Kamal Hassan, recently as a part of campaigning for the upcoming Tamil Nadu Assembly elections, made a promise to provide ‘payment’ to homemakers for their domestic work. When asked how he plans to fund this fairly ambitious process, he claimed that a prosperous state could come into place by eliminating corruption and subsequently be able to fund this idea. While somewhat vague and morally debatable, Hassan’s proposal comes with the overly ambitious task of eliminating corruption, something that rings bells of suspicions in the mind of every Indian. Nevertheless, the intention behind Hassan’s absurd proposal seems to be a noble one – to acknowledge and assign value to household work done by women. The approach being taken by him, providing a salary to women, seems to be relatively flawed and grossly infeasible. His proposal indicates that to deem anything as remotely crucial in the world we live in today, it is necessary to attach a monetary value to it. Hassan’s words have once again stirred up the debate around what should actually be done to assign importance to unpaid household work. In this essay, I talk about the current economic value of household work in the form of spillovers, its blatantly neglected impact on our economy, and the discussion surrounding the incorporation of such work into National Accounts. Keeping in mind the restraints of discussion and time, I would be focusing my discussion on this idea’s desirability over the process’s feasibility.
Apart from the shockingly unequal distribution of it in our houses and the kind of opportunities a woman in India has to forego to serve these long-standing sexist norms of our society, why is there a pressing need to value a woman’s unpaid housework? I offer a three-fold answer to this question, one that should provide a fresh perspective to the otherwise mainstream discussion on household work valuation. Imagine a woman who is raising two daughters and has a working husband. The environment she fosters at home, the resources she finds for her daughters’ education, the nutrition she very carefully provides, and the additional support she offers her husband all contribute to this family’s betterment. In a sense, she is an equal, if not more, producer of her daughter’s future earning stream. Unfortunately, due to a lack of ‘market value,’ her contribution goes unnoticed. Investments in education pay off not just in terms of future earnings but also in child outcome. The time given to the management of one’s family is often considered production for own utilization instead of an investment. On the other hand, money spent on education and health is considered an investment, yielding a future income or utility. Regardless of whether a sharp division is drawn between the organic creation of children and the creation of ‘human resources’ as a bunch of productive abilities, parental time adds to youngsters’ availability and capacity to learn and should accordingly be viewed as a part of schooling. Indeed, it is not easy to describe any private market transaction that does not create spillovers or externalities. However, the social benefits of care are specifically huge relative to the private costs because care work greatly adds to the development of human capital that influence virtually all social transactions.
Valuation of unpaid household work can play a game-changing role in the public policy arena as well. It can help us find the real impact of policies that promote equal partnership between two partners in raising their children, or for instance, a reduction in the burden of housework from people’s shoulders by offering accommodations. It can also help us find the impact of any policy focused on reducing the gender gap in the labor market. It will contribute to political discussions, such as how to manage the effect of an aging society in which care for the older generation will be more critical for the prosperity of huge and developing portions of the populace.
Multiple studies have also found a significant impact of accounting for unpaid household work on macroeconomic aggregates. Given the country and the valuation method, it is found that the addition of the value created by housework leads to an increase in the level of GDP by 15 to almost 70 percent. It must be kept in mind that the inclusion of these services into the national accounts will have a noticeable impact on GDP and can be expected to affect other factors like disposable household income, total consumptions, savings, and investment.
From the above discussion, I believe it becomes ample clear why a valuation of unpaid household work is essential today. The question remains: why are unpaid household activities currently excluded from the official System of National Accounts (SNA)? To understand the answer to this question, we need a little background on what SNA (2008) considers an economic activity and the details of the famous production boundary. The formal definition for a general boundary by SNA is as follows (§ 6.24):
“Economic production may be defined as an activity carried out under the control and responsibility of an institutional unit that uses inputs of labor, capital, and goods and services to produce outputs of goods or services. … A purely natural process without any human involvement or direction is not produced in an economic sense. For example, the unmanaged growth of fish stocks in international waters is not produced. In contrast, the activity of fish farming is production.”
According to this definition, we can conclude that unpaid household work rightfully falls under the umbrella of economic activities. However, SNA offers a more restrictive definition of the production boundary to exclude unpaid household work from the economic arena. They offer the following explanation for this exclusion (§ 6.30):
“…, the reluctance of national accountants to impute values for the outputs, incomes, and expenditures associated with the production and consumption of services within households is explained by a combination of factors, namely the relative isolation and independence of these activities from markets, the extreme difficulty of making economically meaningful estimates of their values, and the adverse effects it would have on the usefulness of the accounts for policy purposes and the analysis of markets and market disequilibria.”
Can unpaid household work be termed as an isolated, non-market activity in reality? The arguments surrounding human capital and GDP progression discussed earlier in this essay do not support this claim. Additionally, without the assistance provided by unpaid workers at home, a decline in the formal labor market’s efficiency is a likely possibility. This can have dire consequences on not only economic growth but also well-being more generally. Various studies claim that adding unpaid housework into national accounts will change the very nature and usefulness of these accounts, moving them away from our economy’s monetary notion. This can increase the burden on the different ways in which economic analysis is currently undertaken. A foundational question to ask in response to this claim would be about the ideal nature/goal of the SNA. Should we limit them to only financial, economic activities and focus it on well-being in general? This also brings into light the debate surrounding the measurement of GDP and its deficiency in accounting for well-being due to only factoring in the pecuniary aspects of the economy.
With the rapidly increasing digitization of our economy, formal economic activities seem to be getting increasingly replaced. People are governed by transformative self-reliance. For example, we book flights and hotels ourselves without using a travel agency; there are self-checkout methods on airports and supermarkets. Additionally, people are increasingly expanding their human capital via unpaid services like Wikipedia and open software. With such transformative digitization taking place, we need advanced monitoring services that do not directly benefit the formal economy and help people improve their well-being. Furthermore, an increase in awareness and economic development will expectedly lead to a subsequent rise in women’s bargaining power, shifting their roles to the ‘formal’ market from household work. In addition to this, women may also seek to minimize the burden of house care by remaining childless, a trend that has been noticed in Italy, Spain, and South Korea. With a fertility decline, an inevitable increase in the relative share of the elderly in the populace is in place. This will lead to an increase in the demand for unpaid labor in India to cater to the care responsibilities previously handled by women. It is a well-known fact that domestic labor in India is exceptionally exploitative and belongs mostly to the informal sector. This expected expansion of the informal sector calls for an immediate augmentation of the production boundary of SNA. Keeping declining fertility and increasing digitization in mind, along with an increasing demand for measuring factors like well-being and happiness, a shift like the System of National Accounts seems to be an inevitable change shortly.
Ananya Chaba is a 3rd year undergraduate student at Ashoka University currently majoring in Economics