New ways to measure economic activity: Breastfeeding as an economic indicator

Julie P Smith, Australian National University; Nancy Folbre, University of Massachusetts

 

The issue: measuring the economy

Why does so much of women’s work count for nothing? International systems for measuring the economy have institutionalised the devaluing of women’s unpaid productive and reproductive work, distorting the allocation of resources, and entrenching gender inequality.

What we measure reflects what we value, and shapes what we do. Following the Bretton Woods meeting of 1944, gross domestic product (GDP) was adopted as the main measure of ‘the economy’. GDP is widely used for intertemporal and cross-country comparisons of economic progress and living standards, and to judge the success or failure of government policy. Since 1953, countries have defined and measured the economy using United Nations guidelines called the System of National Accounts (SNA).

Despite purporting to comprehensively and objectively include all economic activity, it has been shown that economics ‘has a serious sex problem’. This is evident in the SNA. Viewing markets, money and machines as central to daily economic life, the SNA definition of the economy strongly reflects male norms, values and priorities. Monetary transactions define its core economic boundary, GDP, which excludes most goods and services produced by households, as well as the value of environmental resources. These are seen as too difficult to measure. GDP does however, include imputed values for owner-occupied housing, and for illegal prostitution and drug sales. Furthermore, although factories, mines and machines are counted as ‘capital’ in a nation’s balance sheet, human beings are not – the labour force is taken to materialise from nowhere. Such androcentrism is not surprising; the economics profession is heavily dominated by males. In Australia for example, less than one in three senior economists in key Australian economic agencies is female. Only one female has ever won the ‘Nobel Prize’ in economics – and she was a political scientist.

Since the early 1970s, there has been growing criticism of the SNA as a system for measuring the economy. Criticism has centred on the narrow definition of economic activity included in GDP. Most attention has been given to how the national accounts failed to record the depletion or degradation of environmental resources, whilst counting the cost of pollution cleanups as boosting economic growth. However, some have also observed the problems arising from excluding non-market household production. As GDP focuses on measuring the market economy, unpaid production by households, much of which is undertaken by women, is excluded from GDP. In effect, economic activity such as unpaid housework and care has been given a zero economic value since early in the 20th century.

As Maria Durán-Heras has pointed out, the efforts of those who work on producing national accounts are not primarily directed to measuring the economy, but rather to measuring better and better that part of the economy they have agreed to make the object of their attention.

 

Feminist interventions

Feminist critiques have been important to rethinking how the economy should be measured and how economic progress can be more effectively tracked and compared. In a scathing critique published in 1988, Counting for Nothing, feminist scholar and former Member of Parliament, Marilyn Waring denounced the SNA as ‘applied patriarchy’. She had first encountered the deficiencies of the SNA while on the New Zealand parliament’s Public Expenditure Select Committee.  Her work  inspired a sustained and wide ranging feminist critique of ‘menstream’ economics, generated data collections and methodological innovations, and empirical analyses which have provided important new knowledge and understanding of non-market household production (including its contribution to human capital) and its relation to economic expansion. Feminist economists also emphasised the policy implications and impacts of excluding non-market household production from measures of the economy. Crucially, this scholarship identified how non-market household production underpins the market economy.

 

Defining economic activity

Marilyn Waring’ key intellectual contribution was to strip bare the conceptual foundations of the SNA and challenge the view of the economy that underpinned its application to economic measurement. Feminist scholarship also focused on collection of relevant data, in particular time-use studies. Nancy Folbre has shown how statisticians discouraged collection of data and measurement of national household production from the late 19th century; it ceased altogether when the SNA was institutionalized internationally from 1953 . Those occupied in household production came to be classified as ‘economically inactive’ or ‘dependent’.

