Research into investment in care and construction

The Women’s Budget Group carried out research on the impact of government spending on social infrastructure, focused on seven high-income countries. Our results revealed that investment in childcare and elder care services is more effective in reducing public deficits and debt than austerity policies which reduce spending. We saw a boost to employment, earnings and economic growth. And more social infrastructure spending fosters gender equality.

Investing 2% of GDP in the UK care sector would generate twice as many jobs as the same investment in construction.

Our report, produced for the International Trade Union Confederation (ITUC), shows that investing 2% of GDP in the caring industries would generate up to one million jobs in Italy, 1.5 million in the UK, two million in Germany and 13 million in the USA. See graph below.

When you compare the effects of similar size investments in the caring and construction industries, both would generate increases in employment and add to growth. But investment in the caring sector creates more jobs overall, with a higher proportion of those jobs going to women.

Our findings are consistent across seven countries: Australia, Denmark, Germany, Italy, Japan, UK and USA. The graph below shows that investing public funding worth 2% of GDP in care services would boost overall employment rates by between 2.4 percentage points in Italy (one million jobs) to 6.1 percentage points in the US (13 million jobs).

It would raise women’s employment rates by much more than that, given their greater concentration in the care industry: between 3.3 percentage points in Italy (660,000 jobs) and 8.2 points in the US (8.7 million jobs) with rises of more than five percentage points in Japan (two million jobs), the UK (1.1 million jobs), Australia (400,000 jobs) and Germany (1.4 million jobs).

Men’s employment would rise more than women’s if the investment took place in construction industries. However, men’s employment would increase by almost as much with investment in care because of the larger overall employment effect.

For example, investing in care would provide 4.3 million more jobs for men in the US compared to 4.8 million if the investment was in construction industries. In Germany, men’s employment would increase by 650,000 from investing in care and by 750,000 from investing in construction.

Percentage point employment rise of men and women stemming from public investment in care and construction industries.

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It is not just because of differences in average wage levels that investment in care industries creates more jobs than equivalent amounts invested in construction industries. Wage levels are similar in those two sectors in all the countries studies except the US and the UK. Rather it is because the care industry is more labour intensive and employs more people per unit of output produced. They also generate more employment locally because care services use fewer non-labour inputs, and in particular fewer imports, than construction projects.

Besides creating employment and reducing the gap in employment rates between men and women, investment in social infrastructure contributes to resolving the care deficit. This deficit arises because more women are in paid employment than ever before, while men have not increased the amount of domestic work or caring they do to sufficiently make up the difference, and neither public nor private sector provision has been expanded sufficiently either.