaller and more women are pursuing professional endeavors, the availability of informal caregivers for the aging population decreases looking into the future. This contributes to another foreseen LTC workforce shortage in the future.
These shortages call for an increase in recruitment within the LTC sector. As the sector workforce ages, attracting younger workers has proven difficult as they, mostly women, are drawn to sectors that have a more appealing image such as a child or hospital care. Additionally, LTC jobs are still widely considered to be feminine positions, and the sentiment on this subject matter has been slow to change.
Foreign-born workers play a significant role in recruiting and retaining LTC workforce. They are highly over representative within LTC across the OECD when compared to other care sectors, and many of them are young, Often, they tend to come into the sector with high levels of skill sets, even overqualified. Micro-econometric analysis has shown that in the U.S. and the UK, these foreign-born workers have higher retention rates than others within the sector.
In terms of recruitment, drumming up interest in the available positions is also problematic. In some cases, many vacancies receive no applications at all. On top of this, recruiters often have a difficult time identifying qualified candidates out of those that do apply.
In order to address this, many countries have focused on four main policies:
– Target recruitment to the traditional pool
– Improve the Image of the sector
-Recruit outside the traditional pool
-Increase the recruitment of for foreign-born workers
Overall, better policies are needed in order to improve recruitment within the LTC sector, and thus far few OECD nations have implemented policies in order to do so. By addressing these issues addressed within the first section of this report, there is potential for effective improvement.
On Wednesday, September 30th at 10:00 -11:30 am BST, the Women’s Budget Group (WBG) will be a hosting a webinar titled “Creating a Care Economy” which will discuss the work being done within the Commission on a Gender-Equal Economy and the launch of its digital final report. This report comes at a unique time in our history, amidst a devastating global pandemic and on the brink of a harsh economic recession. The commission has taken this unprecedented time to pose the question: “do we really want to go back to business as usual?”
The Women’s Budget Group, (WBG) based out the United Kingdom, is an independent network of policy experts, academic researchers, and campaigners, harboring a vision of a “caring economy that promotes gender equality.” This non-profit organization works hard toward producing vigorous analysis intended to influence policymakers while also building the knowledge and confidence of individuals to talk about feminist economics. WBG achieves this through offering training and creating resources that are accessible and informative.
In February of 2019, WBG launched the Commission on a Gender-Equal Economy. This project works proactively to develop policies that promote gender equality across the UK, and is the first of its kind. This commission is chaired by Diane Elson.
The commission has thus far produced a number of helpful resources. To begin they have produced a short video entitled Spirals of Inequality which delves into how unpaid care is at the heart of gender inequality. This video is also accompanied by a short brief and a longer, more in-depth accompanying paper. They also have an ongoing blog, and have commissioned a number of papers focusing on four areas: Public Services, Social Security and Taxation, and an Enabling Environment. Additionally, they have gathered a number of calls for evidence, which collects evidence from many experts in varying sectors.
The final report that will be explored within this upcoming webinar will lay out a roadmap in which to build a more caring economy, outlining out the how, the why, and acting as a call to action across all the four nations encompassed within the United Kingdom.
Learn more and register for the webinar here.
Joe Biden has officially accepted the Democratic Presidential nomination, and he and his team plan to make substantial investments in the infrastructure of care in the U.S. if he wins in the Presidential election. The potential of this plan to provide much-needed support for care workers, both paid and unpaid, is more important than ever amidst the pandemic.
Even prior to this pandemic, the U.S. has long suffered a caregiving crisis. Family caregiving needs often come with incredible financial, emotional, and professional burdens. Professional caregivers, disproportionately women of color, have long been underpaid and undervalued. The pandemic has exacerbated these issues, leaving parents struggling to find the care services needed while juggling careers. There are a number of measures that have been proposed by the Biden team to address the many issues currently plaguing the overall care system in the U.S. today.
