Care Work in the United States Has Been Broken for Years

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1:14Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, you know, we've spent the last, I don't know, I guess it's like three years now, maybe even a little, actually it's been longer than three years now. Feels like a long time. Talking about many aspects of the sort of physical manufactured economy that broke or are broken in some way. Yeah. And I think it's because, I mean, obviously the pandemic exposed a lot of these fault lines with global supply chains for physical goods, primarily consumer goods, things like furniture and food and stuff like that.

1:50But on the other hand, there was also a lot of disruption to services. And we haven't really spoken as much about that. Right. And the other thing that's really striking with services, so actually right now we're in this period where like for the Fed, there's a lot of focus on services inflation and when is that going to come down, et cetera. The other thing with a lot of services, particularly like very crucial services, is that to the extent that we talk about certain industries being broken or market failures, which I think was like a sort of like recurrent theme of our work, many of what's sort of broken, it seems, in the services space existed long before.

2:29Like these problems were actually very evident even prior to COVID. No, totally. There was actually a chart I was looking at just last week that showed the long-term inflation trends in the U.S. broken into sort of components. And if you look at it, the highest price increases are all in services. So things like healthcare, childcare, while all the consumer goods, the durable stuff has been going down. So it's much cheaper to buy a big screen TV than previously, but it's much more expensive to have a kid and send them to college and things like that. Right. And so these are like these sort of like deeper things.

3:05And so we're thinking about like, okay, what are the bottlenecks? What are the so-called market failures, et cetera, that caused this? And we look at it in the manufacturing world, but by and large, TVs and refrigerators and air conditioning and cars, and they get better and better. It seems like over time and by and large, they do get cheaper even with the recent disruptions. But why are there parts of this economy that I think everyone considers to be crucial and sort of things related to child care, care work, elder care, which is going to become a bigger and bigger crisis or issue for the economy as the baby boomer generation ages?

3:39These have been broken for people for a long time, and there's no like end in sight. There's no like, oh, it's going to finally normalize because the pre-COVID trend was so bad. Yeah. Are we pivoting from goods to services? Is that what's happening? I think we are doing a little pivot. All right. Well, let us, but yeah, we need to talk about this more. And so I'm very excited about our guest today. We're going to be speaking with Nancy Fulbright. She is a professor emerita of economics at UMass Amherst and director of the program on gender and care work at the Political Economy Research Institute.

4:10Professor Fulbright, thank you so much for coming on Odd Lots. Thank you. I'm really looking forward to it. So let's just start with like the premise of this conversation, because I, you know, we discussed it as this is a care work and that encompasses multiple things. It feels like an area that's been broken in some sense for long before the pandemic. But I'm curious, like, A, do you accept that premise that broken is a good way to think about it? And how would you characterize the sort of, you know, what have we seen for years in this sector that feels wrong to people? You know, I kind of agree with the broken word, but I think that analyzing it completely in terms of markets, even in terms of market failure, is a little bit misleading.

4:57Because what's really interesting about care provision is it involves a lot of paid work, but also a lot of unpaid work, and also a lot of government provision. And it's the way that all of those sources of provisioning interact, I think, that give it some very particular characteristics, in addition to the kind of characteristics of services in general that make it different for manufacturing. Well, on that note, maybe talk to us about the landscape of child care in the U.S. and what it looks like now, because my impression is, you know, there is some government support. Some families get subsidies, but for the most part, you're talking about a sort of network of primarily very small, independent childcare centers and or people who are doing this work for free for their families.

5:50If you have a family member who's maybe looking after your kid or a friend's kid or whatever. So talk to us about what it looks like currently. Well, right now, it's pretty clear that people are having a hard time finding the child care that they need outside of the home and also that it's become increasingly expensive to do it. And it's clearly making life difficult for a lot of families and having some adverse effects on children as well. I think it's particularly consequential for women who are often more constrained by child care responsibilities than men are. You know, part of this has to do with just the nature of services that are different than it's different than producing a good physical good.

6:33It's long been noted that services are not as susceptible to technical change. The very nature of care means you got to have some face to face hands on interaction. Maybe technology is going to improve the quality or change the nature of it. But it's basically a pretty labor-intensive and emotionally intensive kind of provision. It's one that people really value that's really important in terms of their quality of life and child outcomes. But it's not easy to put it together with a world in which most families need two income earners. So they need some help with child care outside the home. So another thing I think is worth mentioning is that it used to be that parents could rely on a pretty large network of neighbors and kin to help them out with child care.

