“And what did you do all day?” He would ask as he came through the front door at about 6 o’clock. An inquiring look searched out his wife, while the follow-up phrase, “while I was out earning a paycheck to pay for this house, the food we are about to eat and the clothing for the kids,” was left hanging in the air, unsaid. Having returned to his home, he had not yet transitioned from the private nature of the workplace.
Through the 70’s and 80’s the notion of unpaid labor in the home was adjudicated many times over as marriages came apart. Terms like like spousal support, child support, alimony, pension obligations, all forced the issue that what she did all day could not be classified as leisure time. And carved out what we all knew: a worker in a home environment is a valuable component to the economic outcomes of the family.
By 1989 a formal accounting was given to the work done by homemakers, caregivers to the elderly and to children, and all those who exist in the realm of domesticity. Dale W. Jorgenson of Harvard and Barbara W Fraumeni wrote a paper that led to a measure of unpaid labor in the form of human capital, where it took up a spot in the national income accounting system. Jorgenson explains.
Barbara Fraumeni and I (1989) have proposed a measure of the output of education and training, namely, the increment to lifetime labor incomes. This accrues as current income to individuals who receive the education and training. Our approach has the important advantage of providing separate measures of output and input. The value of input into investment in education is equal to expenditures on education and the incomes of students in school. The value of output is equal to additions to lifetime labor incomes.
Human Capital and the National Accounts (bea.gov)
(Hang on, I’m getting to the good part)
In more current times Michael Christian has maintained the accounting of human capital in the US. Our very own Ellen McGrattan, with the Federal Reserve Bank of Minneapolis, collected her comments on Michael Christian’s 2010 paper on human capital accounting. From the abstract:
Michael Christian’s paper presents a human capital account for the United States for the period 1994 to 2006. The main findings are twofold. First, the total human capital stock is about three-quarters of a quadrillion dollars in 2006. This estimate is roughly 55 times gross domestic product (GDP) and 16 times the net stock of fixed assets plus consumer durables. His second finding is that the measures of gross investment in human capital are sensitive to alternative assumptions about enrollment patterns. In my comments, I emphasize the need for greater interaction between human capital accountants and applied economists. To date, there remains a disconnect between those measuring human wealth and those investigating its economic impact.
McGrattan isn’t satisfied with summing up a present value for the life-time work that could be performed by ‘non-market’ individuals, she would like more specifics on what actual economic outcomes will evolve from their work performance.
Perhaps what is needed is more focus on economic questions and less focus on the magnitudes of the human capital wealth estimates. Whether these estimates are based on current costs or on lifetime earnings, economists can construct the same statistics in their model economies as satellite accountants construct for actual data. Unfortunately, there still remains a great divide between those measuring human wealth and those investigating its economic impact.
I don’t want to put words in her mouth, but it seems like she would like the evaluation of this type of work to be centered around an economic objective. She goes onto reference a paper that she co-author with Edward Preston, Unmeasured Investment and the Puzzling US Boom in the 1990s. Although reading such a thing is more than a little intimidating, I was able to pickup that they measured a decrease in household labor and an increase in unpaid business labor which then lined up nicely to justify the business boom of the 90’s.
What are the common threads between business people who dig in and amp up their unpaid work into R&D which results in a business boom, and a homemaker who stays home to care for children? Both are doing work for a long term return, they are building capital for themselves, but also a larger group. Both are only able to perform because they are in a situation of opportunity. If they were to offer those work hours to someone else, it would be work for pay, and not at all the same thing.
I believe this is the type of framing Ellen McGrattan is requesting. She would like to see the study of unpaid work categorized, as we do here at home-economic.com by objective, and measured in that way. Rather than assume a measure based on a summation of remaining years of work life in concert with educational attainment.
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