No economy would function without adequate care for young children (who will grow to become economic agents) or the housework necessary to sustain people. Since care- and housework in one’s own home is largely unpaid, it is unclear how to measure the economic value of this work. To understand the economics of the household, though, it is important to understand better the economic value of the work produced within it.
The literature quantifying the worth of house- and care workFootnote 1 assigns a value to the number of hours spent in this work (most commonly calculated using time-use surveys) in one of three main ways. On the one hand, there are two “input” methods: the opportunity cost approach and the market replacement cost approach. On the other hand, there is an “output” method. The first of these three – the opportunity cost approach – assumes that time spent on unpaid work is at the expense of earning a market wage. Many calculations of opportunity costs simply use an average wage rate of all employed people (Ahmad & Koh, 2011); others estimate a potential wage rate even for people outside the paid labor force (Gammage, 2010; Schmid et al., 1999). The second approach – the market replacement approach – imputes wages that reflect the market price of the respective tasks, using either the average wage rate of a general housekeeper (Ahmad & Koh, 2011; Varjonen et al., 2014) or including multiple wage rates of specialists in matched occupations (Hamdad, 2003; Landefeld et al., 2005). Sometimes, calculations with minimum wages for these tasks are included to provide lower-bound estimates (Landefeld et al., 2005). Some studies using the market replacement approach also account for the intensity of care (e.g. physical and development care) and incorporate supervisory care (Suh & Folbre, 2016; Mullan, 2010). Finally, the output approach quantifies the value of the output of unpaid work, measuring the service price of, for example, a kilogram of washing or ironing (Holloway et al., 2002), or a child taken care of (Mullan, 2010; Yoon, 2014). In practice, many studies in the literature calculate a value of unpaid work using more than just one of these methods, providing instead a battery of potential wage rates in order to give a range of estimates for the value of domestic and care work. The fact that many studies report values calculated with several different approaches speaks to the lack of any “best” practice in this literature.
In considering how to better and consistently quantify the value of unpaid house- and care work, we propose a new approach to introduce more precision into wage estimates in the specialist replacement cost method. In particular, we use the wages demanded for housework and childcare on actual online platforms to get the market price of the work performed, disaggregated by region at the NUTS-2 level. We then apply these values to region-specific time-use statistics to compute the aggregate value of the work.
The use of online platforms to organize work has become increasingly prevalent (see, for example, Katz and Krueger (2019) and Kässi and Lehdonvirta (2018)), not least to match households with babysitters and cleaners. Our approach thus allows the literature to keep up with the changing nature of the organization and payment for this work. National accounting offices, who are already working to supplement GDP measures with satellite accounts (European Communities, 2003), can find our approach particularly useful.
In relation to other literature on this topic, we consider our approach to fit into the specialist framework, in that we assume that it is specialists who offer childcare and cleaning services on online platforms. Table 1 shows that there are varying degrees of “specialization” among the workers on the platforms we use; those with more years of experience also demand higher wages.
The benefits of the calculation method described here are five-fold. First, our approach does not rely on hypothetical considerations about the value of the worker’s time to measure an opportunity cost of doing the work, estimates of which differ widely based on education, professional experience, and socioeconomic background (Schmid et al., 1999). Instead, our approach takes the value of the work to be the market value that the worker herself demands. Second, our approach uses relatively local wage rates (NUTS-2 level), meaning that the application of our method would produce more accurate local estimates of the value of household and care work. Third, the approach avoids applying a minimum wage to a job that may actually receive higher remuneration, making it more accurate. Fourth, the wage data are reported per hour, unlike in labor force surveys, where hourly wage data are often imprecisely computed because they are calculated using other variables such as yearly income, hours worked per week, and weeks worked per year. Finally, our approach uses free and real-time data on wages paid, instead of relying on this information from labor force surveys. The latter are costly in terms of time as well as money and their publication typically has a long delay after data collection. Researchers can use our method in any country that collects time-use data and in which there are platforms organizing these services.
In the next section, we show an application of our method with the wage data collected from online platforms. We estimate the aggregated value of typically unpaid work by applying wage rates to time-use data from the same region.