Research Findings

Does outsourcing of domestic services increase female earnings?

February 19, 2019

Even though a vast majority of all households in wealthy countries have two wage-earners, women on average work fewer hours and at lower wages than their partners. This is commonly attributed to the fact that women perform most of the routine housework. For instance, Swedish women spend approximately 15 hours per week on domestic work compared to 10 hours for men – a moderate gender gap compared to many other European countries.

When women decrease time in domestic work, their time in paid work is generally thought to increase. This may happen, for example, with increased access to child care, increased supply of low-skilled workers which makes it cheaper to hire domestic help, or technological improvements in household appliances.

However, we don’t have detailed information about exactly how much more women work for pay when these kinds of changes occur.

Tax rebates for outsourcing of domestic work

Our analysis is based on a natural experiment. A Swedish tax discount policy implemented in 2007 reduced the consumer price of purchasing domestic services such as housecleaning and minor gardening tasks by 50 percent. Population data on everyone in Sweden for the period 2000-2010 gives us information about tax rebates at the household level, so we can approximate the number of hours of domestic work that households outsource and how that affects women’s paid work. We include in our study only married individuals who hadn’t taken advantage of any tax discounts before the policy change.

In terms of numbers, 13,906 women in 2008, 24,596 in 2009 and 33,621 in 2010 were in households that took the tax discount for outsourcing. This is not likely to reflect previously illegal services becoming legal, because survey data from the Swedish Tax Agency indicates that only a small share of the households outsourcing domestic work had previously purchased these services in the informal market.

Domestic outsourcing and women’s earning are positively related

The results indicate that, following the policy change, if domestic outsourcing increased by 40–70 hours per year, or 2.0–3.5 percent of a full-time year-round worker’s hours, women’s annual earnings would increase by a similar amount (2.4–3.6%). However, the positive impact of domestic outsourcing on women’s earnings tends to weaken if total domestic work outsourced exceeds 100 hours per year (more than one month of full-time work). It may be that the effects reach a ceiling as the number of hours purchased approaches three weeks of full-time work (6% of a working year), i.e., that time saved through outsourcing becomes more likely to be exchanged into (additional) household work or leisure rather than labor market work.

In a survey conducted by the Swedish Tax Agency, users of domestic services were asked to state their perceived time gains when outsourcing domestic work. The responses indicate that the time saved by hiring professionals on average is about 1.8 times larger than the number of hours purchased. Our results therefore yield an approximate rule of thumb: married women working full-time devote 60 percent of the time saved by outsourcing to paid work. This is substantially higher than reported by previous studies even if one takes into account the possibility that the actual time gains may be slightly overstated.

Implications for gender equality?

A possible interpretation of our findings is that the gender earnings gap may be mitigated by subsidizing domestic services relative to the counterfactual of no subsidies. First, increased female earnings could improve women’s bargaining power within the household. Second, if social norms are an important determinant of the gender earnings gap, then changes in behaviors within households may, over the longer term, lead to changes in social norPolicy

Policies subsidizing domestic services work

On the other hand, one may claim that the reform served to cement gender roles because women constitute a majority of domestic service workers. In addition, the gender gap in housework within households might not change even though the absolute amount of domestic work decreases.

It remains an open question whether the state resources spent on subsidizing domestic services would have been more efficiently spent on, for example, extending the open hours of kindergartens or increasing home assistance for the elderly. (Elderly family members are generally cared for by younger female relatives.)

Nevertheless, our findings suggest that increased outsourcing of domestic work may raise high-skilled women’s labor supply, and that the effect is non-trivial. Policies that directly subsidize and stimulate the domestic services sector exist in several European countries, so the results of our study are of policy relevance beyond Sweden.

Read more

Karin Hallden and Anders Sterberg, “The Relationship between Hours of Outsourced Domestic Services and Female Earnings:  Evidence from a Swedish Tax Reform,” Research in Social Stratification and Mobility 2018.

Image: Snow Coming Soon! via Flickr (CC BY-NC-ND 2.0)

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