 

Estimating the size of non-market household production – new data and new knowledge

Since the 1980s, new data collections and studies have shown the substantial value of non-market household production.  The number of hours of household work are about the same as for market work, while the number of hours of childcare is much greater in the household economy. Most of this work is by women, though unpaid work by males has increased slightly in the past half century. Minimum estimates of the economic value of household production based on the cost of paying for this household work (proxied by the market wage of a housekeeper) range from 20 to 40% of GDP. The estimates are even higher if measuring time values at the opportunity cost of women’s time.

Paula England and Nancy Folbre have shown that societal devaluation of care work contributes importantly to gender wage gaps , including to what International Labour Organisation researchers recently identified as the ‘motherhood pay gap’. This has significant implications for international and intertemporal economic comparisons. A number of empirical studies have demonstrated the extent to which measures of economic growth have been biased by not accounting for the shift of household economic activity to the market sector, especially during the periods of rising female labour force participation.

GDP and income growth overstates economic progress and well-being, and is increasingly understating poverty and inequality as non-market production becomes less of a buffer.  For example, it has been shown that in Norway between 1972 and 1999, the growth in households’ consumption possibilities was overstated by more than 20% by GDP, which grew much faster than the growth of extended GDP. The amount of household production is quite similar across households, so as home production shrinks, inequality worsens by more than is revealed by trends in market income inequality.

The significant value of unpaid work to national productive activity is well illustrated by a comparison of estimates of unpaid work as a share of national production for 27 countries using two different valuation measures (see Figure 1). While there is great cross-country variation, these results show that the lowest estimate of the value of unpaid work using a market replacement cost approach was 15 per cent of GDP in Canada and using an opportunity cost approach was 32 per cent of national productive activity in Hungary.  

Figure 1. Value of unpaid work as a percentage of GDP

 

Note: Data was derived from Incorporating Estimates of Household Production of Non Market Services, OECD Statistical Working Papers, October 2011, and ABS estimates based on Time Use Survey, Survey of Employee Earnings and Hours, Labour Force Survey, Australian System of National Accounts.

Source: ABS (2014) Spotlight on National Accounts, May 2014, Spotlight on the national accounts: Unpaid work and the Australian economy, ABS, pp. 12 available at http://www.abs.gov.au.virtual.anu.edu.au/ausstats/abs@.nsf/mf/5202.0?OpenDocument (3 October 2017).

 

Time use data

Collection of time-use data has shown the high time costs of providing care. From the 1980s researchers such as Duncan Ironmonger and Ann Chadeau were demonstrating the relevance and usefulness of collecting time-use data, including to value household production using input or output based methods.

Collection of data on household time inputs into household production has also revealed large gender gaps in leisure, pointing to how differences in economic well-being of women and men have been masked by inadequate and misfocussed statistical collection and measurement.

 

Links between fiscal policies and household production of services

A gender lens also highlights the significance of household services and goods for the market and government sectors. In the tradition of Ester Boserup, who showed in the 1970s how women experienced economic development differently from men , Diane Elson and others have shown how fiscal policy differentially affects women. Gender analysis of structural adjustment policies imposed on developing countries during the 1980s anticipated  the particularly adverse impacts on women of economic and fiscal policy responses to the global financial crisis since 2007 .

Feminist analysis has shown how unpaid household production and reproductive work invisibly underpins the functioning of government budgets. Non market household production is crucial to national budgets and economic sustainability, through provision of care of dependent children and the elderly, and maintaining demographic and labour force stability. Since the 1990s, rapidly declining fertility and population aging have become key issues for public policy in many countries, including in rapidly industrializing countries such as China and South Korea. In Korea, this has led to policies aiming to address problems of a shrinking workforce and more widely share women’s household work and care burdens. Increasing female labour force participation highlighted the need for new budgetary expenditures on elder care and child care. A recent study compared the scale of Korean government provision of childcare and eldercare with that provided by women in the household sector. Despite substantial recent budget increases, government provision was very small in relation to the huge extent of care services still provided by women in the household sector. Likewise, Australian government expenditure on childcare is around $8 billion a year compared to the $65 billion worth of unpaid childcare services that the Australian Bureau of Statistics estimates is provided by households each year.

