Care Earnings in the United States and 24 European Countries

The Role of Social Policy and Labour Market Institutions

How to explain the low wages plaguing American care workers? Is the situation the same in other countries? Do low levels of education or sector productivity suffice to explain the wage penalty of sorts in this sector? Emanuele Ferragina and Zachary Parolin explore these questions and present their findings in the paper Care earnings in the United States and 24 European countries: The role of social policy and labour market institutions (Social Policy & Administration, September 2021). Presentation.

Defining Care Occupations

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Care occupations represent almost a third of the total workforce in the United States and Europe, and the demand for care services is rapidly increasing. However, the average care worker remains poorly paid and this is especially true in the U.S. – the country that has received the bulk of empirical focus in investigations of the ‘care penalty’.
Though care occupations are commonly considered a small subset of occupations, such as childcare workers, recent literature has expanded this definition and provided a broader conceptualisation of care work. Overall, care occupations are those that fulfil nurturant and reproductive needs. Reproductive care work emerged as an analytical category in the Marxist literature about domestic labour and unpaid social reproduction.
Wally Seccombe⁽¹⁾Wally Seccombe, The Housewife and Her Labour Under Capitalism , NLR,, 1974 – Wally Seccombe, Domestic Labour: Reply to Critics, NLR, 1975 . illustrated how unpaid domestic labour ‘acts directly upon wage-purchased goods and necessarily alters their form’, and that the work housewives performed for free is ‘part of the congealed mass of past labour embodied in labour power’. The notion of reproductive care was then transposed from unpaid to paid care.
Nurturant care work is distinguished from other paid and unpaid activities because grounded in human relationality. The centrality of relationality contributes to jobs where ‘feelings’, ‘responsibility’, ‘responsive action’ and ‘relationship/dependence’ between the caretaker and the care receiver are key and unique. .

Three Main Categories of Professional Activity

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Following this research, we segment care occupations into three categories: low nurturant, high nurturant and reproductive care occupations.
Nurturant occupations provide services that are interactive and support the physical, mental and cognitive health and the safety of those they serve. This category includes high nurturant occupations, life science and health professionals (medical doctors, dentists, veterinarians, pharmacists, nursing professionals) as well as teaching professionals (college, university and higher education teaching professionals; secondary education teaching professionals; primary and pre-primary education teaching professionals). Low nurturant occupations are the lower-level versions of the high nurturant jobs, e.g. medical assistants, nursing associate professionals, primary education teaching associate professionals.

The growth of reproductive care occupations follows increasing processes of externalisation and commodification of activities that previously were informally performed, mostly by women, within the household. These occupations involve less direct human interaction than nurturant care work, and for this reason are also distinguished within empirical classifications. Reproductive care occupations contribute to routine activities necessary for the reproduction of the workforce, e.g. cleaning, food preparing, food service, laundry. Examples of jobs included within our categorisation are the following: travel conductors, housekeepers, cooks, waiters/waitresses, bartenders, home-based personal care workers, hairdressers, barbers and beauticians, street food vendors, shoe cleaning and other street services elementary occupations, domestic helpers and cleaners, helpers and cleaners in offices, hotels and other establishments, building caretakers, garbage collectors, etc.

Despite their different origins, nurturant and reproductive care activities have in common the offer of services related to social reproduction. This is the link that binds them all and provides a conceptual foundation to the study of the ‘care penalty’. While past explanations of the care penalty tend to point to individual, relational, and market valuation factors, we integrate a comparative institutional lens to investigate differences in the relative earnings of care workers across countries.