Elderly individuals in nursing homes are feeling an increasing need to be cared for at home rather than in community living situations where they are more vulnerable to COVID-19 exposure. The Biden care plan addresses this by aiming to close the existing Medicaid gap to allow for home and community-based care services while creating a state innovation fund for cost-effective direct care services. This will provide more affordable and accessible care on that front. This step will also help to alleviate the extensive waitlists now existing for those under Medicaid to enter home and community care programs, providing these services for 800,000 individuals. If implemented properly, this initiative allows the opportunity to provide more functional care systems that grant greater independence to elderly individuals, while also freeing many unpaid care workers, such as family members, to pursue professional endeavors.
This plan also proposes increasing wages and benefits for caregivers and early childhood educators while providing opportunities for training, professional growth, and unions. This particular initiative takes into consideration the fact that early childhood development is incredibly important, and quality childcare is essential for children to grow into healthy, productive members of society. Universal preschool will also be provided via tax credits and sliding scale programs. Furthermore, included is an investment into safe and developmentally appropriate childcare facilities, including bonus pay for those providers that operate non-traditional hours, such as early mornings, late evening, and weekends. By increasing access to childcare centers with more flexible hours, the burden for many families will be lifted; currently, many parents that don’t work traditional Monday through Friday hours are left scrambling to find adequate care. These initiatives overall will have significant positive impacts on working parents, particularly women. Far too often, women find themselves sacrificing professional progression and development due to the constraint of inadequate or unaffordable childcare.
For those parents who grapple with the decision to further their education as a result of unaffordable and reliable care, investment in childcare centers at community colleges is also included in this plan.
Lastly, expanding the awareness of the Department of Defense fee assistance childcare programs so that all military spouses have the ability to pursue their professional development and education.
In order to pay for these initiatives, the Biden team has estimated a cost of $775 billion over the span of ten years, to be funded by rolling back certain tax breaks for those earning over $400,000 annually. A $5000 tax credit or Social Security credits for those providing unpaid care for members of their family is also proposed. Further, the plan seeks to offer low- and middle-class families up to $8000 in tax credits to assist in paying for childcare. For those that choose not to claim this credit, high-quality care is to be provided on a sliding scale, where it is estimated that families will not pay over $45 per week.
Although this plan is incredibly ambitious, and its implementation is not a guarantee, it sets a precedent that has been long lacking within the U.S. care work sphere. Implementation of these initiatives on any scale would prove beneficial to both the paid and unpaid care economy.
A growing concern in many countries is an aging population and an increase in the number of elderly in need of long-term care. However, the impact of elderly care on the well-being of care providers remains relatively understudied. One of the primary factors which complicate analysis is that a majority of elderly care is provided informally by family members, with adult children often comprising the largest share of care providers. The pervasiveness of unpaid care due to cultural or family ties has even limited the development of long-term care insurance in economically advanced regions like Europe. However, while children may provide an informal safety net, parental caregiving is a time-intensive task and must be met by adjustments in leisure or work hours on the part of the care provider. Hence, in order to understand the full macroeconomic implications of growing elderly care needs and the appropriate policy response, it is imperative to understand how households cope with these caregiving needs.
Economic models of elderly care have focused almost exclusively on inter-generational bargaining between parents and children or bargaining among siblings. However, little attention has been paid to the influence of care demands on the power dynamics between partners within a household (e.g. husband and wife). This is despite data showing that caregiving falls disproportionately on women and that some caregivers respond to increased parental care needs by reducing work hours, taking more flexible jobs, or by quitting paid work entirely. Moreover, caregiving may have spillover effects on the caregiver’s spouse or partner. For example, a spouse may work longer hours or reduce their spending to cope with fewer hours of paid work by the caregiver. So it is unclear to what extent partners reallocate their time and resources and share the burden of parental care needs when they arise.
In the study detailed in the CWE-GAM working series paper published May 2020, we develop a theoretical model to explore how unpaid parental caregiving can affect the allocation of time and resources across partners under different household power structures. As parental caregiving disproportionately falls on daughters, we consider a model in which a woman’s parent is in need of time-intensive care. The provision of care across partners is then a bargained outcome between the couple. We not only examine how power dynamics and work arrangements impact caregivers and their partners but also how these factors may influence unmet care needs and care recipients.
