If all couples who could afford it decided that one of them should

be a stay-at-home parent, what effect would it have on the economy?

I’m sure there must be a significant percentage of married couples with kids who, if they scaled back on the lifestyle a bit (more modest house, smaller, fuel efficient non-luxury type cars instead of SUV’s, etc.) could afford for one of them to stay home with the kids. What if they all made this choice? Leaving aside the impact it would have on the kids (which I’m pretty sure would be positive), how would it effect the country economically?

Would the unemployment rate decrease? Would average wages/salaries increase as the stampede of a significant number of workers out of the workforce created a labor shortage, or would employers simply demand more work from the employees they had left at the same pay rate? Would working conditions improve for those remaining in the workforce improve as employers had to compete for workers, instead of workers having to compete for jobs? What would happen to the tax base?

Have any reputable economists studied this issue? Anyone here have any thoughts?

A couple of points occur to me.

First, as you point out, whether a family can “afford” to become a single-income family depends on the choices they make about consumption. To a signficant extent, it’s a choice that is driven by the couple themselves rather than something imposed upon them externally.

As you point out, for nearly all couples choosing to become a single income family involves limiting consumption. And, if enough couples make that choice, we have a significant overall drop in consumption in the economy. And, right there, we have the makings of a recesssion.

Would unemployment go up? Well, it depends on what you mean by “unemployment”. If unpaid homemaking is an employment then, no, unemployment would not go up (or, at least, not solely because of the numbers withdrawing from the labour force to become full-time homemakers). If, on the other hand, you only count paid occupations as “employment”, then the total numbers in employment in the economy would decline signficantly and, by that measure, unemployment would go up. But if you only count those who are seeking a paid occupation as “unemployed”, then those who have withdrawn from the paid workforce are not unemployed and their withdrawal does not, of itself, increase or reduce unemployment,

If consumption were to continue unchanged, then employers would seek to replace all those who had left to become homemakers. Unemployment would fall to very low levels, wages would rise and (probably) immigration would rise. But, as already noted, consumption would also decline. Would the loss of productive capacity caused by the withdrawal of workers be offset by the decline in consumption? I have no idea which effect would predominate.

There would certainly be a lot of disruption in the economy. The workers withdrawing from the workforce would not be the ones producing the goods and services no longer in demand, so many of the remaining workers would have to redeploy. This wouild take time and cost money (but of course a large-scale withdrawal from the workforce of this kind would probably be spread over years, if not decades, anyway).

There would also be political consequences. If the American people as a whole came to attach a high value (or a higher value than at present) to full-time homemaking, they would, for example, expect that to be reflected in the tax system. Why should not a non-working spouse, for example, not be able to transfer tax allowances and deductions to a working spouse, for instance, so that a home with income of, say $100,000 would pay the same tax regardless of whether that income was earned by one spouse or by two? The result would tend to be a shifting of the tax burden from married people to single people, with consequent alteration in people’s behaviour (i.e. the incentive to marry would rise).

And of course the tax base would be being eroded by the declining national payroll, so
expect to see (a) new taxes, other than income tax, and (b) a rise in income tax rates, and © pressure to curb government consumption. If the productive capacity of the US economy declines by, say, 20% due to withdrawal of workers from the workforce, can the US still afford (say) its defence commitments?

Which raises another possibility; the government might seek to encourage workers to remain in the paid workforce by (say) lowering taxes on earned income and raising them elsewhere, subsidising out-of-home childcare for working parents while reducing support for non-working parents, whatever. In doing so the government would be putting productive capacity ahead of individual welfare and maximising the autonomy of the citizen but, hey, the tax base is threatened! Desparate measures are needed!

All in all, it would be disruptive. People as a whole would certaingly be less well-off materially. The would enjoy increased welfare, however, if by “welfare” we mean the ability to make and implement lifestyle choices, unless the government intervened to try to influence their choices.

I don’t know if it’s so much limiting consumption as it is changing the type of things people would consume. A household would, for example, still probably need two cars, one for the SAHP to transport the kids around, run the errands, etc. and one for the parent who worked outside the home to get to work and back. Kids still need shoes and school clothes, but parents would opt for less expensive brands rather than designer labels. There would still be a need for housing, but developers would need to channel their building into smaller, more economical houses.

Aside from certain luxury items, I think there would still be the same demand for goods, but companies would have to gear their production for less expensive, more economical versions of the goods they produce.

I’m not wanting to hijack the economic issue, but I remember reading studies that indicated that having a stay-at-home parent had positive benefits for children only if the parent was happy in that role. Sorry that I can’t cite. That has been several years. (And the study may have been only on stay-at-home mothers.)

All that counts as limiting consumption, I’m afraid. If my income declines and I can no longer afford (say) my daily bottle of expensive imported beer that I happen to like a lot, I have two choices. I can buy my EIBTILAL perhaps three times a week, or I can buy barely-drinkable store-brand lager every day. Either choice is limiting consumption, not in terms of volume but in terms of the amount I’m spending, and so the amount the brewing industry get from me. If they get less money from me they can pay their workers less, or fire some workers, or pay lower dividends, or use cheaper raw materials (in which case the raw material suppliers have the same set of options facing them) or - most likely - some combination of these, but the end result is the the same. Someone, somewhere, is going to be poorer. In fact, several people are going to be poorer.

Yeah, there is a reason I didn’t specify stay-at-home mom. There are quite a few women who would be gnawing the doorjambs out of aggravation if they had to stay home with the kids, and I hope equal numbers of men who would be gnawing their desks at work but who would do quite well hanging out with the rugrats.

(I can dream, can’t I?)

Any idea what the effect would be on employment in the daycare industry? I’m thinking the loss of parents from the workforce would contribute towards unemployment of daycare providers, but I doubt that it would be a one-for-one exchange.