Outsourcing Chores: The Economic Impact

My It’s the Economy column last Sunday explained how you too can live like an economist: by outsourcing lower-value services in order to give yourself more time to work, do rewarding things with your children or otherwise play. Outsourcing household production usually smacks of something only a hedge-fund billionaire or perhaps the Monopoly Man would do, but it is probably a good investment for plenty of middle-class people, too, since doing so can improve their future expected earnings.

Several readers have written in to ask about the macroeconomic impact of this sort of outsourcing. Hiring people to call the cable company or do the laundry creates jobs, after all, and frees up the employers to spend time on higher-paid work today and possibly to get bigger raises tomorrow. So skills are allocated more efficiently, which is probably good for both productivity and economic growth. What effect, then, might an increased propensity to outsource household production have on gross domestic product?

“It would probably increase efficiency, which would be good for the economy, but the impact on G.D.P. itself would probably overstate the true benefit because of the way G.D.P. is measured,” said Jon Steinsson, an economics professor at Columbia and evangelist for outsourcing.

Right now, unpaid household production is not measured by gross domestic product. Shifting a lot of work that is already done but not measured into the measured sector would show a big increase in output that exaggerates how much new stuff the economy is actually producing.

By the way, some economists (including Nancy Folbre, one of this blog’s daily economists) have proposed ways to rethink our standard measure of output to start including unpaid household services like cooking and cleaning for yourself or your family. If this more expansive measure of output were used instead of our current definition of G.D.P., isolating the efficiency gains that might come from greater outsourcing would be easier.