After developing our model, we use cross-country data from the Survey of Health, Age-ing, and Retirement in Europe (SHARE) to illustrate our theoretical concepts with some numerical exercises. Broadly our results indicate caregivers may face a “triple burden” of market work, domestic chores, and caregiving. For example, our model predicts that for a duel-earning couple in France, the total cost of unpaid parental caregiving to the male is only about 57% that of their female partner—a skewed but shared burden. The higher cost to the female stems from two sources; (1) relatively fewer hours of leisure due to her provision of unpaid care; (2) the additional mental or emotional cost of leaving her parent with some level of unmet care needs.
Overall, our theoretical and numerical results show that ignoring bargaining power differentials across partners can misrepresent the true cost of unpaid parental caregiving by not taking into account the uneven distributional consequences. Moreover, our cross-country findings suggest that lower female bargaining power results in a larger burden on female caregivers and additional unmet care needs for their parents. If bargaining power is determined by relative earnings, government policies subsidizing long-term care could decrease the well-being gap within a household by providing financial relief and improving the bargaining position of the caregiver. This could further result in reduced levels of unmet care needs and improved outcomes for elderly care recipients. We further show that inflexible work arrangements also exacerbate the total cost of unpaid caregiving to the household as well as the unequal distribution of the burden. This implies policies that promote flexibility, such as caregiver leave or part-time options, could provide substantial relief, particularly to high-intensity caregivers.
This blog was authored by Ray Miller and Neha Bairoliya, who are both expert researchers for the Care Work and the Economy Project within the Rethinking Macroeconomics working group. To learn more read the CWE-GAM working paper upon which this blog was based here.
Reflections on The Effects of Public Social Infrastructure and Gender Equality on Output and Employment in South Korea
In terms of “Economic Participation and Opportunity” South Korea is one of the lowest-ranked countries in the world (124th out of 149 countries) as of 2018. Global Gender Gap Index also shows that South Korea ranks 88th in terms of female labour force participation and 121st in terms of gender wage equality for similar work. The average wages of women in South Korea are on average 36.7% lower than average male wages (as of 2012, Oyvat and Onaran, 2020). Hence, there is a significant economic gender gap in South Korea despite the fact that the country is now classified as a high-income economy. Moreover, the underdeveloped care infrastructure and reliance on unpaid care labour of women is posing serious demographic and social sustainability challenges in an aging society.
Our new research analyses the effects of public social expenditure in education, health and social care and closing gender pay gap on aggregate output and female and male employment (Oyvat and Onaran, 2020). We introduce a structuralist gendered model of the demand and supply sides of the economy with endogenous productivity, labour supply and wage bargaining. Empirically, we use a structural vector autoregression (SVAR) analysis to econometrically estimate the effects of an increase in social infrastructure spending, female and male wages, and closing the gender pay gap on aggregate output and employment of men and women in South Korea for the period of 1970-2012.
Public social expenditure, specifically education played an important role in the rise of South Korean economy. The social sector has not only been a sector that is crucial for economic growth in South Korea, but it has also been important for generating female employment and closing gender employment gaps. The share of women in employment in the social sector (education, healthcare and social care) has been greater than in the rest of the economy since the 1970s. The share of female employment in the social sector in South Korea increased from 47.4% during the period of 1988-1997 to 58.3% in 1998-2007 and to 63.2% in 2008-2012. In contrast, the share of female employment in the rest of the non-agricultural economy is only 27.7% in 1998-2007 and 28.4% in 2008-2012. The female employment share even in sectors which traditionally had a high female employment such as food, beverages, tobacco, textiles, leather, and footwear or electrical and optical equipment have been steadily declining and is lower than the female employment share in the social sector in the post-1998 period.
Our theoretical framework identifies the possible channels through which public social spending influences total output, male and female employment. In the short-run, the increase in public social spending has a positive effect on total output and female and male employment. While higher social public expenditure may increase public debt/GDP in the short-run, this negative effect is moderated as tax revenues also increase alongside aggregate income, which in turn offsets any potential crowding out effect on private investment. As the female employment share is significantly larger in the social sector than in the rest of the economy, higher public social expenditure is expected to reduce the gender employment gap.
