Asymmetrical Information

My mother stayed home with us. By the time I was ten, she was going bonkers. There simply wasn't enough to do in the house . . . and my mother, mind you, had gone in for gourmet cooking in a rather large way, producing elaborate dinners that took hours to prepare. She was the mainstay of the PTA, the building's co-op board, and so forth. Nonetheless, there simply wasn't enough to keep an active woman occupied after the children were in school.
My mother went bonkers by the time I was 8 -- well, not bonkers -- just back to working more than half time. I'd never put together the technological side of "not enough to keep an active woman occupied." Thanks!

I had an apercu about "not able to boil water" this weekend, by the way (family wedding, beachhouse full of relatives, lots of talk about the past, grandmothers, greatgrandmothers, etc.

Who can't boil water today? No one, of course -- we have stoves that start themselves. I think the old saying REALLY goes back to a time when "to boil water" implied a lot more than filling a pot and turning a control dial to "hi". I have enough trouble building a decorative fire in a fireplace -- keeping a woodstove burning efficiently would have been a serious life-skill which some young women wouldn't have acquired.

Sound convincing? My aunts were divided on the subject. They still think their mother couldn't have boiled water reliably with a gas stove.

Regardless of the ultimate cause, increased female labor force participation has certainly had an impact on GDP. The same is true for increased participation rates by other marginalized groups: blacks, Hispanics, the disabled, etc. Insisting on equality of opportunity for all is a classic case of doing well by doing right.

It's a shame that no one's figured out a way to make that sort of homework economically productive.

I would argue though that there are indirect economic benefits to having a parent at home. I've read that in communities where there are people at home during the day there is less crime (more robbery, etc).

Your mother was the "mainstay of the PTA". I assume that she was very involved in your education as well? Parental involvement and support is vital to how well kids do in school. Now most parents are too tired to do that sort of work after work. All those mothers who stayed home were probably keenly interested in their children's education. Do you think this has something to do with the horridness of our educational system?

All those kids who decide to shoot up their classmates, would they have sunk to this level if someone had been parenting the kids? I think there are a lot of indirect negative effects that we are only just beginning to deal with.

By the same reasoning, Mr Drum, the government could mandate 60-hour work weeks, and our GDP would soar.

Of course, a lot of volunteer work done during those additional 20 hours a week wouldn't get done, but hey, nobody's getting paid for it anyway.

To what degree has additional participation by women moved their economic activity, especially child care, out of the uncounted volunteer economy and into areas where it can be tracked?

If work that was once handled in the family moves into the marketplace, then it is counted in the economic statistics in a way it wasn't before. My question is: does this also apply for corporations? If I was previously running my own employee cafeteria and decide to outsource it, does that make the GDP go up? Ditto, if I was making my own circuit boards and decide to outsource this process to Flextronics, does the economy look like it just grew some more?

Consider that when my grandmother got married, laundry took an entire day, and left her exhausted by the wrenching work of boiling water for washing, wringing the clothes out, and physically hefting wet clothing onto the clothesline. Three hefty meals a day had to be prepared for men doing hard physical labour without any of the modern aids, from food processors to frozen vegetables, that I enjoy, a mound of dishes done after every meal, a house had to be cleaned without the aid of vacuum cleaners, groceries had to be gotten on foot . . . everything was physically more demanding, and more time consuming.

I may be misunderstanding your point, but I think what you're saying is compatible with what I suggested, although not the last paper I cited.

What you say goes to the value of unpaid household labor. As you point out, market forces have been diminishing that value for some time now, making household labor less valuable.

But the reverse point still holds. If people leave the labor force and go back to the household, even if their future unpaid labor has less value, they still have caused GDP to go down. The effect might be small or large -- I don't know -- but there has to be some effect, right?

I think I'm missing the point of all this. Stuart Buck says that if a specific set of people (childrearing women)leave the workforce, there should be a negative effect on the GDP. Assuming they aren't being replaced (immigration, new workers, etc.) that seem uncontroversial.

The question is why they they are leaving the workforce, right? (Or, in Jane's formulation, why they entered it). Does it really tell us anything if we found out that women left to raise their children? It means that the incentives were greater in raising their kids than going to work, but we don't know what the specifics of those incentives are. I mean, if someone leaves the workforce because the only jobs that she can get are crappy ones, or ones that generate less than the cost of child care, then that still doesn't indicate anything ameliorative about the economy in 2001. I can't find Stuart Buck's original post, so I may have missed a point there.

Similarly, while Jane's "housfrau bordom" theory may explain some entry into the workforce, surely some of it was caused by necessity (hello, no-fault divorces and deadbeat dads), or a lower cost in the form of lower social stigmas or fewer stereotypes acting as barriers to entry.

I'm sure I'm missing something here, but what is it?

