A powerful economic force

A mounting body of quantitative research reveals that women who are given the opportunity can be influential and make real change happen. Our countries and companies will be stronger and more competitive if they have more women operating as managers and decision-makers—whether they are in developed or emerging markets.

According to an Inter-American Development Bank report, “Without a doubt, women joining the work force will increase the economic overall efficiency of a country, whether developed or developing.” Goldman Sachs’s Global Economics Paper No: 154 (April 2007), Gender Inequality, Growth and Global Ageing, makes the case clearly: “Closing the gap between male and female employment rates would have huge implications for the global economy, boosting US GDP by as much as 9%, Eurozone GDP by 13% and Japanese GDP by 16%.

…Encouraging more women into the labour force has been the single-biggest driver of Eurozone’s labour market success, much more so than ‘conventional’ labour market reforms. The US and Japan, while starting from very different positions, have both made little progress in narrowing the gap between male and female employment in the past 10 years.”

In another Global Economics Paper (Women Hold Up Half the Sky, No: 164, March 2008), Goldman Sachs analysts discuss the important role of women’s education in boosting economic growth. Again, the arguments are persuasive: the analysts believe that in the BRICs and N-11 countries, greater investments in female education could yield a “growth premium” that raises trend GDP growth by about 0.2% per year. “Narrowing the gender gap in employment—which is one potential consequence of expanded female education—could push income per capita as much as 14% higher than our baseline projections by 2020, and as much as 20% higher by 2030,” the analysts write, adding that a one-percentage-point (ppt) increase in female education raises the average level of GDP by 0.37 ppt and raises annual GDP growth rates by 0.2 ppt on average. A United Nations report (Investing in women and girls, February 2008) supports this view, noting that investing in female education “has a multiplier effect on productivity, efficiency and sustained economic growth. …Educated women have more economic opportunities and engage more fully in public life.”

The level of female education has been shown to have an impact on economic growth, both positive and negative, according to the Goldman Sachs study. The effects of gender inequality in education may have reduced potential annual per capita income growth by 0.5 ppt to 0.9 ppt in much of South Asia, Sub-Saharan Africa, the Middle East and North Africa. In Africa, this means that actual per capita income growth was only half its potential level.

The United Nations Economic and Social Commission for Asia and the Pacific Countries also points to the relationship between women in the workforce and higher GDP, noting that growth in India, for example, would increase by 1.08 ppt if its female labor-participation rate were put on par with the US. In the book, Women Empowered: Inspiring Change in the Emerging World (2007), former US Secretary of State Madeleine Albright cites the economic benefits of investing in women, pointing out that women reinvest 90% of their income in their families and communities, compared to men who reinvest only 30% to 40% of their income. Entrepreneur Vikram Akula, who founded SKS Microfinance in 1998 to spur development in rural India, has provided about US$275 million in loans and life insurance to more than 900,000 women living in India’s slums and villages while enjoying a 99% repayment rate. Akula attributes the high repayment rate to the fact that women are more likely than men to support each other (e.g., in repaying the loan) and to invest in their households.

Next section: Wide occupational and wage disparity