7:27That's much less true than it used to be. College educated workers in particular are pretty unlikely now to live in the same area as their parents. A lot of job requirements mean that people have to be willing to move. So, you know, there's just less available kin nearby compared to what there used to be, especially in large cities. And, you know, the fact that more women are working means that more sort of potential grandmothers are also working as well. So that's another constriction in the kind of supply of informal care. So that's one of the things that's driving the problem. So one of the things that's really striking, and you mentioned, particularly say in New York City, there's so many people face child care stress.

8:14People are tearing their hairs out trying to find someone to watch their baby or young child. And we see these charts of the prices going crazy and the numbers that people have to pay are pretty astronomical. And yet my impression is that the actual wages of the people who work in daycare centers or child care centers are low. And so there is seems to be, you know, I know you're sort of the idea of a market failure is maybe perhaps not the best way of framing it. But this does feel very intuitively like how people think of a market failure. Why are the costs for the end consumer surging? At the same time, the workers do not seem to be reaping much of the benefit from it in terms of rapid wage gains.

8:59You know, one of the most basic market failures that often gets left out of the discussion of market failure is that people can't participate in a market unless they have enough money. So what's happened with child care is as inequality has increased, the demand for child care has gone up and the price of it has gone up. And what's happened is a lot of low income families have been just priced out of the market. So they're unable to buy it. So it's kind of like the housing market, which tilted very much towards high end housing and left us with a huge. Growing population of homeless people that can't afford housing because low income housing is so hard to find.

9:39So I think that's one of the factors that's driving the problem. But another one in New York City in particular is that for a long time, the kind of safety valve was low-wage immigrants who were willing to work under the table as nannies or as occasional babysitters or childcare. We don't have very good statistics on what's happened to that supply. But it's pretty clear that the combination of the pandemic and immigration policy and cultural change in the U.S. has kind of reduced that informal supply that was once kind of helping lubricate the market. But, you know, another factor is that the way the labor market is supposed to work is that when there's a shortage of labor, wages go up very rapidly.

10:23But it's really hard to raise wages in the child care industry for a couple of reasons. One is a lot of it at the lower end relies on government subsidies and government, you know, regulated rates and also on funding. And so if the funding stream doesn't increase, those subsidized centers can't pay higher wages. Right. So that's one kind of sticky point in the whole, you know, in the whole process. But then another one is the example that I was, you know, the point that I was making is that if you have enough money and there's a lot of scarcity, you can bid up the prices for kind of individual providers like nannies, right, without really necessarily going through the daycare, center care system.

11:16So it's not, you know, I guess maybe a way to think about it is it's not a homogeneous product. you know it's coming from all these different sources and yet the market failure that you're referring to is kind of a function of a more complex institutional failure i guess that's that's aggravating things

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12:34This is Steve Covino from Covino & Rich. Here to tell you Toyota's legacy has been standing tall for generations. From pioneering hybrid technology to redefining the standards of safety and efficiency. with each innovation a commitment to progress and with a legendary lineup of in-stock trucks including the ultra rugged new tacoma and heavy-duty half-ton tundra you can experience the legacy of toyota for yourself visit buyatoyota.com the official website for deals to find out more toyota let's go places so i definitely want to talk about inequality inflation or this idea that you have you know more price inelastic consumers who might be driving up prices for other people.

13:14But just before we do, in terms of this idea of childcare is expensive and you might have someone who's paying$2 ,000 or$3 ,000 a month in New York City or elsewhere, where is that money going to if it's not going to the wages of the workers? And if, you know, we were doing some prep on this before the episode, if profit margins for a lot of these childcare centers are relatively low. Where does all that money go? Yeah. Well, yeah, it's always a good idea to follow the money, isn't it? But I guess one of the points I'm trying to make is that, you know, buying childcare services on the informal market, like paying a nanny, probably those rates are going up a lot.

13:58Those aren't really part of the establishment, you know, Bureau of Labor Statistics establishment survey. So what we're seeing with kind of low and stagnant wages is child care centers, right? Including some that are subsidized through state and local funding. And, you know, and yet there's this, you know, there's this kind of boutique market where people are really, really paying super high prices, and that's not necessarily reflected in the aggregate statistics. So, I mean, and you're sort of just putting together what you're saying. Part of the problem is to even talk about this as a market is there's so many different markets.

14:37You have some people who work as nannies and probably getting paid very well. You have a lot of people who are not getting paid any nominal wage because they're taking care of their child or they're taking care of their grandchild or something in the family. And then you have daycare or childcare workers. And so to even talk about this as like a market or to say, well, we know that the average wage of a child care worker, it's X, is a flaw right from the beginning because there are just so many different types of ways with which child care is provisioned. Yeah, I think that's a really good summary.

