Thursday, May 28, 2009

A Stay at Home Parent's Worth

Last year, as a 6th grade classroom teacher, I taught my students the concept of opportunity cost as part of a unit on careers. We discussed that being a stay-at-home mom (parent) was a real job, and that even though they did not get paid for that role, they were saving the family a lot of money every year. How much money do stay-at-home parents save a family? That depends. We did a simple math example on the board including a 7am - 5pm (10 hours) shift, at 5 days a week, and at an average hourly wage of $12.00. We came up with an annual salary of $31,200. I came across this recent article that makes the conversation a little more scientific...

Mothers’ Pay
By Nancy Folbre
Nancy Folbre is professor of economics at the University of Massachusetts, Amherst.
On Mother’s Day, did you tell your mom her market value?
Salary.com Inc., which describes itself as a “leading provider of on-demand compensation, payroll and talent management solutions,” now issues an annual press release estimating the median dollar value of mothers’ work at home.
Its approach applies the logic of replacement cost, described in my post last week: What would it cost to hire someone to do a mother’s job? The Salary.com analysts lay their reasoning out in nice detail, but their estimates seem too high, perhaps because they rely on responses to an online survey whose participants were not representative of average moms.
Salary.com reports that, in the typical week, stay-at-home mothers spend 96.4 hours performing the 10 most popular “mom job functions” (laundry machine operator, van driver, janitor, housekeeper, computer operator, cook, day care center, teacher, facilities manager, psychologist and chief executive officer). Using estimated wage rates for these functions, this adds up to an annual cash compensation of $122,611 for a stay-at-home mom (up 5 percent from last year).
Hello, median earnings for women with a college degree in 2007 employed full-time were about $48,500. How could stay-at-home moms this year be doing work with a market replacement value more than twice that?
Two factors help explain this high estimate.
First, respondents to the Salary.com survey reported longer hours of household work than stay-at-home moms in the latest American Time Use Survey (ATUS), collected from a nationally representative sample of the United States population. My estimates based on the 2007 ATUS data show that mothers living in a household with at least one child under 18 who were not in paid employment reported an average of 42.5 hours — not 96.4 hours — of household work a week.
Second, the Salary.com estimates assume that all household work over 40 hours a week (in this case, 56.4 hours!) represents “overtime” that should be valued at 1.5 times normal market wage rates. This is not an unreasonable proposition, but not one that academic researchers like myself normally make.
A couple of other small complaints: If you try the Mom’s Salary Wizard yourself, you’ll notice that the results vary only by the ZIP code that you type in, not by age or number of children. And here’s an interesting twist: The work of stay-at-home-dads is valued even more highly than stay-at-home moms, with a median value of $128,755.
The Web site clearly illustrates the market substitutes available for much of the work that people do outside the money economy. It correctly observes that some of the time individuals devote to running their households requires management skills. I’m focusing here on stay-at-home parents, but the site also provides estimates for employed parents, emphasizing that most people combine paid and unpaid work.
One could argue that mothers’ unpaid work has been ignored, underestimated and devalued for so long that we need to dramatize its dollar value, especially on Mother’s Day. Too many of our public policies — including those defining access to public assistance — define work only as an activity that is paid.
But an overestimate of the replacement costs of a mother’s services also does mothers a disservice. It overstates the living standards of their families (the sum of market income and the value of non-market work), making them appear better off than they really are.
More discussion and debate over the valuation of non-market work could help us all sharpen our estimates.
Meanwhile, let’s remember that replacement cost valuations are limited to the value of services that can be replaced by market purchases. They cannot capture the intangible, personal and unforgettable gifts our parents make to us.

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