I'll try to straighten it out for everyone: :) :)

Jobs exist for a reason. Work needed to be performed for a company. If a there is 10% of an adult population that wasn't working but decides one day "I want to work", that doesn't necessarily mean that there are jobs for the 10% of adults that want jobs. The immediate effect is that there is what's called an "employers market" where employers if they needed a job filled could obtain the labor for a lower cost than before. (Just like in a housing market if it's a buyer's market houses are cheap and sellers do not get what they really want for their house).

Over time this straightens out because of the business cycle. As more people are employed and more income is being earned that leads to more consuming and more consuming going on out there leads to employers having more work and needing more employees. The change over time would surely mean a rise in the GDP that is faster than the previous situation. But the rise in GDP is only due to the fact that there is a larger base of people working, earning, spending and paying taxes...... but at a lower rate initially (because of the employers market).

For someone to calculate a 44% or 47% rise in GDP is ridiculous because it fails to take into account the initial effect on wages (read... earnings and capacity to spend). As with any large scale calculation the one thing that everyone must remember is that the economy will change gradually over time and in cycles. You might be able to say that the effect is positive by a certain small percentage overtime but nowhere near 44% or 47%. The only reason why GDP would've grown is that there were more income earners with the ability to spend than the previous situation and more tax revenue into the government with the government having more ability to spend.

But this is a gradual shift over time that was only positive because more people would be spending (as they earned the lower income which was due to the flood of cheap labor)

What about the "unpaid household work" done by single people? They make their beds, clean their houses and cook for themselves. Should that activity be counted in GDP? If they had servants, it would be. And mothers staying home to take care of their children benefit in many ways, not least because they are cleaning and cooking part of the time for themselves. They would have to do housework if they lived alone. Take a childless couple, where the wife decides to stay home, or even where she works and does all the housework, too (Oh, yes, that does still happen). Does she really do more work than if she were living alone? Some, but not much more. Also, half the responsibility for the work that mothers do taking care of their children is theirs. Calling all the work a woman does at home an uncompensated benefit to her husband is false. Families work as a team.

Stuart -- it's not incompatible; I should have made it clear that I was asking a different question: not "does the entry or exit from the labour force produce a measurable effect on GDP", which it clearly does, but "is the measurable effect actually a good measurement of what's going on". In other words, are we, or are we not, moving labour from higher valued to lower valued uses when women stay home.

I'd argue that the answer is that we are, not because child-rearing is not as highly valued as whatever the woman was doing before, but because the opportunity cost is very, very large. We deprive ourselves of smart women at the top of the professional ladder in their later years, because we have no mechanism for, for example, a woman lawyer on partner track to "stop the clock". Ditto other fields.

And I'd definitely argue that the movement into the labour force was measuring huge productivity gains in the domestic sector--not "phantom growth", as I've heard some conservatives argue.

Pat, you're confusing wages with GDP. GDP is the measure (however imperfect) of the sum total of goods and services produced in an economy during a given period. The level of wages is irrelevant to this measurement; unless it represents an increase, or decrease, in worker productivity, it will wash out in the numbers.

Another way of looking at the question is in terms of productivity (efficiency):

When women began entering the labor force in large numbers, the housework didn't stop getting done. For the most part, these women (and many men) started doing 'double-duty' (housework and outside work), yeilding increased productivity, and adding to GDP.

Now with many parents (mostly women, but quite a few men) leaving the job market to care for children and become homemakers, this should be seen as a drag on productivity, as they were already doing much of the housework anyway. So this should definitely have a negative impact on GDP.

But the real question is how substantial an impact is it? From purely anecdotal evidence, I'd say not so much. Most of the people I know who've decided to become 'home-makers' still have outside income. Several provide (paid) child care for other children, and others have part-time jobs or provide consulting services from home. Additionally, many of the husbands pick up extra hours at work to pick up the slack. This, combined with the substantial increases in (commercial) productivity that we've seen lately are probably more than enough to cover the lost labor. However, like Stuart said, I'd like to see a study documenting this.

hi megan,
noyt inconsistent with your post is the fact that many women entered the workforce because they had to. given rising expectations of what constituted a reasonable standard of living and the fact that many segments of the american workforce had stagnant and even falling wages, it makes sense that women entered the workforce (at the very least, it helped pay for all that labour saving machinary that home providers use nowadays) to supplement the wage of the (usually) male breadwinner.

Jane,

I'm not confusing anything. I understand economics. For anyone to say that GDP would increase by 44% or 47% overnight is silly and I addressed it.

The sum of goods and services produced would not increase by 44% overnight is what I was saying.

If you understand the economy, why jobs exist, what effect 10 million new workers entering the workforce overnight would have on the economy, you would have to look at the things that I looked at FOR YOU.

Hopefully you'll come around to understanding. :)

Jane:

Even if you restrict your argument to smart women who are on the professional ladder (as I take it you do), it isn't clear to me that you are properly measuring the cost to society.