In the medium-run, higher public social expenditure is expected to have not only a direct positive effect on labour productivity, but also an indirect positive effect through i) higher output and benefits of increasing returns to scale; ii) higher wages creating incentives for adopting labour-saving technologies; and iii) higher private expenditure in education, health and social care by the households as income, in particular female income increases. Due to these effects on productivity, we refer to public social expenditure as social infrastructure investment.
Figure 1: The cumulative impact of a 1% increase in social expenditure (YH) on aggregate non-agricultural output (Y)
The estimation results show that a 1% increase in the public social expenditure in South Korea increases non-agricultural output by 0.5% contemporaneously, and by 2.3% in cumulative over six years and 2.9% over ten years (Figure 1). As a result female and male employment increase contemporaneously by 0.7% and 0.1% respectively (Figure 2). The short-run impact is larger for female employment as the share of women is significantly higher in the social sector compared to the rest of the non-agricultural sector. In ten years female and male employment increase by 2.2% and 2.9% respectively. Finally, labour productivity increases by 0.22% over four years.
Figure 2: The cumulative impact of a 1% increase in social expenditure (YH)on female (EF) and male employment (EM)
The results also show that an increase in female wage rate has a significant positive effect on output. A 1% increase in female wages leads to a cumulative increase in output by 0.2% in year 3 and by 0.3% over 10 years. This shows that the South Korean economy is female wage-led/gender equality-led in the medium-run; hence higher equality is conducive to growth and development. The cumulative impact of a 1% increase in the male wage rate on output is 0.2% over 10 years. It is also important to emphasize that higher male wages are not an impediment to growth in South Korea. The results also indicate the importance of improving gender equality as part of an equality-led development policy.
Our research shows that an equitable development path in which both average wages increase and gender gaps close via an upward convergence in the wages of men and women is possible in South Korea. However, the effects from wages are economically small in comparison to the strong effects of social spending. The results indicate that sustainable equitable development and a substantial increase in employment requires a mix of both labour market and fiscal policies.
This blog is authored by Cem Oyvat and Özlem Onaran are both expert researchers for the Care Work and the Economy Project within the Rethinking Macroeconomics working group. To learn more read the CWE-GAM working paper upon which this blog was based here.
Despite notable progress in recent decades (including in primary school enrolment and access to the political system), gender gaps remain pervasive in rich and poor countries alike. In many developing economies, gaps in secondary and tertiary education, access to finance and health care, labor force participation, formal sector employment, entrepreneurship and earnings, remain large. In today’s low- and middle-income countries for instance, the labor force participation rate for women is only 57 percent, compared to 85 percent for men. Women’s share in the formal sector employment remains low and in recent years has even fallen in some cases. On average, women workers earn about three-quarters of what men earn. In Sub-Saharan Africa more specifically, women still have fewer years of education and fewer skills than men; and learning gaps remain large. Wage and employment gaps in certain occupations (particularly in managerial positions) and activities, and gaps in access to justice and political representation, also remain sizable.
In recent years formal academic research has shed new light on the causes of gender gaps and their consequences for economic growth. The mainstream analytical literature has identified several channels through which gender inequality may affect growth. One of them is the infrastructure-time allocation channel, which emphasizes the fact that, in addition to the conventional positive effects on factor productivity and private investment, improved access to infrastructure reduces the time that women allocate to household chores, and this may, in turn, allow them to devote more time to remunerated labor market activities. In addition, infrastructure may also have a significant impact on health and education outcomes, for both men and women, which may in turn affect their productivity, relative earnings, and indirectly the allocation of time within the family.
CWE-GAM working paper Access to Infrastructure, Women’s Time Allocation, and Economic Growth further explores how improved access to infrastructure affects women’s time allocation decisions and how, in turn, changes in these decisions affect the process of economic growth in low-income developing countries. To do so it develops a simple two-period, gender-based overlapping generations model with public capital to explore the implications of public infrastructure on women’s time allocation and growth. The focus is on the specific impact of access to public infrastructure services (whose supply can be directly influenced by policy decisions) on female time allocation decisions between market work and home production, and its interactions with economic growth. As in some existing contributions, the basic model accounts not only for the standard productivity effect of public infrastructure but also for its effect on home production and occupational choices. In addition, the case where gender bias and bargaining power, as well as fertility choices and rearing time, are endogenous, and the case where there are two types of infrastructure, physical infrastructure (which includes transport, water supply, and sanitation, telecommunications, and energy) and social infrastructure (which includes the provision of maternal care), are also considered.
