Economic Watch

The Business Case for Women’s Empowerment

Christine Lagarde
Christine Lagarde.jpg

Over the past few decades, women around the world have been pushing boundaries on areas like educational achievement, political representation, and economic participation – yet gender gaps remain.

Globally, just 55%% of women participate in the labour force, compared with 80% of men – and women are only now earning what men did a decade ago.

As countries around the world seek to grow their economies and reduce inequality, tapping into the huge potential of women can be a game changer.

Recent analytical work – including that done at the IMF – clearly demonstrates the compelling business case for women’s empowerment. Everyone has a role to play – including governments, businesses, and international institutions.

A game changer

Recent research by the IMF shows increasing women’s participation in the labour force can deliver significant macroeconomic gains.

For example, if Latin American countries raised their female labour participation to the average of the Nordic countries (about 60%), GDP per capita could be up to 10% higher.

Gender inclusion is also associated with lower income inequality. Again, our research has shown that moving from a situation of perfect gender inequality to perfect gender equality is equivalent to reducing income inequality from the levels prevailing in Venezuela to those in Sweden. 

 These macroeconomic gains are especially critical in the face of demographic change.  Many advanced, and some emerging, economies are struggling to raise growth potential in the face of aging populations and therefore shrinking labour forces. Overwhelmingly, women are not the problem here – they are part of the solution.

Japan is one such economy dealing with this challenge. There, raising female labour force participation to the levels of Northern Europe could boost GDP growth by up to 0.4 percentage points in the transition years. With growth rates in Japan currently hovering around 0.5% in this year and next, the economic gains can be massive.

Aside from wider macroeconomic benefits, women's empowerment can also have a strong impact on business success. For instance, IMF research has also shown that adding one more woman in senior management or on the corporate board, while keeping the size of the board unchanged, is associated with 8-13 basis points higher return on assets.

A role for everyone

Narrowing gender gaps is no small task. It requires a comprehensive agenda and a commitment to gender equity by governments, the private sector, and international institutions. 

There are several ways in which governments can demonstrate leadership here – starting with gender budgeting that looks at how spending and revenue policies can help achieve gender equity goals 

Reducing taxes on a family’s secondary earner – mostly women – can encourage more women to join the labour force. This was the case in Canada in the 1990s, which improved incentives for secondary earners by introducing tax cuts and benefits for families with children. Today, Canada’s female labour participation rate is over 80% - above the 74 percent of the United States.

Governments can also level the legal playing field for women. In 90 percent of countries women face at least one legal barrier – impeding their economic opportunities.

In some countries, they have no right to sign a contract, open a bank account, or initiate legal proceedings without their husband’s consent. In this context, Peru is a remarkable success story. Starting in the mid-1990s, Peru changed the laws that constrained women’s legal rights. A decade later, women’s labour force participation increased by 15%.

Investing in social infrastructure is also vital – on many fronts. Supporting girls’ education not only has individual and social benefits, but wider economic ones as well.

IMF staff have found that increasing education spending by 1% of GDP in India could boost female labour force participation by 2 percentage points. Better transport to ease the journey from home to school and the workplace can also pay dividends.

Even in countries without significant gender barriers in these areas, high-quality and affordable childcare can help women stay in work when they have a family.

So, changes in public policy can make a big difference – as can changes carried out by the private sector.

Many businesses, for example, are promoting gender equity by ensuring pay parity for equal jobs, by giving greater access to maternity leave, and for those involved in the financial industry, by ensuring access for women to financial services.

International financial institutions also have a role to play. Gender equality and women’s empowerment are now one of the 17 priorities of the U.N.’s Sustainable Development Goals (SDGs) to achieve inclusive growth by 2030.

Accomplishing this goal, however, will require better data and research to help us understand the drivers of women’s empowerment and to monitor its progress. This is another area where institutions such as the IMF come in.

Over the past few years, we have stepped up our research on gender-related topics. Many of the examples that I mentioned earlier draw on that research. And we are going further – by operationalizing these findings in our surveillance and program work.

In particular, we are now incorporating gender-equality goals into our annual Article IV country consultations where women’s economic participation can be of material impact.

As part of this, we have already completed detailed analysis for 13 countries to help us provide “tailored” policy recommendations on gender equity: Chile, Costa Rica, Guatemala, Germany, Hungary, India, Italy, Jordan, Mali, Mauritius, Nigeria, Pakistan, and Sweden. A second wave of analysis includes 9 countries.

Gender considerations are also increasingly included in IMF-supported programs. Our program with Jordan contains a goal to raise women’s economic participation. We are doing the same with our recently announced program in Egypt – with a focus on investing more in public nurseries and making transport safer for women.

A lot has been accomplished but there is much more to be done. Leveling the playing field will not only make a difference for women, it will help the global economy achieve more sustainable and inclusive growth.

                                                                                                                                                    By Christine Lagarde

(This article was first published on 8 March 2017 via LinkedIn and is based on a speech given at the APEC CEO Summit. Lagarde is Managing Director at the International Monetary Fund.)

Also read: Zuma out-foxed by Malema on Women’s Day



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