Gender inequality stymies GDP growth, study finds

For countries, especially emerging markets, looking to boost GDP growth, here’s one strategy: Increase the number of women in the workforce.

A study by global consulting firm Booz & Co. estimates that, throughout this decade, gender inequality will keep 865 million women between the ages of 20 and 65 out of the global economy. And 94% of them live in emerging markets.

Raising female employment to male levels would bring many of these 865 million women into the workforce and boost GDP growth in individual countries: 5% each in the US, the UK and China; 9% in Brazil; 10% in South Africa; 27% in India; and 34% in Egypt.

“Our findings give compelling numerical evidence of a correlation between women’s economic participation and a country’s general economic growth and well-being,” the study, Empowering the Third Billion: Women and the World of Work in 2012, concludes. “They strongly suggest that the economic advancement of women doesn’t just empower women but also leads to greater overall prosperity.”

Women are more likely than men to invest a large portion of their household income in the education of their children, which allows their children to improve their social and economic status as they grow up, the study says. That means efforts to raise female employment are likely to boost a country’s population of middle-class consumers for years to come.

Empowering women is also likely to create jobs. Policymakers and researchers agree entrepreneurs are catalysts for job creation and economic growth, but due to a lack of support, woman entrepreneurship has been lagging in developed and emerging markets. In 2011, women’s share of US entrepreneurial activity was 35.3%, according to the Ewing Marion Kauffman Foundation.

The Global Entrepreneurship Monitor, a research collaboration of the London Business School and Babson College near Boston, found that in 2010 only a handful of 59 economies had an equal number of male and female entrepreneurs. Men outnumbered women in most of the remaining economies.

With female empowerment as an economic indicator in mind, Booz & Co. crunched the numbers to come up with an index that ranked countries based on inputs such as educational opportunities for women, entrepreneurial support and access-to-work policies and outputs, including female-to-male ratios for wages, labour force participation, professional skills, job responsibilities and pay.

Australia and Norway led the rankings, followed by six Northern and Western European countries, New Zealand and Canada in the top 10. The UK came in 13th, and the US was 30th. Economies in Asia, Latin America, Africa and the Middle East followed, with South Africa ranking 36th, Brazil 46th, China 58th, Egypt 108th and India 115th out of 128 countries.

Sprinkled across the middle of the rankings and below were countries that have adopted policies to promote female empowerment but have yet to see the results or have achieved modest results. Malaysia, Tunisia, Cambodia and China are among them.

“We are interested to see if having initiated the right inputs will lead to outcomes in the next few years, which is our hypothesis given the very strong correlation between inputs and outputs in general,” according to Leila Hoteit, a Booz & Co. principal in Abu Dhabi, United Arab Emirates; and Mounira Jamjoom, a Booz & Co. senior research specialist in Riyadh, Saudi Arabia.

Efforts that countries and companies worldwide could take to empower women include:

• Improve infrastructure for child care and elder care.

• Establish affordable vocational training for rural women.

• Offer tax incentives for women to start their own businesses and lower bureaucratic requirements for start-ups.

• Expand programmes that offer microfinance loans.

• Develop corporate mentorship and coaching programmes.

• Improve women’s access to health care, social services, transportation and quality education.

• Decrease gender disparity in senior management positions.

• Offer flexible work arrangements, such as telecommuting and work-sharing.

• Enforce laws that give women equal rights to inherit and own property.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.