Economic Progress

Why discrimination is bad for business

Margareta Drzeniek-Hanouz
Deputy Head of Social and Economic Agendas, Member of Executive Committee, World Economic Forum Geneva
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Economic Progress

Discussions at our Annual Meeting 2015 in Davos highlighted the importance of tackling discrimination due to sexual orientation, which unfortunately still takes place in many countries around the world.

At the World Economic Forum, we look at discrimination predominantly through an economic lens. There is no doubt that countries or companies that discriminate against people based on gender, ethnicity, nationality, sexual orientation or any other characteristic cannot perform to their full potential.

Discrimination: bad for business

Such discrimination is not only immoral, but also economically harmful. With access to talent becoming increasingly scarce, the way a country uses talent will determine its competitiveness and overall economic performance. A healthy business environment enables companies to tap into a wider talent pool.

Countries that discriminate against marginalized groups within society also tend to be less innovative – the exchange of ideas between different people breeds fresh ideas that give rise to new business opportunities, products and services.

In a recent report on city competitiveness, the open and tolerant environment of cities was identified as being conducive to the generation and dissemination of ideas, which in turn contributes to innovation that supports competitiveness and economic growth.

Examples include diverse, tolerant cities such as London, Berlin or New York, which are at the forefront of global innovation and major hubs of the creative economy. Tolerant cities and countries not only use available talent efficiently, their diversity and tolerant environment makes them an attractive place to live for global talent. Tolerance and openness gives countries a major competitive advantage. Companies that put in place anti-discrimination policies have better access to talent and lower turnover rates.

Measuring diversity

Tolerance and openness result in diversity, which is taken into account in The Global Competitiveness Report through a number of indicators related to human capital. In the absence of data that would enable us to directly measure the lack of discrimination, we use outcome indicators such as a country’s ability to attract and retain talent, or the extent to which positions in companies are attributed based on meritocracy.

In an effort to more directly capture the absence of discrimination, tolerance and diversity as driving factors of innovation and the creation and exchange of ideas, we are currently searching for indicators of the state of diversity in the workplace across the 144 economies we cover.

Better data will not only enable organizations to benchmark the degree to which countries are tolerant and do not discriminate against societal groups, it would also provide a base for empirical research, highlighting the importance of tolerance for economic development.

We have been successfully highlighting the importance of gender parity for moral and economic reasons for over 10 years through our Global Gender Gap Report. The same logic applies to other groups of society. Countries that do not allow people to fully leverage their talent by combating discrimination, or that limit their citizens’ civil rights reduce their competitiveness significantly.

Author: Margareta Drzeniek Hanouz is Director and Lead Economist, Global Competitiveness and Benchmarking Network, World Economic Forum.

Image: The shadow of an umbrella is cast on the ground during the annual gay pride parade in Budapest June 18, 2011. REUTERS/Laszlo Balogh

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