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.
About half of all the time devoted to work in the U.S. is devoted to unpaid work in the home. The Institute for New Economic Thinking has created an adorable animation of some comments I made in an interview with them on this topic a while back.
It’s quite a lot of fun, and basically accurate. Just don’t pay too much attention to the numbers they inserted into my discussion of two families, each with a market income of $50,000–the animation seems to imply that leisure should be assigned a monetary valuation–not something I advocate. Still, the main point comes through just fine: conventional measures provide a misleading picture of living standards.
The animation provides a great introduction to the topic for students, and you can find a more academic version of the basic argument in a short briefing paper I wrote for the Washington Center for Equitable Growth.
Original blog published on CARE TALK: FEMINIST AND POLITICAL ECONOMY on June 11, 2020. See here for the original posting.
Reposted with permission from Dr. Nancy Folbre from University of Massachusetts Amherst and an expert researcher for the Care Work and the Economy Project within the Rethinking Macroeconomics working group.
A social accounting matrix (SAM) is an economy-wide consistent representation of the payments in an economy, linking production, primary factors, and institutions (the latter often split into households, government, and the rest of the world). In the words of Round (2003), “it is a comprehensive, flexible, and dis-aggregated framework which elaborates and articulates the generation of income by activities of production and the distribution and redistribution of income between social and institutional groups.” Most of the time, a SAM refers to the economy of a country for one year. It may be used to describe the structure of an economy and as a data input to economic models, most importantly CGE models. This paper documents a gendered Social Accounting Matrix (SAM) for South Korea for 2014: the steps followed in its construction, the data sources, and what the SAM says about the economic structure of this country (for brevity from now on referred to as Korea), including gender, time use, and the role of households in providing care and other services provided by households. The SAM that is presented is the key data input to a forthcoming analysis of gender and care in Korea’s economy based on GEM Care, a computable general equilibrium (CGE) model.
At an aggregate level, the value-added in the GDP economy is roughly 86 percent of the total (with agriculture, industry, services accounting for 2, 33, and 51 percent, respectively) and the non-GDP economy 14 percent. This information may be contrasted with aggregate time shares in terms of which, the non-GDP economy accounts for a much larger share, 40 percent. If leisure also were included, then it would on its own account for 50 percent of total time, 53 percent for men and 47 percent for women. The share of time allocated to household activities are drastically different for men and women, 15 and 57 percent, respectively. For women, non-care household services comprise the largest time using activity by a wide margin, followed by household childcare, trade services, and hotel and restaurant services. For men, manufacturing dominates, followed by trade services, household non-care services, and construction. For agriculture and industry, the lesser educated dominate all activities except electricity for both men and women. For services, the differences across sectors are drastic with some dominated by those with high education and others by those with low. These are few of the many descriptive findings from the gendered SAM developed by the authors.
This paper will be available December 2019.
Since the 1990s, unpaid work and care have garnered increasing academic attention, creating the emerging fields of the economics of unpaid work and the study of “the care economy.” Most of the earlier work was oriented toward microeconomics, focusing on issues such as the household division of labor, subsistence production in developing countries, the substitution between non-market and market goods and services in households, and the role of caring motivations in sectors of the labor market in developed and developing countries. Empirical work paralleled these theoretical efforts. Examples include measuring unpaid work via time-use surveys across the world, estimating the monetary value or opportunity cost of unpaid work, and linking care with the gender–wage gap and gendered job segregation. Macroeconomic models exploring gender and economic development were rare, and even fewer macro studies examined care and unpaid work.
Braunstein et al. (2011) contributed to this literature by embedding unpaid work and care in a structuralist macro model, illustrating how the social structures of production matter for economic outcomes. Braunstein and Tavani (2019) recast a simplified version this model in order to generate policy implications through numerical simulation. The authors go beyond the standard utilization-labor share framing in structuralist models in order to focus on more direct measures of gender inequality and the gender composition of the labor force and of employment. The resulting producer’s equilibrium – which describes the supply side of the model – always features a positive relationship between economic activity and gender wage equality. The goods market equilibrium, or the investment-savings curve, can either be care-led or inequality-led. The model results accommodate a variety of scenarios. A reduction in non-market care time can foster both aggregate demand and gender equality, but under some conditions it is also possible that there are trade-offs between economic activity and gender equality.
This paper will be available in December 2019.
Impact of Investing in Social Care on Employment Generation, Time- and Income-Poverty and Gender Gaps: A Macro-Micro Policy Simulation for Turkey
Feminist economists have long emphasized the recognition, reduction and redistribution of unpaid care work (the so-called 3R strategy) as a primary policy intervention towards closing of the gender economic gaps. Investing in a social care infrastructure is an important component of the 3R strategy. Universal access to quality care services enables reduction of the unpaid work burden through its redistribution from the domestic sphere to the public sphere. Public investment and expenditure, however, is a question of fiscal policy at the helm of macroeconomists and policy-makers who are often gender blind and also adopt the mainstream approach of public expenditure constraint. Several waves of empirical research have examined the allocation of sectoral allocation of public expenditure through macro-micro simulations.
Yet until recently, studies have failed to explore an important outcome of investing in social care from a gender perspective, namely gendered patterns of time allocation. While investing in social care creates jobs for some women, enhances their access to employment and earnings, it also increases the requirements on their time through higher paid work hours. Simultaneous access to services alleviates the unpaid work burden of women with care dependent household members. The net welfare impact for different groups of women and men taking both time- and income-effects into consideration is an empirical question.
The forthcoming paper titled “Impact of Policy Interventions at Reduction and Redistribution of Unpaid Care Work On Employment Generation, Time- And Income-Poverty And Gender Gaps: A Macro-Micro Policy Simulation For Turkey” by Ilkkaracan, Kim, Masteron, Memis, and Zacharias uses an applied macro-micro simulation policy modelling approach to explore the gendered impact of increased public expenditures on social care service expansion on new employment and income generation, time allocation to paid versus unpaid work, time- and consumption poverty. An increase in social care spending triggers two types of effects at the household and individual level: It generates new jobs improving access of previously non-employed persons (predominantly women) to employment and income generation, but at the expense of increasing paid work time of job recipients. Simultaneously, improved access to childcare services reduces unpaid work time in the households with small children. The authors use a statistically matched data set from the 2015 Time Use Survey (TUS) and the Survey on Income and Living Conditions (SILC) in Turkey to assess the impacts on individual and household well-being, not only in terms of gains in employment and income, but also in terms of potential changes in household production responsibilities and time deficits.
The paper will be available December 2019