The analysis shows that by inducing women to reallocate time away from home production activities and toward market work, improved government provision of infrastructure services—assuming a sufficient degree of efficiency—may help to trigger a process through which a poor country may escape from a low-growth trap. This result is in line with those established in a number of recent contributions. It is also shown that with endogenous gender bias and bargaining power, there are two additional channels through which improved access to infrastructure can affect growth: positive effects on the level and rate of savings, which tends to promote growth. However, the increase in both the public and capital stocks implies that the net effect on the public-private capital ratio, and thus women’s time allocation, is ambiguous in general. This is due to the fact that higher private capital stock increases congestion costs, which tend to lower the public-private capital ratio. By implication, the net effect on gender equality in the market place, and economic growth, is now also ambiguous. Thus, improved access to infrastructure may not always be beneficial.
With endogenous fertility and child-rearing, improved access to infrastructure may raise the fertility rate and total rearing time, thereby mitigating the positive effect on women’s time allocated to market work. However, this effect is not robust. In addition, if there is a positive externality associated with improved access to infrastructure, this may lead not only to a reduction in time allocated to household chores but also to a reduction in total time allocated to child-rearing. In turn, this may lead to women allocating more time to market work, thereby promoting growth. Finally, the analysis highlights the fact that although the physical and social infrastructure is complementary at the microeconomic level, a trade-off exists at the macroeconomic level as a result of the government’s budget constraint. The optimal policy that internalizes this trade-off must account for the relative efficiency of investment in these two types of assets.
This blog is authored by Pierre-Richard Agénor and Madina Agénor who are both expert researchers for the Care Work and the Economy Project within the Rethinking Macroeconomics working group.
I have despised macroeconomics–even relatively innovative, post-Keynesian, gender-infused versions—for many years, for two big reasons. First, macro remains largely focused on an output variable, Gross Domestic Product, that systematically mismeasures the total value of material goods and services produced. Second, it treats the quantity of one of its most important inputs, labor, as exogenously given and/or relatively unimportant.
This is so wrong. Economies cannot be reduced to the production of commodities by means of commodities. They should be understood, more broadly, as the production of people by means of people. My collaborator James Heintz develops this critique in exceptionally clear and accessible terms in his new book The Economy’s Other Half. All of the participants in the Gender and Macro project under the rubric of the Care Work and The Economy project are, in one way or another, subverting the conventional paradigm.
They have actually taught me to love macroeconomics by showing how analytical models can enrich narrative accounts of social reproduction. I got so inspired that I actually sat in on a graduate course (taught by none other than James Heintz) and reviewed my calculus.
I went back and read some classic articles by Paul Samuelson and others explaining why intergenerational transfers (including the support and care of children and the elderly) cannot be organized by voluntary exchange.
James and I outlined some of the ways economists have conceptualized expenditures on children in a joint paper published in the Basque journal Ekonomiaz (also available on the Political Economy Research Institute website). Most recently, he took the lead on another joint paper that explains long-run macro models minimize the importance of demographic change (“Endogenous Growth, Population Dynamics, and Returns to Scale: Long-Run Macroeconomics When Demography Matters”).
It seems pretty obvious that models treating population growth as exogenous ignore the most important link between the family economy and the market economy. It is far less obvious that assumptions regarding constant returns to scale in production functions can have similar implications. Our paper explains why this is the case. It also develops an endogenous growth model that highlights the potentially negative macroeconomic effects of population growth rates that are either “too low” or “too high.” Microeconomic decisions don’t always magically lead to good macroeconomic outcomes.
The below-replacement fertility rates now common to many countries, including the U.S., Italy, Spain, Korea, and China, can potentially have negative macroeconomic implications, as can the high fertility rates characteristic of many sub-Saharan countries. In a sequel to this paper, we plan to develop its microeconomic foundations more fully, demonstrating the macroeconomic effects of public policies such as parental allowances and paid family leaves as well as changes in women’s bargaining power in the home. This model could also bring immigration policies into the macroeconomic limelight.
