Should unpaid housework and the like be taken into consideration when using GDP?

[Aimless]

In many different situations, we find ourselves using GDP as a part of analyses of eg. social issues, policies, legislation, forecasts etc.

GDP has its advantages and disadvantages. In what situations, if any, would it be useful or interesting to supplement (or adjust) GDP with an estimate of the total value of unpaid work such as housework, taking care of sick relatives etc?

[Loki]

Would it be at all meaningful? Should we pretend that people in sub-Saharan Africa are wealthier than they are because nearly all of their women spend most of their time doing housework? The point of GDP is to measure economic production, not the amount of great stuff that people do.

[Wraith]

Roughly the same question as Loki: What's the point here?

[Dreadnaught]

Yeah, I sorta agree -- while in theory housework could save households costs, on the flip side when both members of the household work they bring in more income and produce more.

[wiggin]

Would it be at all meaningful? Should we pretend that people in sub-Saharan Africa are wealthier than they are because nearly all of their women spend most of their time doing housework? The point of GDP is to measure economic production, not the amount of great stuff that people do.

Yeah, I sorta agree -- while in theory housework could save households costs, on the flip side when both members of the household work they bring in more income and produce more.

I think there's a useful point here to think about. There has been a historic shift in the last century in labor pools, as more and more women leave traditional housework roles and move into the labor force. Yet someone still needs to do all of that housework, childcare, elderly care, etc. When a wife is replaced by a nanny, day care, nursing home, and maid, those services are considered economic activity and added to GDP. So you end up getting a remarkable increase in GDP that may mask the fact that much of the work was already being done, but hidden from GDP statistics. Including this in GDP numbers could conceivably allow us to get a better feel for the impact on economic productivity of shifting women into the workforce and out of the home... and would also yield important insights into the value of specialization. A stay-at-home mom is not particularly specialized, so her productivity may be quite low from a GDP perspective. Put the babies in a daycare, the grandparents in a home, and farm out cleaning/cooking to high-throughput, efficient workers, and stick the mom in her own specialty, and you're likely to get much more productivity. Including housework is a way to capture this quantitatively.

Rebasing GDP numbers to include e.g. illegal services (prostitution, drugs, etc.) or R&D (as an investment) doesn't actually change the economy at all. But it helps to quantify economic activity that is happening, and study how various policies and situations affect things. It's a useful tool for analyzing things, that's all. Whether including housework is important enough is an open question, but I see the argument in favor of it.

[Loki]

The thing is that when women are all working at home, very few would actually pay for housework. That means they're effectively doing work that's worth nothing on the market. I.E. It shouldn't add to GDP.

[wiggin]

The thing is that when women are all working at home, very few would actually pay for housework. That means they're effectively doing work that's worth nothing on the market. I.E. It shouldn't add to GDP.

I'm not sure I follow that logic. They wouldn't pay for housework because they're doing it, just like a dentist might not pay for their own family's dental care. It doesn't mean the work doesn't have value. There's a clear opportunity cost in doing unspecialized housework, but the value of that work isn't zero. If the mother doesn't do it, someone will have to, and that work certainly is worth something on the market.

I think this is a semantic argument. GDP is what we say it is, and it's just a useful tool for evaluating the size of an economy. Does understanding and quantifying the dynamics of housework vs. specialization (and the increased productivity of housework given the advent of labor-saving devices) add to our understanding of GDP? Then great, include it. If we think it doesn't add much of significance, we shouldn't include it. We aren't forced into slavish adherence to some theoretical ideal of what GDP means.

[Loki]

Things are valued at how much they're worth on the market, not how much they should be worth. If in one society, no one's willing to pay for x, then it's ridiculous to pretend that it adds to a country's economy. GDP is not meant to measure opportunity cost. And frankly, that would be an odd measure to use for a country's economic well-being anyway. You're basically measuring what people could be doing, not what they're actually doing.

[Flixy]

Things are valued at how much they're worth on the market, not how much they should be worth. If in one society, no one's willing to pay for x, then it's ridiculous to pretend that it adds to a country's economy. GDP is not meant to measure opportunity cost. And frankly, that would be an odd measure to use for a country's economic well-being anyway. You're basically measuring what people could be doing, not what they're actually doing.

I don't think so - if, say, someone's housework would on the market be done for 10$/day, but they do it themselves, surely that also has value. Plus, if they start working now, the GDP changes by how much they make PLUS the housework that is done by someone else, while that work was already being done.

Of course valuating work that isn't actually paid is tricky.

[wiggin]

Not at all, you're not measuring opportunity cost; that's just an implied outcome from comparisons between economies with different workforce participation. I'm saying that GDP currently assumes that the opportunity cost of a woman moving from the home into the labor market is zero or even negative. I.e. the woman was producing no economic activity beforehand, and now she's producing AND the people they're hiring to replace her work is producing. This flatters the boost in GDP and may be distortionary when valuing the shift of women into the formal workforce.

Regardless, people are very much willing to pay for childcare, and elderly care, and cooking and cleaning. Just because most of a country can't afford the going rate doesn't mean that it doesn't have a market value (and almost invariably there is a small market for said services among an elite). I find the idea that informal labor doesn't contribute to GDP to be odd. Do subsistence farmers who don't sell their goods on the market not get their productivity counted in GDP? No one in their area can afford to pay for food, since they're ALL subsistence farmers, and certainly no one's going to pay for it given transport costs. But they're still producing, albeit inefficiently.

[Dreadnaught]

Except their absence from the home creates value that wasn't there before -- and presumably they are earning/producing more over the long-run than the value of the housework they are paying for, right?

[wiggin]

Agreed, and including the value of the housework in GDP would show just how much more productive women get when they specialize.

[GGT]

There's no such thing as "unpaid housework". Is it fully recognized by economists or legislators or statisticians making "GDP" numbers? Probably not. They can't even compare the price of strawberries using illegal workers, or our 'voluntary' tip system....those are enterprises left to shadow markets.

Does a GDP reflect national priorities?

[LittleFuzzy]

The impression I have, Minx, is that it would really just be academic trivia. Things like housework, home repair, garage-tinkering, and most of our recreational activities could be considered economic activities, but they don't produce anything nor will they generally lead to any transactions which simulate producing things, or lead to producing something through later transactions. When you pay someone to do those tasks you do simulate production or create a transaction which will do so. It's not the work which contributes to GDP, it's the money which allows other things to do so. Money that is held onto is not part of GDP.

As Loki says, if you're interested in the opportunity cost of these activities it's relevant, though I would call it trivia because while the economists don't track it, on a micro level the individual households most certainly do and are probably mostly making rational choices for themselves when they choose to hire people or do it themselves.