What’s The Value Of US Household Production?

The value of household production has never been included in GDP. But although this is sometimes interpreted as a knock against those who do most of household production, it’s really just a matter of accounting. To be included in GDP, there needs to be a market transaction. Even back in 1934, when Simon Kuznets was reporting the first estimates of “national income” to the US Congress, he was careful to note: “A student of social affairs who is interested in the total productivity  of the nation, including those efforts which, like housewives’ services,  do not appear on the market, can therefore use our measures only  with some qualifications.”

However, the US Bureau of Economic Analysis and statistical agencies in other countries now often use  “satellite accounts” to calculate the value of household production, which is currently equal to about 23% of US GDP–and has been declining over time. Here’s a bit of broader context for the comment from Kuznets in  his 1934 report, National Income, 1929-1932 : Letter from the Acting Secretary of Commerce Transmitting in Response to Senate Resolution No. 220 (72nd Cong.) a Report on National Income, 1929-32, and then some information on the current estimates of the size of household production in the US and elsewhere.

Kuznets wrote in 1934:

“The volume of services rendered by housewives and other members of the  household toward the satisfaction of wants must be imposing indeed,  when totaled for the 30 million families comprising the population of  this country; and the item is thus large enough to affect materially any estimate of national income. But the organization of these services  render them an integral part of family life at large, rather than of the specifically business life of the nation. Such services are, therefore, quite removed from those which gainfully occupied groups undertake to perform in return for wages, salaries, or profits. It was considered  best to omit this large group of services from national income, especially  since no reliable basis is available for estimating their value. This  omission, unavoidable though it is, lowers the value of national income  measurements as indexes of the nation’s productivity in conditions  of recent years when the contraction of the market economy was accompanied by an expansion of activity within the family. … Thus, the estimates submitted in the present study define income in such a way as to cover primarily only  efforts whose results appear on the market place of our economy.  A student of social affairs who is interested in the total productivity  of the nation, including those efforts which, like housewives’ services,  do not appear on the market, can therefore use our measures only with some qualifications.”