Who knew that macro could be so much fun?
Dr. Nancy Folbre is from University of Massachusetts Amherst and an expert researcher for the Care Work and the Economy Project within the Rethinking Macroeconomics working group.
With rollback of the developmental state under the neoliberal policy regime, financial inclusion has come to be adopted as a developmental strategy. Micro-credit schemes, which were initially promoted as tools for gender-empowerment and poverty alleviation, have in the process become increasingly absorbed within the sphere of mainstream private finance. The relatively low rates of default in this sector have attracted an influx of funds from profit oriented financial institutions. The focus has shifted from the sustainability of income generation for borrowers to that of the profitability of the lending institution. Given the higher transaction costs associated with small loans and extending outreach to marginal low income households this change of focus has undermined the social mission of microfinance to reach the poorest and most neglected households. Social priorities are being subordinated to commercial considerations.
The impact of micro-credit on both poverty and gender relations has been extensively studied. However, the implications of the growth of micro-credit for the care-economy, and their repercussions in the wider macro-economy have received less analytical attention. The neglect of the implication microfinance for the provision of care labor is surprising in the light of the original mission of microfinance, which targeted the female worker in rural areas in developing countries, with less access to earning opportunities and disproportionate responsibility for the care work. The increase in market labor implies a claim on the time of working women. In the absence of social provisioning of care, this claim on the labor time of women could lead to a squeeze on the time of rural working women
A simple two-sector post-Keynesian model allows the integration of the role of demand and care work into the analysis of microfinance. This investigation demonstrates is that micro financed enterprises face a structural constraint on the demand side from overall macroeconomic conditions, and on the supply side from the responsibility for unpaid care work borne by the female beneficiary of microfinance. Paradoxically, microfinance has been espoused as a developmental strategy in precisely the period when the role of the developmental state has been eclipsed, and cutbacks in public spending on care provisioning have been prescribed.
Slowdowns in the wider economy, would lower the demand for the output of the microfinance sector, and hence undermine the viability of these enterprises. The capacity of the microfinance sector to provide the impetus to broader demand growth in the economy is likely to be more limited in the absence of public policies to stimulate demand and investment. The capacity of microfinance to alleviate poverty and lift incomes is thus dependent on conditions in, and linkages with the wider macroeconomy. A vibrant and stable macroeconomy is the only sustainable basis for a stable microfinance sector.
We also draw attention to some of the complexities of the impact of microfinance on the provision of care. The home-based nature of microenterprises perpetuates the gendered asymmetries of care responsibility within the household. While higher female earnings can alleviate the burden of care by making care work more effective and by enabling the market to substitute for unpaid care, at the lower income levels and in a context of the inadequate social provision of care the gendered responsibility for care remains a critical constraint for the female beneficiary of micro-finance.
Some clear policy prescriptions emerge from this investigation. Donors and development agencies have been encouraging raising interest rates in order to ensure the viability and profitability of microfinance lenders. Our model suggests that high-interest rates will actually undermine the scope of microfinance as a path to better and sustainable livelihoods for poor households in rural areas. Higher interest rates in this sector impose a higher burden on the labor time of the female worker with a consequent squeeze of care-labor or the own labor time.
More significantly, the analysis suggests that microfinance cannot be an effective path to poverty alleviation or gender empowerment unless it is backed by investment in the social provisioning of care. The success of microfinance as a developmental strategy depends on wider policies that support demand and the social provision of care. There is, in the final analysis, no substitute for a developmental strategy based on public investment in support of both job creation and social provision of care.
This blog was authored by Ramaa Vasudevan and Srinivas Raghavendran are both expert researchers for the Care Work and the Economy Project within the Rethinking Macroeconomics working group. To learn more read the CWE-GAM working paper upon which this blog was based here.
