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Analysis
Empower women, boost economies

Empower women, boost economies

Gender equality will raise global growth

by Christine Lagarde in Washington

Wed 8 Mar 2017

Over recent decades, women around the world have been extending their achievements on educational attainment, political representation, and economic participation. But gender gaps remain. Globally, just 55% of women participate in the labour force, compared with 80% of men. Women are only now earning what men did a decade ago.

As countries seek to expand their economies and reduce inequality, tapping into the huge potential of women can make an important difference. Analysis clearly illustrates the compelling business case for women’s empowerment. Increasing women’s labour force participation can produce significant macroeconomic gains, as shown by International Monetary Fund research.

If Latin American countries, for example, raised female labour participation to the Nordic country average (around 60%), GDP per capita could be up to 10% higher. Gender inclusion is also associated with lower income inequality. IMF research has shown that moving from a situation of perfect gender inequality to perfect equality is equivalent to reducing income inequality from the levels prevailing in Venezuela to those in Sweden.

This can strengthen the structural makeup of an economy. Increasing gender equality can lift a country from the lowest rank to the average in terms of export diversification. These macroeconomic gains are critical in the light of demographic change. Many advanced and some emerging economies are struggling to raise growth potential in the face of aging populations and shrinking labour forces. Women are part of the solution.

Japan is one such economy. 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 hovering around 0.5% in this year and next, the economic gains could be massive.

The impact of employing more highly educated women on productivity growth could be even more significant – by up to 0.4 percentage points per year in Canada, for example. Bringing more women into the labour force would expand the talent pool and boost productivity and growth.

Aside from wider macroeconomic benefits, women’s empowerment can have a material impact on business success. Adding one more woman in senior management or to a corporate board, while keeping the size of the board unchanged, is associated with higher returns on assets of 8-13 basis points.

Narrowing gender gaps requires an agenda and a commitment to gender equality by governments, international institutions and the private sector. Governments can demonstrate leadership, for example by gender budgeting, which looks at how spending and revenue policies can help achieve 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 introduced tax cuts for secondary earners and benefits for families with children. Today, Canada’s female labour participation rate is over 80%, above the 74% of the US.

Governments can make efforts in the legal field to try to move women towards more equal opportunities. 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 percentage points. After Namibia strengthened women’s legal rights – including the ability to sign contracts, pursue professions, and open bank accounts without a husband’s permission – female labour force participation rose by 10 percentage points.

Investing in social infrastructure is vital. Supporting girls’ education not only has individual and social benefits, but wider economic ones as well. Increasing education spending by 1% of GDP in India could boost female labour force participation by 2 percentage points. Changes in public policy can make a big difference, as can changes carried out by the private sector. Many businesses are promoting gender equality 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 have a role to play. Gender equality and women’s empowerment are one of the 17 priorities of the United Nations’ sustainable development goals to achieve inclusive growth by 2030.

The IMF is incorporating gender-equality goals into its annual Article IV consultations, where women’s economic participation can be of material impact. As part of this, the Fund has already completed detailed analyses for 13 countries to help 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 nine countries.

There is much more to be done. Improving equality will not only make a difference for women; it will help the global economy achieve sustainable and inclusive growth.

Christine Lagarde is Managing Director of the International Monetary Fund. This article was included as one of 14 contributions in March's all-female author edition of The Bulletin.

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