Broadening the Scope of Analysis

The individual and relational perspective focuses on the personal characteristics of care workers and/or their relationships to the individuals for whom they care. Workers in care jobs, and reproductive care work especially, are more likely to have lower levels of education. It has been suggested that demographic differences of reproductive care workers relative to the general population help to explain care penalties in the U.S. Devaluation based on gender, race, ethnicity, or citizenship status may similarly drive down earnings. This perspective relates for example to women’s role in the domestic sphere: as women have historically provided care for free, society has fostered the expectation that care is primarily a moral obligation toward care recipients within the household. Care work is associated with mothering; hence, it attracts only workers who are predisposed to this activity and ready to accept wages below the market value. Wages of men and women employed in occupations socially constructed as quintessentially feminine – such as caring labour – are devalued in the market.
The market valuation perspective focuses on the economic valuation of care work. The impersonal dynamic of supply and demand are better designed for the invisible hand than the invisible hearth for several interconnected reasons. First, the quality of care cannot be adequately priced because care receivers are not normal customers – third parties often pay for the service – and their satisfaction is hard to measure. Second, care sector productivity grows more slowly than productivity in manufacturing, as the ‘Baumol disease’ plagues the care sector more than other kinds of services-sector occupations. While for example workers in the banking sector saw their per capita productivity rapidly increase due in part to technological development, care workers – employed in activities more labour than capital intensive – remain stuck in a low-productivity path. The large majority of care occupations, and in particular reproductive care activities, are at the margins of the service-based economy.

The Key Role of the Welfare State

Labour market and welfare state institutions are at the forefront of analyses of income inequality and the market wage distribution. Countries with greater collective bargaining coverage tend to have more compressed wage distributions. For care workers in particular, collective bargaining and/or union protections often offer stronger employment standards and standardised wage schedules. Hence, following an institutional perspective, one can reasonably expect that collective bargaining agreements, employment protection and welfare state generosity heavily contribute to cross-national differences in the relative earnings of care workers. Moreover, we suggest that labour market and welfare state institutions are more important than individual, relational and market valuation factors to explain these differences.

An Empirical Study Design

A Comparative Methodology

New York State Nurses Association Demonstration, 2020. Source: NYSNA Website

We test these hypotheses, analysing the factors influencing care earnings in the U.S. and 24 European countries. We posit that for an explanation of the relative earnings of care workers to be robust, it should be able to explain differences between countries and not just within a given country. For example, if education or immigration status are the strongest drivers of care earnings, then accounting for such factors in a cross-national framework should largely explain why countries like the U.S. have higher penalties for reproductive care workers.
At the methodological level, we use higher-quality data and methods than previous comparative research in the field – i.e. harmonised micro-data from the U.S. and European countries from 2005 to 2016, country and year fixed effects models, and a counterfactual analysis – to test the extent to which the relative earnings of care occupations are conditional on demographics and time-varying institutional contextual factors.

Institutional Context and Key Role of the State

Our primary findings show that the institutional context appears to matter far more than individual, relational, or market valuation factors in explaining cross-national differences in earnings penalties and premiums for care occupations. In particular, stronger employment protection, more widespread bargaining agreements, and larger investments in cash transfers contribute to smaller wage penalties for reproductive care workers. Larger investments into social services seem to moderate the earnings of high and low status nurturant care workers. More broadly and largely unsurprisingly, we find that greater earnings inequality contributes to more extreme earnings penalties (for reproductive care workers) and premiums (for high nurturant care workers), independent of the role of collective bargaining, employment protection, and welfare state investment.
Our counterfactual analyses demonstrate that these institutional factors can explain nearly all of the differences in the relative earnings of care occupations between the U.S. and European countries. However, our empirical findings also show that a small earning differential persists between some European regions and the U.S. even when the labour market and social policy context are equalised. This indicates that some unmeasured factors, which might be different for reproductive and nurturing care workers, still contribute to some differences between certain European regions and the United States.

New Research Paths

How can the research initiated by this analysis be taken forward? We suggest there are at least two new pathways for future research. First, our analysis illustrates that there is scope to investigate the contribution of the care sector to wage polarisation or earnings inequality at the cross-national level. In particular, the opposite impact that the labour market and social policy context have on the earnings of reproductive versus high nurturant care workers indicates that labour market flexibilisation and welfare state retrenchment contribute to greater earnings inequality within the care sector. While spending on services contributes to more beneficial social outcomes (better health care outcomes, conciliation between work and family, support for an ageing population, investment into human capital, and so on), it might also contribute to reducing potential earnings for high and low status nurturant care workers.
Second, our research seems to indicate a potential trade-off between national spending on social services and the earnings of nurturant care occupations. The expansion of the care sector, in conjunction with the decline of industrial jobs, proposes new challenges to societies and invites new perspectives on the study of earnings inequality.

Emanuele Ferragina is an associate professor in sociology affiliated with the OSC and LIEPP of Sciences Po. He conducts research in comparative social policy and focuses on family policies and the labour market.