A Solution For A Struggling Global Economy: Gender Equality

This year’s Nobel Peace Prize was awarded to three women from Africa and the Arab world in acknowledgment of their courageous work promoting peace, democracy and gender equality. In awarding the prize, the Nobel Committee stated that democracy and peace cannot be achieved unless women have the same opportunities and rights as men.

They might have added that without gender equality sustainable economic development cannot be achieved either. In fact, it is no exaggeration to say that women are the key to a global economic recovery.

A few weeks ago, U.S. Secretary of State Hillary Clinton, chairing the first-ever Asia-Pacific Economic Cooperation (APEC) High-Level Policy Dialogue on Women and the Economy, made this point emphatically: “By increasing women’s participation in the economy and enhancing their efficiency and productivity, we can have a dramatic impact on the competitiveness and growth of our economies.”

In her remarks, Secretary Clinton recounted some of the evidence: The Economist found that the increase in employment of women in developed economies during the past decade contributed more to global growth than did China. In the U.S., a McKinsey study found that women went from holding 37% of all jobs to nearly 48% over the past 40 years, and that the productivity gains attributable to this modest increase in women’s share of the labor market now accounts for approximately 25% of U.S. GDP. That works out to over $3.5 trillion – more than the GDP of Germany and more than half the GDPs of China and Japan.

Women are indeed the world’s third largest “emerging market” after China and India. A Boston Consulting Group survey concludes that women will control $15 trillion in global spending by the year 2014 and by 2028 will be responsible for about two-thirds of all consumer spending worldwide.

As farmers, workers, business owners and householders, women are central to the global economy. In developing countries, rural women farmers grow most of the food that is eaten and dominate the informal economy. In the U.S., they drive most consumer purchasing decisions and are now half the workforce and the majority of college graduates.

Yet the barriers to women’s full economic participation – laws, customs and practices that reinforce gender discrimination at multiple levels – remain. Women are over-represented at the bottom of the global economy and under-represented at the top. They constitute a majority of the world’s poor, more than 60% of the world’s hungry, hold less than 20 percent of the world’s land titles despite their dependence on and predominance in agriculture, and are much more likely to be illiterate and face gender-based violence. Among Fortune 500 companies, women hold only three percent of CEO positions and 15 percent of board seats.

It is time we understand that these barriers are not only tragically unjust but are also fundamental impediments to global economic growth.

Put simply, persistent gender inequality is holding countries back. In Sub-Saharan Africa, it’s estimated that between 1960 and 1992 inequality between men and women in education and employment suppressed annual per capita growth by 0.8% points per year; gender equality would have doubled economic growth over that time period. The Asia and Pacific region is losing $42 billion to $47 billion annually because of women’s limited access to employment opportunities, and another $16 – $30 billion as a result of gender gaps in education.
A Goldman Sachs report found that reducing barriers to women’s participation in the labor force would increase America’s GDP by 9%, the Euro Zone’s by 13% and Japan’s by 16%. According to Secretary Clinton, in APEC economies (including China, Russia, Indonesia, the Philippines, Vietnam and Korea) unlocking the potential of women by narrowing the gender gap could lead to a 14% rise in per capita incomes by the year 2020. Rising incomes mean increased spending, which in turn stimulates economic growth.

Multiple studies have shown that women spend more of their earned income on food, healthcare, home improvement and schooling. In other words, empowering women has a multiplier effect, leading to more job growth and stronger local economies. The research also shows that women are stronger savers than men – and a higher savings rate translates into a higher tax base.

In her APEC speech, Secretary Clinton summarized data from 20 semi-industrialized countries suggesting that for every one percentage point increase in the share of household income generated by women, aggregate domestic savings increase by roughly 15 basis points.

There is also a growing body of research from the business world demonstrating that when companies empower and advance women they are likely to reap the benefits in terms of improved performance and profitability. For example, a 2007 Catalyst study found that when Fortune 500 companies were divided into quartiles based on the percentage of women on their boards, the top quartile companies outperformed the bottom quartile by 42 to 66% across a range of financial indicators. A recent McKinsey survey found that of companies that had made efforts to empower women in emerging markets, 34% reported increased profits, and another 38% said they expected to see profit as a direct result of those efforts.

In a McKinsey survey, a third of executives reported increased profits as a result of investments in empowering women in emerging markets. The World Bank finds that eliminating discrimination against female workers and managers “could significantly increase productivity per worker by 25 to 40%.” Reducing barriers preventing women from working in certain sectors would lower “the productivity gap between male and female workers by a third to one half…across a range of countries.”

The way to catalyze any market, emerging or otherwise, is to invest in it. But somehow this message doesn’t seem to be getting through when it comes to investing in women. It needs to. Empowering women can transform businesses, economies and societies. Conversely, by failing to advance women we are not only failing them and their families – we are actively undermining economic growth.

The urgent need to revive global economic growth calls for a new focus on gender equality and women’s empowerment. The Nobel Committee has sent a clear signal and Secretary Clinton has clearly articulated the challenge. Now it is up to other global policy makers as well as leaders in the private sector to take the next steps. Let the truth be told: investing in the transformative potential of women is the key to lifting the world out of poverty and recession.

Ritu Sharma is the President of Women Thrive Worldwide, a Washington-based non-profit advocating for shaping U.S. development assistance and trade policy to benefit women and girls across the globe. Joe Keefe is Chair of the Board of Women Thrive Worldwide and President & CEO of Pax World Management LLC.