Economic Impact of the Care Economy: Assessing its Contribution to GDP and Employment

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Economic Impact of the Care Economy: Assessing its Contribution to GDP and Employment

30 Sep 2024

What is the Care Economy?

The care economy refers to the broad network of paid and unpaid labor that is essential for supporting the well-being of individuals and communities. This sector includes caregiving activities like child care, elder care, disability care, and domestic work, both in households and in professional settings such as daycares, nursing homes, and hospitals. A key aspect of the care economy is that it often involves tasks traditionally associated with women and is undervalued, despite being critical for the functioning of societies and economies. Unpaid care, such as looking after children, the elderly, or household chores, frequently falls on women, reinforcing gender inequalities in labor participation and income.

In the formal sector, care workers, including nurses, home aides, and childcare providers, are often underpaid and work in precarious conditions. Yet, the demand for care work is rising due to aging populations, increasing life expectancies, and higher workforce participation rates of women, which has led to increased reliance on professional care services. The care economy is integral not only to the functioning of the economy at large, but also to social cohesion and human development. When individuals receive adequate care, they are healthier, more productive, and better able to contribute to society.

Governments and organizations are increasingly recognizing the need to invest in the care economy to address labor shortages, improve working conditions, and ensure that the growing demand for care is met. Expanding access to quality care services can also promote gender equality by reducing the burden of unpaid care work on women while creating sustainable, dignified employment opportunities in the formal care sector.

Care Economy in India

The origin of the care economy in India is deeply rooted in the country's socio-cultural context, where caregiving has traditionally been viewed as a familial and gendered responsibility. Historically, caregiving activities, such as child-rearing, elder care, and domestic chores, have been largely unpaid and performed by women within households, often viewed as an extension of their roles as mothers, daughters, or wives. This reflects a patriarchal division of labor where caregiving is often overlooked as "real work" and is instead considered a natural duty of women.

Key Historical Influences:

Traditional Joint Family System: India’s joint family structure has long emphasized collective responsibility for caregiving, especially for the elderly and children. The unpaid nature of this care, mostly provided by women, meant that formalized care services were not widespread.
Colonial Era: During British colonial rule, the formal economy in India began to industrialize, but care work remained largely informal. Domestic workers, often from lower castes or marginalized communities, began to be employed in middle- and upper-class households, though their work was poorly paid and unregulated.
Post-Independence Changes: After independence in 1947, India’s economic policies prioritized industrialization and formal sector employment, but caregiving continued to be informal and largely unpaid. Over the decades, economic reforms, urbanization, and rising women’s workforce participation led to an increasing need for formal caregiving services, such as childcare centers and elderly care homes.
Impact of Globalization and Migration: In the 1990s, economic liberalization led to more women joining the workforce. This resulted in a rising demand for professional care services, both in urban areas and abroad. The migration of women from poorer regions to wealthier urban centers and overseas for domestic work became more common, highlighting the gendered and class-based nature of care work.
Government Interventions: Programs like the Anganwadi system, launched in 1975 under the Integrated Child Development Services (ICDS), were one of the first formalized government initiatives recognizing the need for childcare and nutritional services for women and children. However, these programs remained largely underfunded and dependent on poorly paid workers, mostly women from rural and lower-income backgrounds.

Modern Trends:

Today, the care economy in India is gradually becoming more formalized, driven by demographic changes like an aging population and a growing middle class. However, it is still heavily dominated by informal, low-paid, and precarious work. The formal care economy, encompassing healthcare, education, domestic work, and elderly care, continues to expand, but issues like labor rights, fair wages, and recognition of unpaid care work remain central challenges.

India’s Economic Context Pre-Care Economy

Before the concept of the care economy began to take shape in India, its economy was predominantly agrarian, with agriculture and subsistence farming serving as the primary sources of livelihood for the majority of the population. In pre-colonial India, the economy was largely based on rural communities that practiced a mix of agriculture, craftwork, and trade.

Colonial Impact on India’s Economy: Although care work continued to take place informally within households, the economic focus shifted towards industries controlled by the British. Large-scale infrastructure projects, such as railways and telegraph systems, furthered industrialization, but caregiving remained largely invisible in formal economic discourse. During this period, caregiving was still seen as a familial responsibility, predominantly carried out by women, and not as an economic sector worthy of recognition.

