Time to take stock of housewives' economic worth

More for my own records...

From The Straits Times

May 20, 2006
Time to take stock of housewives' economic worth

Study shows value of home production last year was 8.4% of S'pore's GDP
By Euston Quah
For The Straits Times

MUCH of what goes on within households is unrecorded. One obvious example is household work and child rearing.

The amount and value of time and effort used to provide the day-to-day services of cooking, cleaning, grocery shopping, child support and the myriad other chores that need to be done in any household are clearly not insignificant. It is time society took stock and recognised the worth and contributions of housewives.

A study I did more than 10 years ago found that the value of home production was some 5.4 per cent of Singapore's gross domestic product (GDP) in 1986. A subsequent study by one of my students at the National University of Singapore, Ms Ong Qiyan, showed that home production last year had risen to 8.4 per cent.

This value, while lower than estimates for countries such as the United States and Britain - about 30 per cent of GDP - is however not insignificant in absolute terms, amounting to about $4 billion.

Furthermore, the Singapore estimates exclude work done by paid domestic maids which is a feature not prevalent in other countries. That portion of home production done by domestic maids is already captured by a country's GDP.

If one adds this to work done by unpaid housewives, the estimates will be along the same magnitude as those in North America and Europe.

The original and continuing impetus for valuing housework stems from the observation that estimates of total production of goods and services in a country neglect to take into account the unpaid and significant amount of production that occurs in the home.

Diligent recording of activities in households have shown that housewives contribute more than 80 per cent of total housework time.

It is often argued as such that housewives, by providing services to their homes, are engaged in productive activities no different from any other market occupation. Thus, the services provided by them warrant inclusion with other components of GDP.

As early as 1898, Alfred Marshall, a pioneering giant in economics, observed that 'a woman who makes her own clothes, or a man who digs his own garden or repairs his own house, is earning income just as would the dressmaker, gardener, or carpenter who might be hired to do the work'.

Another celebrated economist, Arthur Pigou, raised what has become a well-known paradox in national income accounting, that 'the services rendered by women enter into the dividend when they are rendered in exchange for wages, whether in factory or in the home, but do not enter into it when they are rendered by mothers and wives gratuitously to their own families. Thus, if a man marries his housekeeper or his cook, the national dividend is diminished'.

In principle, most economists recognise that housework has value in the same way as market work, but point out the difficulties in estimating such a value, and with the lack of information on intra-household activities they are prepared to exclude it from the accounts altogether.

The last few decades, however, saw increasing criticisms of the methods of national income accounting. These criticisms centre on three areas of contention: inadequate measurement and erroneous designation of some national income components, incorrect use of GDP measurements, and omission of non-market goods and services.

Today, the possibility of constructing a set of household accounts as part of an overall national income accounting system has become more feasible, given the improvements made in data availability and structural changes in most economies.

Housework has become more commercialised with easy access to maids - at least in Singapore and certain other parts of Asia. This, with the spread of commercial launderettes, daycare centres, and home-cooked-meal caterers have all allowed for more empirical data to be collected.

The need for the measurement and valuation of housework lies not only in a desire to provide a better estimate of the total economic production for an economy, but also in providing a better basis for growth calculations and for international comparisons of national income.

This, in fact, was shown by another student of mine, Mr Lim Sze How, now an economist with DBS, that over the past three decades, Singapore's growth rate was cushioned by household production activities in periods of reduced growth.

High GDP growth rates may be misleading as this may come from a diminishing household economy. This is because the labour force participation rate of women has been increasing over time, and with increasing commercialisation of housework activities, it is possible that the total production of goods and services over time may not have changed that much.

Similarly, in periods of economic downturn, falling growth rates may not be indicative of the total production of goods and services because women may have returned to their households and now generate increased home production.

High or low growth rates as reflected in a country's GDP may be inaccurate as they ignore changes in the household economy. To the extent that home production is not measured in conventional income accounts and to the degree that the household output omitted changes over time, then both the quantity and total output are mis-measured.

While valuing housewives' work is a useful exercise, by no means does it need to be fully incorporated into the GDP estimates. A more meaningful way might be to have a separate reporting of both GDP and home production.

Research is needed to determine how home production estimates can be derived. There already exists a number of methods proposed by economists. These might be refined for Singapore.

The writer, an environmental economist, is head of the economics department at Nanyang Technological University.