 

Creating and valuing human capital stock

When women’s time is viewed as free, no account is taken of the lost economic production or lost leisure due to rising female labour-force participation. For example, in 2016 the head of the IMF bemoaned the lost productivity of women who were not in employment, without acknowledging that increased market work could be accompanied by a loss of productivity in home production.

The expansion of market opportunities has liberated women in some ways but at the expense of a shrinking care economy. An important contribution by feminist economic analysis has been to ask ‘who pays for the kids’, and show that child raising has features of a public good  .  Parental rewards and incentives for investment in children are reducing as the benefits of children are socialised in the modern economy, while the costs, such as foregone labour market earnings, remain substantially on individual parents. These costs fall particularly on mothers whose earnings and retirement incomes are lowered by workforce participation breaks and their segregation into occupations and employment that accommodate child raising.

Resource transfers made by the non-market household sector to governments, the market sector and to future generations are largely hidden from view by conventional economic statistics. The SNA measures the creation of physical capital such as factories or buildings, but does not measure the accumulation of value which arises from household investments in human capital, taking form as young citizens and workers. Australian studies have confirmed that the country’s human capital stock remains much larger than the physical capital of the country, even when non-market household contributions are undercounted.

By 2017, around 20 countries had estimated the value of their human capital by valuing the future income stream of young adults (‘the rate of return method’). Though such estimates do not encompass the non-monetary household contributions to the education and health of humans, acknowledging the economic importance of human capital formation is an important conceptual advance led by feminist economic critiques of the SNA.

 

Breastfeeding

Breastfeeding and human milk provides an archetypical illustration of how feminist economic analysis has contributed new ways of thinking, and approaches to policymaking. Indeed, Counting for Nothing cited breastfeeding as an example of GDP mismeasurement. This led to research showing how breastmilk, being a ‘good’ produced by households for their own consumption, was omitted from GDP even despite meeting the revised SNA93 guidelines for inclusion.

As the SNA is currently applied, the market value of milk formula production and sales are counted in a nation’s GDP but the value of breastmilk production is not. Market values are available, with hospitals caring for vulnerable newborns paying around $300 or more a litre for human milk. Moreover, women and children who have not breastfed have higher rates of illness, chronic disease and hospitalisation. The financial costs to the health system and to families of this additional illness and disease are (perversely) counted as increasing GDP while the economic cost of households investing time in breastfeeding to prevent such health problems is not counted. A number of epidemiological studies (including in Australia ) have identified the substantial costs to national health systems of the global trend to formula feeding.

Breastfeeding has an economic cost which is borne mainly by women – care and feeding of infants is highly time intensive .  It is not a ‘free resource’, and is a learned skill that may not come naturally to all women. By ignoring the time investment by women, governments and society avoid responsibility for resourcing women to breastfeed, such as through providing adequate paid family leave and ensuring employer and other accommodations and support for such care work is available. The mindset that breastfeeding requires no skill or effort and is easily substitutable by modified cows’ milk also results in failure to ensure there is suitably skilled lactation support available for new mothers using health care services.

In 2016, feminist economic conceptualisation of non-market contributions to human capital formation underpinned estimates by Nigel Rollins and colleagues in leading medical journal The Lancet on the contribution of breastfeeding to the value of country’s human capital. This pathbreaking study estimated that premature cessation of breastfeeding cost the global economy around $300 billion a year in lost productivity and income arising from child cognitive losses, and called for governments and health services to invest more in enabling women to breastfeed.

 

Impact

A gender lens on how the economy is defined has increased awareness of the economic importance of unpaid household work, and of women’s work. This has led to more widespread acceptance that statistical measurements should be expanded to include unpaid work as well as environmental values. In 2016, The Economist called for key reforms to SNA, notably, for non-market production to be included in GDP. Valuing non-market production as part of the economy has contributed to better understanding of income distribution as well as giving visibility to women’s work and achieved more comprehensive estimates of the level of economic activity.