Impact of the Care Economy on India

The care economy in India has a profound and multi-dimensional impact across various avenues, influencing not only the workforce but also the social structure, economic development, and gender dynamics.

1. Economic Contribution: The care economy, which includes both paid and unpaid labor, plays a significant but often unrecognized role in India’s economy. The formalization of the care sector can contribute to economic growth by expanding the labor force, improving productivity, and boosting household incomes.

2. Gender Equality: The care economy has a critical impact on gender dynamics in India. As more women enter the formal workforce, the demand for professional care services increases. This shift can help redistribute unpaid caregiving responsibilities, promote gender equity, and challenge societal norms that confine women to domestic roles. However, the care sector itself is often marked by low wages and poor working conditions, which further entrenches gender inequality.

3. Social Well-being and Quality of Life: Access to quality care services directly improves the well-being of children, the elderly, and disabled It also reduces the burden on primary caregivers, allowing them more time for education, employment, and personal development. Better care facilities lead to healthier populations and a more balanced work-life dynamic for families.

4. Labor Market Dynamics: As India’s population ages and more women join the formal workforce, the care economy is poised to grow. Investments in care infrastructure and the protection of care workers’ rights can strengthen labor markets, reduce unemployment, and address skill gaps. Moreover, formalizing care work offers workers job security, benefits, and pathways for career growth, thereby improving their livelihoods.

5. Sustainable Development: The care economy also contributes to India’s broader sustainable development goals (SDGs) by promoting decent work, reducing poverty, advancing gender equality, and fostering inclusive economic growth. By investing in care services and infrastructure, India can address social inequalities, enhance human capital, and create a more resilient and equitable society.

Contribution to GDP and Employment

The care economy plays a significant role in contributing to both India's GDP and employment, though much of its value is often under-recognized and under-reported due to the informal nature of much of the work involved.

1. Contribution to GDP:

The exact contribution of the care economy to India's GDP is difficult to quantify, as a large portion of caregiving, particularly unpaid care work (such as household labor, child-rearing, and elderly care), is not included in traditional GDP calculations. However, if this unpaid work were monetized, estimates suggest that it would account for a significant share of GDP.

A 2019 estimate by the International Labour Organization (ILO) suggested that unpaid care work contributes roughly 7-9% of global GDP, and India's situation is likely similar.
Formal care sectors like healthcare, education, childcare, and domestic work contribute directly to GDP through services. The healthcare sector alone, a significant part of the care economy, contributed around 4.7% to India’s GDP in 2020.

2. Contribution to Employment:

The care economy is a major provider of employment in India, particularly for women and marginalized communities. However, much of this work is in the informal sector, leading to precarious conditions and low wages.

Unpaid Care Work: A vast majority of care work, particularly domestic work, child-rearing, and elder care, is unpaid and performed primarily by women. According to a 2019 Time Use Survey by the Indian government, women spend around 299 minutes per day on unpaid care work, while men spend about 97 minutes.
Formal Care Sector Employment: The formal care economy, including sectors like healthcare, childcare, eldercare, and domestic work, creates millions of jobs. In 2020, India had around 2.2 million nurses and midwives and a large number of domestic workers (an estimated 4.75 million in 2017). The Anganwadi system under the Integrated Child Development Services (ICDS) employs millions of women across rural areas as health and nutrition workers.
Domestic Work: The domestic worker sector alone employs around 4-5 million workers in India, primarily women from economically disadvantaged backgrounds, though this remains largely informal and under-regulated.

Overall Employment Impact

The care economy is a crucial contributor to India’s GDP and employment, providing essential services in areas like healthcare, education, childcare, and elderly care. With a growing and aging population, the demand for care services is increasing, creating both formal and informal job opportunities, particularly for women. This sector not only adds to economic output through paid labor but also enables greater workforce participation by supporting workers in other industries. Investing in the care economy improves social welfare, promotes gender equality, and fosters inclusive growth, making it an integral part of India’s economic progress.

Sources:

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