Lost household and non-market services: when this component belongs in an employment model

Non-market services, also called household services, captures the value of the unpaid work a person performs at home: cooking, cleaning, childcare, elder care, home and yard maintenance, household management, and transportation of family members. In wrongful death and personal injury matters, this is a standard damages component. In employment litigation, it enters only under specific conditions. Getting this distinction right is a matter of professional responsibility as much as damages theory.

When it applies in employment matters

A plaintiff who was terminated and is now working elsewhere for lower pay did not lose the ability to perform household services. Back pay and front pay capture the earnings loss. Non-market services do not enter this model. Claiming them where they do not belong is how a damages analysis loses credibility on its first page of cross.

Non-market services can enter an employment matter where the adverse employment action caused documented physical or mental health consequences that materially impair the plaintiff’s capacity to perform household work. Harassment matters with documented medical records supporting functional impairment; discrimination matters where the retaliation caused a disabling stress condition; hostile-work-environment claims with objective medical evidence of ongoing impairment. In each case, the factual predicate is specific and documented, not inferred from the general stress of litigation.

Replacement-cost versus opportunity-cost

When the component applies, two valuation methods dominate. Replacement cost values the services at what it would cost to hire a third party to perform them, using occupational wage data for the relevant service types (maid services for cleaning, nanny services for childcare, handyman rates for maintenance). Opportunity cost values the plaintiff’s unpaid labor at the plaintiff’s own earning rate, on the theory that each hour spent on household work was an hour not spent earning.

Replacement cost is the more commonly accepted approach in federal courts and is easier to defend under Daubert. Opportunity cost has a stronger theoretical basis for some plaintiffs but is more vulnerable to attack and is not universally accepted.

Data sources

The American Time Use Survey (ATUS), conducted by the Bureau of Labor Statistics, provides nationally representative data on time spent on various household and care activities by demographic. The ATUS is the standard starting point for non-market services valuation in the United States. Occupational wage data for replacement-service providers comes from OEWS, as discussed in our piece on BLS OEWS as a damages source.

For plaintiffs with dependents, the composition of the household affects the total hours and the mix of service types. The model draws on the specific household composition rather than a national average.

When to decline the component

The honest forensic economist declines to include non-market services in an employment damages model where the factual predicate is absent. A termination without documented physical or mental health impairment does not support a household services claim. Including it anyway creates an exposure in the rest of the report, because the opposing expert will have a clean path into questioning the economist’s judgment.

The report that earns credibility is the report that says, plainly, where the boundaries of the analysis sit. Where non-market services belong, we include them. Where they do not, we say so, and we move on.