For one thing, you would need to discount any future earnings that might accrue to the woman by the likelihood that she wouldn't reach the top position. For example, I'd be very shocked if an attorney entering a law firm had a greater than 1/10 chance of making partner. Or, some women might not like their first career choice; conceive, if you can, of a management consultant who would ends up chosing the much-lower-paying-field of journalism.

For another thing, I think its less than clear that the loss of that hypothetical female partner does anything other than redistribute income. Lawyers, like many professions, don't have a learning curve that continually slopes upward at the same rate. At some point, a person in yr X is roughly equivalent to a person in yr X+10. Where there is a wide disparity between the pay schedule of X and X+10, I wonder about rent seeking (or other inefficiencies). And in the absence of barriers to the mothers re-entering the workforce, I wonder whether some of that excess income (the rent) would simply be redistributed to the mother/returned worker.

I absolutely agree that keeping mothers out of the workforce diminishes total output. But I don't know that their potential earnings (as measured from the standpoint of their initial career start) is a good way to capture it.

Whole post lost - what - two hours work. So a permanent goodbye. Whoever does your comments architecture has serious forebrain limitations, sorry, your server may be cheap, but is junk. Too bad, you sounded interesting. G

I'm not confusing anything. I understand economics. For anyone to say that GDP would increase by 44% or 47% overnight is silly and I addressed it.

Regrettably my good knight, initiating Attack against GDP claims nobody made - using wage goblins as a proxy - will not convince others that you understand the game of economics. Nor will it win you any Logical Reasoning Points (tm), which are currently trading 3-to-1 for Credibility crystals. (Upon aquisition, Credibility crystals add an automatic +5 to Character or Stamina, your choice, so stock up now).

Consult once more the original post and see where you find the 44 and 47% numbers, and search out whether they are actually used again in any form, and then go forth and amend the error of thy ways.

When you return, here is your next move: You encounter a large dragon with a red 'PK' on its chest and a pen in hand, dulled down to the consistency of a hatchet blade from excessive use. Do you:

a) turn and run;
b) try to sneak around it; or
c) confront it?

Pat -- if women, en masse, moved into the labour force, the traded value of goods and services would probably rise to something close to those values, because the substitutes for women's labour are measured, and women's labour is not, and because the substitutes are more productive (although often lower quality). I.E. Kraft produces macaroni and cheese faster and cheaper than I do with a box of noodles and a hunk of gruyere; Merry Maids cleans my house faster; the laundry does my shirts all at once, in big vats and steam irons; and so forth. Moreover, I am now producing goods outside the home; even if I were no more productive, I am now producing measured, rather than unmeasured goods. Those two things should collectively push up GDP significantly. Of course, we may have lost a wealth of non-traded intangibles; GDP is only an imperfect measure, at best.

"noyt inconsistent with your post is the fact that many women entered the workforce because they had to. given rising expectations of what constituted a reasonable standard of living"

Not to mention rising expectations of what constituted a neighborhood that was worth adequately protecting from criminals.

"and the fact that many segments of the american workforce had stagnant and even falling wages, it makes sense that women entered the workforce (at the very least, it helped pay for all that labour saving machinary that home providers use nowadays) to supplement the wage of the (usually) male breadwinner."

"stagnant and even falling wages" are related to supply restrictions (i.e., heavy regulation) in housing, education, and medical care. Other items in lightly regulated industries experiences significant decreases in cost along with increases in quality. And of course a number of items appeared that were previously not available at any price.

Logic RF and Jane,
Jane's original post included the following paragraph.
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How much? Studies show varied values for unpaid household work. An Australian study estimated the value of unpaid work at around 47% of GDP. A British study from 2000 stated that estimates range from 44% of GDP to 104%. This is obviously a wide range, and there must be quite a bit of uncertainty in the valuation mechanism, the time estimates, or both. Even so, the number is substantial.
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Guess what LRF, then Jane negates your point in the next post by posting the following:
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Pat -- if women, en masse, moved into the labour force, the traded value of goods and services would probably rise to something close to those values
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Jane is showing that she still doesn't understand economics nor the factors that I was addressing that negate the claim that GDP would rise by 44% or 47%. I was giving valid factors to show that the economy would not rise by 47% overnight or in the next year. It would be a bigger rise measured rise but probably less than 5% per year given the hypothetical.

The reason why I state is because wages would be driven down all across the board with such a large influx of "available" workers with no linear rise in "actual work needed to be done". It would definitely be an employers market until the business cycle righted itself. That amount of time to right itself would be years (probably a decade) until the amount of earnings produced more desire for consumption and then that more desire for consumption translated into actual goods and services purchased and then that translated into companies actually needing all of the "available" workers.

Do you see yet? Tell me where I am wrong instead of introducing dragons and crystals. Thanks.

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