15:14Thank you. I want to go back to the inequality aspect because I think I find that really interesting. And do we have any like sense of like the distribution or do the distribution, Like how many workers are moving from, say, working, might have been working at a daycare or child care center and now working, getting paid much more as a very rich family's nanny? Like what is the distribution there and that flow of workers look like? And how much does the sort of extreme wealth of some people and the ability to hire a nanny or obviously in many cases, or at least some cases, multiple nannies? How much does that, in your view, sort of affecting the industry overall?

15:56Well, first of all, it's a really interesting empirical question. To answer it, basically you need some administrative data that follows people longitudinally. And there's often a lag in our access to that kind of longitudinal data. I recently worked on a study of human service workers in the city of Seattle, and we were able to get some administrative data showing that when people left human service jobs, including child care for another job, they got a really big pay increase but that was um you know pre-pandemic and not really very up to date but you know another way to think about it is uh the the issue is that there's some selection bias that is like when you see the what's happening to prices and wages there's a lot you're you're not seeing the people that cannot afford to buy child care anymore right so some people are paying a whole lot more for child care, but some people can't buy it at all.

16:51So what you're seeing is, yes, the price is going up because poor people can no longer afford to buy it. So that's why I think the analogy to housing is kind of helpful. You can actually make, you know, affluent families are willing and able to pay a lot of money for child care and for other care services, right? But families at the bottom are not earning a wage that's sufficiently high to hire somebody to help them with that work and still be able to pay their other bills. So it's really kind of about a selection bias in the market. That's why I think the housing analogy kind of works. I mean, how can we have a shortage of housing in a country where we have actually pretty successful and efficient housing industry, but it's building homes for the affluent because the profit margin is higher there.

17:46Right. And both of these things, I mean, housing and child care would be considered essential services or things to have in order to live a full, normal economic life and human life. But talk to us a little bit about how we got here. What are the choices that the U.S. specifically made in order to create a sort of private childcare industry or, I guess, informal economy network? You know, I don't think there were explicit choices. I think it's kind of the chaotic result of a process of kind of collective bickering and negotiation over who should pay the costs of rearing the next generation. That's why I think it's really important to think about the big picture, like who should pay those costs.

18:33And the economics profession, like the social sciences in general, has kind of treated child rearing as though it's sort of a luxury good. It's a consumption good. Having a child is like having a pet. It's your pet. You should take care of it. It's your business. And now we're beginning to realize that that's a terrible metaphor, for because raising children is actually a really important component of economic sustainability, the future labor force, the people who are going to pay the taxes that are going to support us in our old age. So I think it's sort of coming, you know, I think this is becoming, there's more realization about this, looking at kind of the future of Medicare and Social Security, the implications of a below replacement fertility rate.

19:21It's like, oh, gee, you know, it's going to be a problem if we don't have a working age population that's big enough to help us meet our needs as we grow older. Can you talk through, suppose, a family that cannot afford child care, either a private nanny or even a sort of a more public option, or a sort of commercially available option at like a child care or daycare center. What happens? I assume the burden of that in many families, you know, overwhelmingly falls on the mother. But what is the sort of the cost of that in terms of, okay, you have one mother who is able to find childcare, another mother who can't find it or can't afford it in terms of what did the cost to them in terms of their life, in terms of earnings and so forth from that unequal distribution of available childcare?

20:16Well, I mean, first, one big manifestation of it is resorting to part-time or temporary work, you know, cycling in and out of the labor force. Like maybe you have an informal childcare arrangement, cob together with a working schedule, and then your child gets sick. What do you do? You figure out a way, you know, you basically have to quit your job. You might hope that you get unemployment insurance. Then you have to kind of rely on friends and family. And then you go out and try and find another job where you can actually combine that with responsibilities for looking after your kids, or you look for neighbors or kin who are willing to trade or exchange services for that.

20:55That's kind of a stressful and time-consuming process. And, you know, it has pretty significant consequences for lifetime earnings because anybody in the labor market who doesn't have a sort of consistent record of full-time job tenure, it gets stuck at the bottom and it's not a real candidate for moving up the occupational ladder. So, I think it really contributes a lot to the, you know, kind of a serious lack of income mobility for mothers. I mean, the paradox is that there's a lot of evidence that high earning mothers actually pay a bigger quote unquote cost for motherhood, because when they take time out from their careers, the penalty is very high because their earnings are very high.

21:43So they're taking a bigger hit in terms of earnings. But almost all of those women are also married to high earners that and that provides a kind of buffer or safety net that that reduces the impact of the motherhood penalty whereas women who are stuck in very part-time kind of secondary labor market jobs are are basically stuck there for life without much opportunity to you know once their kids grow up and leave home they could look for a better job but they have no employment you know their employment history and their employment record kind of condemns them to a pretty low trajectory. So just on this note, you know, Joe and I started the conversation talking about the supply chain disruptions that we saw during the pandemic.

