Nancy Folbre is the director of the Program on Gender and Care Work and Professor Emerita of Economics at the University of Massachusetts Amherst, and a Stone Center Affiliated Scholar. She recently spoke to the Stone Center about her study, Gender Inequality, Bargaining, and Pay in Care Services in the United States, coauthored with Leila Gautham of the University of Leeds and Kristin Smith of Dartmouth College.

What led you to research this topic — the relatively low pay of care services providers, compared to workers in business services with equivalent levels of education — now?

Folbre: It has long been apparent that much of gender inequality in wages reflects differences in the distribution of women and men among industries (defined by types of goods and services produced)  and occupations (defined by types of work performed). Sometimes economists treat these factors  as “choice” variables, entering them  as “controls” in regression models of wage determination. My coauthors and I are less interested in whether women choose jobs according to their “preferences” than in why their particular “preferences” are so costly in the labor market. After all, many people choose jobs for reasons other than the pay package. 

I put “preferences” in quotes because economists often combine the word with the assumption that preferences are just part of “who we are” rather than socially constructed and vulnerable to change. This assumption is now widely questioned, because we know that social norms have a big impact on individual preferences, and that both norms and preferences are changing over time. 

The standard human capital models that now dominate sociological as well as economic analyses of earnings presume that wages are largely determined by individual characteristics. Yet we know that some jobs simply pay less regardless of who fills them. Early feminist advocates of comparable worth or pay equity were on to this point, looking at pay for jobs, in addition to pay for individual workers. And now many economists are looking at the ways in which industrial structure and organization can affect the bargaining power of workers, showing that some firms can use their market power to capture “rents” (revenues not related to actual value-added) and they sometimes share these rents with their professional and managerial employees. For instance, considerable empirical research suggests that the relatively high (and increasing) salaries of workers at the top of financial services reflect rents rather than actual value-added.

We undertook the research in this paper because it seemed likely to us that paid care workers are, in many respects, the mirror image of bankers. Not only are they unable to capture rents — they actually donate value-added to others. Workers in health, education, and social welfare create social benefits (also termed public goods) that far exceed the private benefits to individual “consumers.” Also, these workers are at least partly motivated by concern for the well-being of others. For these reasons, people working in care services, regardless of gender, have less bargaining power than people working in business services, even though their human capital characteristics are very similar. 

Our paper lends empirical support to this hypothesis, showing distinct pay penalties relative to business services not only for those working in care occupations, but even for professionals and managers in non-care occupations who work in health, education, and social services. Because women are disproportionately concentrated in these industries, this effect contributes significantly to the gender gap in earnings. It also helps explain why women’s increased educational attainment and entry into professional and managerial occupations hasn’t done much to reduce the gender gap.

So the concentration of women in care services brings down the pay of both men and women in care services, but to different degrees?

Folbre: Women tend to experience a slightly higher care penalty than men, but the bigger factor is that many more women are in care jobs in care industries, which brings down their average earnings. 

How do “institutional arrangements and market imperfections” make it difficult even for professionals and high-level managers in care services to earn higher pay?

Folbre: Many work in the public sector, where earnings are set by bureaucratic processes, historical precedents, and budget stringencies rather than by market forces. This is a good example of why institutional arrangements matter. Also, care workers are providing customized, not standardized commodities. The value they create is both contextual and difficult to measure. At the end of the year, financial services managers typically get a bonus based on the dollar revenue they generated for the firm. Childcare workers, eldercare workers, teachers, nurses, etc. seldom generate dollar revenues equivalent to their value-added, even if they work for a for-profit firm.  In a predominantly market-based economy, it often seems that no good deeds go unpunished. 

Do you think that the pandemic gave the U.S. public greater awareness of the critical roles played in society by health care workers, public school teachers, and (possibly to a lesser extent) social service providers? If so, do you think this could help workers — at any level within these sectors — gain higher pay?

Folbre: The pandemic caused a lot of us to rethink our priorities. The Democratic Party has definitely moved toward greater emphasis on rewarding care. Biden’s proposed Build Back Better legislation included measures to increase the wages of child care and elder care workers, and his recent executive orders are leveraging administrative changes in Medicaid and Head Start programs to increase earnings.

Which care occupations are paying the greatest penalty, and why?

Folbre: This depends so much on how you define “greatest penalty.” Many childcare and eldercare workers in the U.S. earn poverty-level wages. Teacher pay has declined substantially over time. The bigger a person’s earnings are, the bigger the absolute size of the penalty — our research shows that professionals (whether in care or non-care jobs) and managers (who we don’t usually think of as “care workers”) pay a significant penalty for working in a care industry relative to their counterparts in business services. 

Also there are big differences within occupations. For instance, consider the relative pay of physicians — this is the highest paid care occupation in the U.S. Which physicians are at the top of the relative pay scale? Cosmetic surgeons, who cater to a “private pay” market (not covered by insurance) that includes extremely affluent consumers. Which physicians are near the bottom of the relative pay scale? Those specializing in family care or public health.

What are the policy implications of your findings, and how does this fit into the broader picture of earnings inequality in the U.S.?

Folbre: We should all challenge the assumption that individual earnings are determined by individual “productivity” and that most people earn what they deserve and deserve what they earn. Too much reliance on market forces will always lead to the undervaluation of care work and, most likely, continuing increases in earnings inequality. We need more social regulation,  including a higher minimum wage indexed to inflation, greater taxation of extremely high earnings, and sectoral bargaining strategies that could raise the wages and benefits of those working in the care sector. 

Read More: