Equity, Diversity and Inclusion

Gender parity can boost economic growth. Here's how

Protesters participate in #MeToo demonstration outside Trump International hotel in New York City, NY, U.S., December 9, 2017

Beyond GDP ... economists now believe financial markets can also benefit from women's equality. Image: REUTERS/Brendan McDermid

Laura D'Andrea Tyson
Distinguished Professor of the Graduate School, Haas School of Business, University of California, Berkeley
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Gender Inequality

From the #MeToo movement to policy initiatives aimed at uncovering gender gaps in the economy and reducing gender pay inequality, the global narrative on gender parity among both the general public and policymakers shifted significantly throughout 2018.

For example, there was growing evidence that significant gender pay gaps persist and that they are caused by a multiplicity of factors; from gender differences in employment by occupation and industry, to gender differences in care obligations and discriminatory pay practices and biases.

One approach to closing gender pay gaps would be to place a higher value on typically female qualities and female-dominated occupations. Professionalising informal sectors, such as the care economy, and increasing the value of critical and predominantly female sectors, such as education, would help increase gender parity in those occupations and sectors.

 All in a day's work means different things to the average man or woman.

But is it a matter of choice or the persistence of social norms and barriers to entry that explain persistent gender gaps in occupations and sectors? Women in lucrative professions such as software engineering lack role models, and evidence suggests that the hiring, retention and promotion of female professionals are riddled with bias. Legislated maternity leave is still more common than paternity leave and women continue to take a more active role as carers for family members. And while those roles support families, communities and economies, female pay takes a hit and the burden of care continues to fall on women.

Around the world, according to World Economic Forum data, for every dollar a man earns, a woman earns 54 cents. There are many factors behind the wage disparity between men and women. One is the fact that women around the world are more likely than men to work part-time, and part-time work even for the same occupation and sector has a lower hourly wage with fewer social protections than comparable full-time work.

Another factor behind gender pay disparities is the “motherhood” penalty on female wages; there is a negative relationship between a woman’s wage and the number of children she has. According to OECD data, the motherhood penalty on women amounts to a 7% wage cut per child. An important step towards closing the gender pay gap would be more equitable sharing of parental responsibilities between men and women. Paid parental leave policies that provide both maternity and paternity leave help achieve this goal, by increasing fathers’ participation in childcare and reducing gender stereotyping in childcare and related household responsibilities.

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The lack of gender parity in pay is just one of a number of gender gaps across economic, educational, health and political spheres. According to the World Economic Forum’s Gender Gap Index, at the current rate of progress it will take more than a century to close the overall gender gap.

According to figures released by Standard & Poor (S&P) at the World Economic Forum's Annual Meeting in Davos earlier this year, if the labour force participation rate of women were equal to the labour force participation rate of men, the US economy would be 8.7% larger than it is today, the French economy would be 17% larger and the Japanese economy would be 14% larger. Economists now say that in the US, increases in gender parity would also lead to larger returns in financial markets. In the US, the effect of greater equality could spur an expansion of 3.6%.

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Related topics:
Equity, Diversity and InclusionEconomic GrowthEducation and Skills
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