Due to gendered innovations in economics, it is now widely recognised that failing to recognise the economic importance of women’s unpaid productive and reproductive work in this influential global statistical system entrenches male privilege, reinforces gender inequality, and drives a significant misallocation of resources. Furthermore, the androcentric application of core GDP boundaries mismeasures economic activity and ignores important connections and interdependencies between the market and government sectors and household production of goods, services and human capital.

By the early 1990s, SNA had been modified to include the value of household subsistence production. However unpaid househould services such as care remained outside core GDP.

In an important study in 2009, economists Joseph Stiglitz and Amartya Sen called for moving beyond GDP to measure economic progress. Reflecting on the household sector they observed that as countries develop, the shift from home to market production may ‘overstate increases in well-being’ and ‘policies that encourage market over non-market production distort the economy’. A particular example cited was the omission of breastmilk, which they explained was ‘clearly within the System of National Accounts production boundary, is quantitatively non-trivial and also has important implications for public policy and child and maternal health’.

Meanwhile feminist scholarship has driven important innovations in how the economy is conceived, and of the dynamic intergenerational interconnections between the non-market household sector and the market sector. The collection and analysis of time-use statistics has been a crucial innovation driven by feminist economic research. It has demonstrated the unequal burden placed on women, and provided a deeper understanding of the supply side of the care economy and how it contributes to gender inequity in pay. Such data and its analysis from a ‘total economy’ perspective has helped reorient economic policy in some countries in ways which reduce gender inequality. For example, the Australian Productivity Commission Inquiry into Paid Parental Leave drew on this conceptual thinking to make the business case for the paid maternity leave that was introduced in 2011. This included adjusting its estimates of economic gains due to greater labour force attachment of women by the losses from reduced household production.

Responding to the call for satellite accounts of non-market household production in SNA93, estimates have now been made for a number of countries. Likewise, the importance of accounting for human capital in national accounts of economic activity is increasingly appreciated with estimates reinforcing its huge relative value compared to countries’ physical capital. Leading economists have recently engaged with promoting the importance of early childhood investment, including by the family. There is also a recognised need to measure human capital through methodologies which include its non-market costs and particularly the contribution of the maternal care economy.

What remains important however, is not only recognising the value of women’s economic contribution, but also achieving a more equitable gender sharing of the burden of this work and redistributing such costs more widely in society. This is crucial for future economic progress to be based on genuine efficiency gains and human development rather than on mining and depleting household production and care, and depreciating human capital. The necessary innovation in thinking and data gathering and analysis relies on a foundation contributed through feminist perspectives on economics.

 

Key readings

Bjørnholt, M., & McKay, A. (Eds.) (2014). Counting on Marilyn Waring: New advances in feminist economics. Bradford, ON: Demeter Press.

Elson, D. (2012). Social reproduction in the global crisis: Rapid recovery or long-lasting depletion? In P. Utting, et al. (Eds.), The global crisis and transformative social change (pp. 63-80). London: Palgrave Macmillan. 

Folbre, N. (1994). Children as public goods. American Economic Review, 84 (2), 86–90.

Folbre, N. (1991). The unproductive housewife: Her evolution in nineteenth-century economic thought. Signs, 16 (3), 463–84.

Smith, J. P., & Forrester, R. (2013). Who pays for the health benefits of exclusive breastfeeding? An analysis of maternal time costs. Journal of Human Lactation,29(4), 547–55.

Smith, J. P., & Ingham , L. H. (2005). Mothers’ milk and measures of economic output.  Feminist Economics, 11 (1), 41–62.

 

Image: Recognising and resourcing women’s economic activity (photo by Catherine Constable)

 

Updated:  7 November 2012/Responsible Officer:  Convenor, Gender Institute/Page Contact:  Web manager, Gender Institute