Nancy Folbre on the Care Economy

The Folbre Framework

Nancy Folbre has been one of the most important academic voices on care economics for thirty years. Her work, including The Invisible Heart (2001), For Love and Money (2012), and the more recent The Rise and Decline of Patriarchal Systems (2020), has argued that care work — childcare, eldercare, healthcare assistance, education in its caring dimensions — is systematically undercounted in mainstream economic statistics and consequently undervalued in mainstream policy.

What Care Work Is

The category is broader than the statistical definition. Folbre distinguishes three layers:

Direct paid care work: roughly 4 million US workers in formal care occupations — nursing assistants, home health aides, daycare workers, preschool teachers, certified nursing assistants in long-term care. These are measured in BLS occupational statistics.

Unpaid family care work: the much larger layer. Time-use surveys estimate this at roughly 30 billion hours per year in the US, mostly performed by women. Includes childcare, eldercare, family healthcare coordination, and the substantial domestic labor that enables other household members to work for pay.

Community-level care infrastructure: schools, hospitals, libraries, parks, mutual-aid networks, and the substantial volunteer labor that sustains civic institutions. Difficult to measure precisely but is a substantial share of public spending and a much larger share of total caring activity than the paid layer.

Why GDP Undercounts

GDP measures only market transactions. Unpaid care work, by definition, is not a market transaction and is not counted. The omission has produced systematic policy biases:

A move from unpaid family childcare to paid market childcare adds to GDP even if the quality of care is identical or worse. A move in the other direction subtracts from GDP even if the children are better off. The measure misreports the actual welfare consequences in both directions.

Family caregiving for elderly relatives is invisible to GDP. A similar amount of care provided by paid home-health aides shows up as economic output. The decision to support family caregiving through paid leave (which counts as compensation) vs. unpaid family work (which does not) has GDP consequences that misrepresent the welfare consequences.

The BEA produces satellite accounts that estimate the value of household production — including unpaid care work — at roughly 15-25% of measured GDP. These satellite accounts are not part of headline GDP and rarely show up in macroeconomic policy discussions. The measurement could be done; the political decision has been to not include it in the headline.

The Productivity-Ceiling Problem

Care work has a structural productivity problem. William Baumol's "cost disease" thesis (1966) pointed out that some sectors do not get more productive with technological progress. A string quartet still requires four musicians playing for the same duration as a century ago. Care work shares this property. A nurse can care for only so many patients at once. A childcare worker can supervise only so many children. Quality care is intrinsically labor-intensive in a way that software production is not.

This produces a recurring policy problem. As technological progress raises wages in productivity-growing sectors, the cost of care work rises without corresponding productivity gains. Either the wages of care workers fall behind (which produces shortages and quality problems), or the price of care services rises faster than incomes (which makes care unaffordable for many families), or public subsidies expand to maintain access (which requires sustained political commitment).

The Demographic Pressure

The US population over 65 is projected to roughly double between 2000 and 2050. The ratio of workers to retirees is falling. Long- term care needs are growing while the workforce available to provide them shrinks relative to demand. This is the demographic squeeze that Charles Goodhart and Manoj Pradhan analyzed in The Great Demographic Reversal (2020): aging populations create persistent demand for care services that the existing market structure cannot supply at scale without either substantial wage increases or substantial subsidies.

The 2030s will produce the test of whether the existing US care- economy structure can sustain. The aggregate evidence suggests it cannot. Home health aide turnover already runs above 60% annually. Nursing-home staffing shortages have produced quality crises in multiple states. Childcare providers have exited the field in substantial numbers since the pandemic.

The European Comparison

Several European countries have addressed care infrastructure more systematically than the US:

The Nordic countries: substantial public provision of childcare and eldercare, funded by general taxation. Wages for paid care workers are higher relative to median wages than in the US, and public sector unionization provides protection.

Germany: long-term care insurance (Pflegeversicherung) introduced in 1995, covers a substantial share of long-term care costs through mandatory contributions during working years. The system is not fully adequate but provides a structural framework that the US lacks.

Japan: long-term care insurance (Kaigo Hoken) introduced in 2000, similar to Germany's model. Has been credited with substantially improving access to long-term care services even as the aging population has expanded demand.

The Netherlands: combined home-care and institutional-care financing through a national insurance framework. The structure allows substantial individual choice while maintaining universal coverage.

The US has none of these. Medicaid covers long-term care only after the recipient has exhausted personal assets ("spend down"), which forces middle-class families into poverty before accessing benefits. Private long-term care insurance has functionally collapsed as a viable market.

The 2021 Child Tax Credit Lesson

The American Rescue Plan's 2021 expansion of the Child Tax Credit — providing $3,000-3,600 per child as a refundable monthly payment — was the closest the US has come to recognizing the economic value of unpaid family care work. The effect on child poverty was striking: a one-year drop from 12% to 7%, the largest single-year improvement on record.

The expansion expired after one year because the political coalition for sustained funding did not coalesce. Child poverty immediately rose back toward pre-2021 levels. The 2024 child tax credit returned to its pre-2021 form, which provides modest non-refundable benefits.

The lesson is that broad cash transfers to families with children can produce large measurable welfare gains, but sustaining them across political cycles is the harder problem. The same lesson applies to potential care-economy subsidies: implementation is easier than maintenance.

The Distributional Politics

Care work is performed disproportionately by women, by immigrants, by people of color, and by people without college credentials. The wages are systematically lower than they would be if the work were performed by demographically different workers, holding skill and output constant. The cross-country evidence shows that care wages are higher in countries where care work has been politically organized and demands compensation in line with its actual social productivity.

The US has not organized care work effectively. The Service Employees International Union has had some success in eldercare and janitorial sectors, but childcare providers are largely unorganized. Home-care workers were classified as exempt from minimum wage and overtime protections until 2015, and the rule continues to be challenged. The political-economy obstacles to care-worker organizing are substantial.

The Honest Reading

Care work is the largest sector of the actual economy that mainstream macroeconomics treats as a side topic. The Baumol cost disease means it will not become cheaper through technological progress. The demographic pressure means demand for it will grow. The political economy means it has been historically undercompensated relative to its social value. The countries that have addressed this through public investment have produced visibly better outcomes than the countries that have not. The US has not, and the structural pressures are growing. The 2030s will probably force the care-economy conversation into mainstream policy debate as the demographic numbers force the underlying arithmetic into unavoidable view.

Reading List

• Nancy Folbre, The Invisible Heart (2001)
• Nancy Folbre, For Love and Money (2012)
• Charles Goodhart and Manoj Pradhan, The Great Demographic Reversal (2020)
• Kathleen Sebelius and various ASPE long-term care reports
• National Domestic Workers Alliance research