Invest more in the caring economy, and growth will come

More public investment in caring infrastructure is well warranted under existing evidence, is the message that emerges from a new study released recently by the ITUC (“the study”).

The study shows that investment into the care economy of 2 per cent of GDP in just 7 countries would create over 21 million jobs and help countries overcome the twin challenges of ageing populations and economic stagnation. Investing in care narrows the gender pay gap, reduces overall inequality and helps redress the exclusion of women from decent jobs.

The importance of investing in infrastructure has re-emerged as a priority in the international development agenda in the last decade, especially under the emphasis the Group of 20 (G20) has been placing on the issue. The G20 sees infrastructure as a key to boost demand and growth, and with it employment. Amidst growing signs of malaise and uncertainty in the global economy, last year the G20 recommitted to a target of 2 per cent increase of GDP that its members hope to achieve by 2018. But the prevailing policy discourse continues to associate infrastructure only with the construction sectors (e.g. roads and bridges), rather than sectors such as health, social care and education, which are the backbone of the caring economy.

That exclusionary focus reflects a gender bias in policy-making. An example of this bias that the study describes is the cap in the European Union rules that limit debt and deficits, which have exceptions for capital investment but not for capital expenditure. The said rules would allow building schools and hospitals, for instance, thus allowing the wages of the builders, but disallow funding for running the schools, hospitals and nurseries, and, thus, the wages of teachers, nurses and childcare workers. ”The system fails to recognize the long-term productive contribution of the social infrastructure that employment in the teaching and caring industries builds, through creating and maintaining the stock of ‘human capital,’” the study says.

Indeed, such bias was all too present in the general responses to the 2008 global financial crisis. In the wake of it, the Group of 20 promoted and coordinated expansionary efforts that, according to the study, included making money available to rescue the banks and boosting spending on physical infrastructure. Whilst spending on physical infrastructure is undoubtedly an important boost to the economy, as the study clearly shows, the study also points out that “No attention was paid to the social or gender impact of this strategy, for example, to how particular social groups were likely to be affected by the support for banks,” it says.

The study comes in the middle of another important policy-making moment. In spite of the generally prevailing trends which, after 2010, have been towards austerity, the G20 continues to promote investment in infrastructure and it does so with a clear penchant to “transformational” projects. The G20 should realize that in order to meet its own target of reducing gender gaps in employment by 25 per cent by 2025 it needs to vigorously promote investment in public social infrastructure. What could be more transformational than that?

The study presents theoretical arguments, evidence from case studies and findings from ITUC’s own empirical research on the employment effects for men and women of investing in social infrastructure. It makes the case for public investment at times of low growth, high unemployment and pervasive underemployment. In addition to a growing body of supporting research evidence, the study provides new empirical findings from seven – country analysis (of Australia, Denmark, Germany, Italy, Japan, UK and US).

The evidence in the report shows that investment of 2 per cent of GDP would create:


  • 13 million jobs in the USA
  • 3.5 million jobs in Japan
  • 2 million jobs in Germany
  • 1.5 million jobs in the UK
  • 1 million jobs in Italy
  • 600,000 jobs in Australia
  • 120,000 jobs in Denmark.

The report cites additional evidence from South Africa and Turkey showing that the economic stimulus from care investment is not limited to the world’s richest countries.

Sharan Burrow, ITUC General Secretary, said: “This study shows how sustained investment in care is not only vital to societies, it also provides an indispensable motor for economic growth and an antidote to the destructive impact of failed austerity policies. Most of the burden of service cuts has been borne by women, which has in turn depressed household incomes at a time when boosting purchasing power and economic demand is crucial to restoring global prosperity. The care sector itself has high rates of precarious work and low pay, and it is essential that workers in this sector have the full protection of labor legislation in line with international standards.”

Read full report.