Bringing Together Research, Civil Society, and Policy Communities to Advance the Policy Discussion on Care in South Korea
Hyun Lim Lee, kindergarten teacher and organizer for the Childcare Workers Chapter of the Korean Confederation of Trade Unions, stood in front of the room full of civil society organization representatives and Korean and international researchers. She is passionate about her job as a kindergarten teacher and passionate about the need to improve working conditions for caregivers in South Korea. She told the group about the challenges she faces as a kindergarten teacher, explaining how the high child-to-caregiver ratio and long hours without breaks make it difficult to provide quality care. She shared how low pay and poor benefits have made it challenging to attract and retain early education teachers in the country. Lee is one of 35 participants who came together on February 25, 2019 in Seoul, South Korea to kick-off a new project led by Care Work and the Economy (CWE-GAM) and its partner Seoul National University (SNU). The event brought together organizations working to support the power of care workers in South Korea with researchers from academia and the government to discuss the issues and challenges in getting care on the policy agenda to promote informed policies that enhance the quality of life of both those providing and receiving care.
Society Cannot Exist Without Care. The Economy Cannot Exist Without Care.
As Ito Peng, Professor at the University of Toronto, stressed at the February 25 kick-off conference: “Society cannot exist without care. The economy cannot exist without care.” Caring for children, the elderly, and other dependents is a vital form of work that sustains human existence, enhances individual and broader societal well-being, and promotes sustainable development. Despite producing tremendous benefits for individuals, families, and communities, care work is enormously undervalued. Peng’s concluding remarks at the conference highlighted how “we often say care is invisible, but what care workers shared with us at today’s conference shows that care is actually very visible – care is being provided all the time – it is just something people refuse to see.” This leaves paid formal caregivers, like Hyun Lim Lee, feeling underfunded and overstretched. And informal family caregivers, who are mostly women in South Korea and around the world, are left struggling to balance their care responsibilities with working conditions and career paths that tend to ignore other, non-work obligations.
CWE-GAM, a network of over 35 researchers, is producing new data and empirical evidence and developing policy tools to advance our understanding of care work, care arrangements, and policy impacts on growth, distribution, and gender equality in South Korea. The project has undertaken a national survey of paid care workers (600 respondents) that includes a 24-hour time use diary, a nationally representative household survey of families responsible for caring for children and/or elderly (1,000 respondents), and in-depth interviews with caregivers and care recipients (90 respondents). The research will provide rich information on paid caregivers – illuminating their working conditions, well-being, and providing detail on the types of activities they undertake. The research also will provide robust data on families in South Korea and how they arrange, provide, and share care responsibilities within the household. A signature output of this work is the development of new macroeconomic tools to guide decisions on fiscal policies and public investments to reduce and redistribute unpaid care work. The project will use our new data in conjunction with existing data to develop a macroeconomic model of South Korea that incorporates care to allow for a more comprehensive understanding of how specific social and economic policies impact economic, welfare and distributional outcomes.
To ensure that this research is used to inform policy design, implementation, and evaluation, CWE-GAM’s new project will convene civil society organizations, researchers, and policymakers over the next year. The first conference on February 25 developed a strong dialogue between care and women’s rights focused civil society organizations, the broader research community in South Korea, and researchers concerned with issues of care and women’s and care workers’ rights internationally. Representatives from more than 12 civil society organizations and researchers from four distinct universities as well as institutions like IOM Migration Research and Training Centre, Korea Women’s Development Institute, Korea Institute of Child Care and Education, and Population Association of Korea spent the day together to articulate and better understand the challenges facing South Korea in providing quality care as well as the challenges care workers face, ranging from issues related to well-being in their jobs to job and income insecurity.
The meeting was an incredible first-step in a long-term commitment to bring together research, civil society, and policy communities to advance the policy discussion on care in South Korea. Over the next year, the CWE-GAM team, led by SNU, will convene several small group workshops around the country and will host two more interactive conferences as well as a high-profile policy dialogue in Seoul in the Spring of 2020. The aim of the engagement is to:
- Support the strategic use of our research and build the capacity of groups to use research more effectively;
- Provide insights into the production of our research outputs and research-based materials; and
- Share research findings, policy recommendations, and strengthen relationships among groups and between the civil society, research, and policy communities;
The project aims to build connections among and between these communities. The hope is that working collaboratively to ensure we are producing the data and research needed by those on the frontlines working to change policy and practice will lead to more informed policies that better address the needs to those providing and receiving care.