22:27And of course, the pandemic was also extremely disruptive for the childcare industry and for anyone who had, you know, younger children and suddenly had to figure out what to do with them while they were perhaps working from home and things like that. Talk to us about what the pandemic showed about this sort of economic trajectory, because I remember there's been a lot of high profile research saying, for instance, that the gender wage gap went up during the pandemic because a lot of women had to reduce their hours in order to look after their children and things like that. Yeah, what we know from time use research is that women increased their hours of child care and housework significantly.

23:10I mean, men did too, partly because of working, of being at home more, right? But the increase in women's workload was clearly bigger than that of men. I think there's another finding from time use research. You know, most time use research is based on the American Time Use Survey, which is a really interesting representative sample of the U.S. population that just asks people, you know, what did you do when you woke up? What did you do after that? What did you do then? So it gives us a real sense of how much unpaid work was being performed both before and after the pandemic. And the survey asked a question, a bunch of questions about active child care.

23:54Like, how much time did you spend? Well, it's not asking these questions directly, but it's taking the responses that people give to the survey and then it's coding them into categories. Like, here's the time that people reported feeding their children. Here's the time that people reported, on average, transporting their children. Here's the time that parents reported, on average, reading aloud to their children. And those active child care responsibilities are pretty, they're pretty binding. But they're not really great that they're not really that high in terms of hours, average hours per day.

24:30What's really much greater for a much greater temporal demand for parents of young children is what's called supervisory time or in your care time. The fact that somebody has to be home and available or on call. with children. And so this difference really explains a lot. For instance, when parents utilize paid childcare services, they're not really reducing their active childcare that much. They're coming home from work and they're engaging with their kids. They're getting their kids ready to go to school in the morning. There's still a lot of active care. What childcare really reduces out-of-home childcare really does for parents is it reduces supervisory constraints.

25:17It's literally against the law in most states to leave a child under the age of nine or even under the age of 12 alone in a house. So during the pandemic, here's what's interesting. A lot of people were working at home. What the time use survey shows is that supervisory time went way up. Active childcare actually went down. Huh. Why is that? Well, I think it's because there's kind of a quantity quality tradeoff. And if you spend all your day with kids around and being available or on call, right, a lot of little small interruptions and a lot of interactions, right, maybe you feel less need to dedicate two hours to them in the evening, reading aloud or playing games or something like that.

26:04It's sort of like child care kind of spreads out into more diffuse activities than, you know, when they're working parents, the schedule is kind of like this huge bustle in the morning to get the kids off. And then this pressure to pick them up after school, which is a pretty big temporal demand on working parents schedules. But then in the evenings, there's this very concentrated peak of time, feeding the child, bathing the child, reading aloud to the child. It's sort of like waking up for not having seen the child during the day. There's this very concerted cultivation that takes place. Definitely relate to everything you just said there.

26:45I'm curious, though, the value of unpaid child care. And I'm curious, like, A, how do you go about trying to put a number on that? And B, like, how useful in terms of your analytical framework is trying to put some sort of dollar amount on how much of that exists in the economy? Yeah, I think it's really important because it kind of reveals the significance of the care sector of the economy as a whole. taking reports of the number of hours spent on the activity and multiplying them times a replacement wage cost, like what you would pay to hire someone to do that work. But obviously, there are a lot of decisions to make about how to define the time and what replacement wage to choose for that calculation.

27:32You know, what you get is not really an accurate estimate, but it's a kind of a lower bound estimate. It's sort of saying, at the very least, if parents withdrew their services and we had to pay somebody to take their place, what would we have to pay? So I think it's really careful. I mean, I think it's really important not to suggest that it's, you know, you're capturing the value of parenting. No, no, no. You're just, you're capturing some kind of counterfactual question about what it would cost to replace the time that parents provide. And it just gives, well, one thing that it shows, I think, is that really the market economy is a pretty, you know, big, but not that huge chunk of the total economy.

28:18So what are we talking about in terms of numbers or like a sort of like, what does it look like? Well, a lot of the estimates are kind of all over the place because they're using different wage rates and different definitions of time. But it's kind of from between 25 % and 40 % of GDP is what a measurement of unpaid work comes to. In my work, I mean, I've actually spent a lot of time working with the American Time Use Survey on exactly this question. And what I found is that a lot of estimates only counted active childcare. And they basically ignored time that children were reported as being in my care, the supervisory constraints.