G20 Must Push for More Inclusive GDP

A woman drives her tricycle in Hangzhou before the G20 summit. Photo by Getty Images.
A woman drives her tricycle in Hangzhou before the G20 summit. Photo by Getty Images.

The global financial crisis demanded a radical overhaul of our economic thinking. Assumptions and policies that for years underpinned mainstream economics have been challenged. But glaring gaps remain. One major oversight has been the failure to measure the staggering contribution of unpaid work to total economic activity.

Food prepared for family goes unrecorded, because it’s a non-market service. Domestic work provided by family members goes unpaid because it is untraded. Raising children goes unaccounted for. Caring for sick and ageing loved ones – which can be exhaustive, long-term and constrain employability – doesn’t count as a contribution to societal welfare and the economy.

Unsurprisingly, this all impacts women disproportionately. Most of the 60 per cent of women who are not in the labour force worldwide work in the ‘informal’ - unpaid - sector.

As this is still not measured as a contribution to economic output, it’s not included in national accounts – the standard internationally accepted system to measure GDP – and so it goes by unrecorded and therefore unnoticed.

Its omission not only limits our understanding of how the economy functions, it carries significant consequences and affects the way policies are formulated. For starters, it means a significant chunk of national output flies under the radar. Estimates using household satellite accounts suggest unpaid work could account for around 40-50 per cent of GDP in high-income countries, and as much as 70-80 per cent of GDP in low-income countries.

Failure to measure unpaid work also impacts on women’s long-term welfare. Because pension entitlements are largely accrued through paid work, women who have not been part of the labour market have limited pension rights. They also have low or no savings. So they tend to be poorer than men, especially in later life. In the EU, the average pensions paid to women are 40 per cent lower than those paid to men. As a result the gender poverty gap widens with age. Almost 16 per cent of women aged over 65 in EU countries are at risk of poverty and social exclusion compared with 11 per cent of men in the same age group – an unacceptably high percentage for high-income countries.

Failure to formally recognize unpaid work further exacerbates employment inequalities, and limits economic empowerment. Women – even high earners – continue to clock up more hours than men at home. As a result, women overall work longer hours – an average of 64 a week compared to 53 by men, of which 26 and 9 hours respectively are dedicated to caring activities. Countries like Sweden are ahead of the curve – there, women and men spend a similar amount of time in paid and unpaid work – but such examples remain the exception.

Working longer unpaid hours constrains the time that women can spend in paid work. In the EU employed men work on average 40.6 hours per week compared with 34 hours for women. Inevitably women end up earning on average less than men, and the wage gap remains wide. In countries where women spend twice as much time as men in unpaid work, they earn on average 65 per cent less than men.

Finally, and crucially, lack of formal recognition devalues domestic and care work. What amounts to a massive annual economic contribution is deemed to have a lower status than paid work in the formal economy - and this inevitably affects the social standing of many women and constrains their empowerment.

We need a cultural and policy change. Making domestic and care work visible should be a top priority on the international economic agenda. It’s not enough for the UK or any country to work in isolation on this - comparable GDP estimates are too important.

The G20 has begun to promote policies to bring more women into the labour market. Doing so would increase total output and fulfill its commitment to strong, sustainable and balanced growth. This makes good economic sense, but it’s not enough. The G20 should focus on the significant contribution of the unpaid economy, recognize the unfairness of the current system and promote policy initiatives to overcome the problem.

This week I’ll be representing W(omen)20 at the G20 in China and will suggest the creation of a new working group to research and discuss a more comprehensive and inclusive measurement of economic activity – one that factors in contributions from unpaid domestic and care work.

Measuring unpaid work doesn’t resolve the gender wage gap or pension poverty. But it’s a step in the right direction. It would help focus and improve policymaking. And it would help shape a policy agenda where fairness and good economics go hand in hand. As Germany prepares to host next year’s G20, it should grasp this opportunity to improve GDP accuracy and reflect the contributions of all. The G20 should act smart on this, and act now.

Paola Subacchi is director of the International Economics Department at Chatham House.

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