The case for gender parity
There is a clear values-based case for promoting gender parity: women are one-half of the world’s population and evidently deserve equal access to health, education, economic participation and earning potential, and political decision-making power. However, it is pertinent to note that gender parity is equally fundamental to whether and how societies thrive. Ensuring the healthy development and appropriate use of half of the world’s total talent pool has a vast bearing on the growth, competitiveness and future-readiness of economies and businesses worldwide.
A variety of models and empirical studies have suggested that improving gender parity may result in significant economic dividends, which vary depending on the situation of different economies and the specific challenges they are facing. Notable recent estimates suggest that economic gender parity could add an additional US$240 billion to the GDP of the United Kingdom, US$1,201 billion to that of the United States, US$526 billion to Japan’s, and US$285 billion to the GDP of Germany.9 Another recent estimate suggests that China could see a US$2.5 trillion GDP increase by 2020, and North America and Oceania could gain an additional US$3.1 trillion over the same period if they closed their gender gaps.10
A number of recent studies also indicate that a reduction in the employment gender gap has been an important driver of European economic growth over the past decade, and has the potential to unleash even further growth. Conversely, limiting women’s access to labour markets is costly, as poor female labour force participation hampers economic growth.11 As a region, East Asia and the Pacific reportedly loses between US$42 billion to US$47 billion annually due to women’s limited access to employment opportunities.12 Research by the World Bank demonstrates that similar restrictions have also imposed sizable costs throughout the Middle East and North Africa13 as well as the Sub-Saharan Africa region.14
This evident relationship between economic outcomes and gender parity and, in particular, the growing evidence of the positive effect of increasing gender parity on economic growth, is illustrated in Figure 6 on the basis of the Global Gender Gap Index. The method of calculating the Global Gender Gap Index is unique in eliminating the direct impact of absolute levels of any of its constituent variables so that, as a result, any relationship to relative wealth of any of the economies covered by the Index is endogenous to the dynamics of closing the global gender gap.
As detailed in the previous section of the Report, the Global Gender Gap Index takes into account four critical dimensions when measuring the gaps between women and men’s access to resources and opportunities: economic participation, education, health and politics. Across these four different dimensions we see a number of positive interdependencies, knock-on and multiplier effects that highlight the multi-faceted nature of the benefits of increased gender parity.
For example, increased gender parity in education lowers infant and child mortality rates, lowers maternal mortality rates, increases labour force participation rates and earnings, and fosters further educational investment in children. The World Bank finds, based on a sample of a wide range of developing countries, that investing in girls so that they would complete education at the same rate as boys would lead to lifetime earnings increases of today’s cohort of girls of between 54% to 68% of countries’ GDP, equivalent to an increase in annual GDP growth rates of about 1.5%.15 Conversely, girls’ exclusion from education considerably hinders the productive potential of an economy and its overall development. In the East Asia and the Pacific region, specifically, it has been estimated that between US$16 billion to US$30 billion is lost annually as a result of gender gaps in education.16 Similar to education, investing in health—and specifically in maternal, newborn and child health—has a significant multiplier effect.17
In the political sphere, women’s engagement in public life has a positive impact on inequality across society at large. The issues which women advocate, prioritize and invest in have broad societal implications, touching on family life, education and health. Women’s engagement in public life fosters greater credibility in institutions, and heightened democratic outcomes.18 In addition, there is a range of evidence to suggest that women’s political leadership and wider economic participation are correlated (Figure 7).
Across all countries, making full use of women’s capabilities paves the way to optimizing a nation’s human capital potential. This is evidenced in the strong relationship between the World Economic Forum’s Global Gender Gap Index and Human Capital Index, presented in Figure 8. Once certain basic elements of human development are in place, countries may initially take a variety of different pathways to further improve and invest in their human capital potential, as demonstrated by the wide range of outcomes in the midfield of Figure 8. However, if such strategies are too focused on just some elements of a country’s population, they miss out on significant positive multiplier effects. Few of the top performers in the Human Capital Index have succeeded in maximizing the development and deployment of their nation’s talent without also narrowing their gender gaps.
Women’s participation in the formal economy, or lack thereof, is also a business issue—costing women, companies and, ultimately, entire economies. Female talent remains one of the most under-utilized business resources, either squandered through lack of progression or untapped from the onset. Business leaders and governments increasingly note that tackling barriers to equality can unlock new opportunities for growth. In the World Economic Forum’s Future of Jobs Survey, 42% of business leaders perceived addressing gender parity in their company as a matter of fairness and equality; yet, in addition, more than a fifth of those surveyed also highlighted rationales closer to their core business: reflecting the changing gender composition of their customer base as well as enhancing corporate decision-making and innovation.
The combined impact of growing gender parity, a new middle class in emerging markets and women’s spending priorities is expected to lead to rising household savings rates and shifting spending patterns, affecting sectors such as food, healthcare, education, childcare, apparel, consumer durables and financial services.19 With women controlling 64% of global household spending and US$30 trillion of consumer spending in 2013—a figure that is predicted to rise by almost a third over the five years leading to 201820—there are large potential benefits for companies with employees who can understand diverse customer bases.
Additionally, the global economy is currently in transition to a Fourth Industrial Revolution.21 In such a highly interconnected and rapidly changing world, diversity is critical to informed corporate decision-making and business innovation.22 When it comes to leadership positions, companies with top quartile representation of women in executive committees have been shown to perform better than companies with no women at the top—by some estimates with as much as a 47% premium on average return on equity.23 Links also exist between having more women directors and corporate sustainability, as well as with economic growth, since more diverse leadership teams can cater to a broader array of stakeholder needs and concerns.24 Unlocking these benefits requires focused action to address the underlying causes of persistent gender gaps in a systemic way.
9 See PwC, Women in Work Index 2016.
10 See McKinsey & Company, The Power of Parity: How Advancing Women’s Equality Can Add $12 Trillion To Global Growth.
11 See Teignier and Cuberes, Aggregate Costs of Gender Gaps in the Labour Market: A Quantitative Estimate.
12 See ILO and ADB, Women and Labour Markets in Asia: Rebalancing for Gender Equality.
13 See World Bank Group, Gender and Development in the Middle East and North Africa.
14 See, for example, the World Bank Group, Gender and Economic Growth Assessments for Kenya, Tanzania and Uganda.
15 See Chaaban and Cunningham, Measuring the Economic Gain of Investing in Girls.
16 See ILO and ADB, op. cit.
17 See Wilhelmson and Gerdtham, Impact on Economic Growth of Investing in Maternal and Newborn Health.
18 See OECD, Women, Government and Policy Making in OECD Countries.
19 See Goldman Sachs Global Markets Institute, The Power of the Purse: Gender Equality and Middle-Class Spending.
20 See Catalyst, Buying Power: Global Women and Silverstein and Sayre, The Female Economy.
21 See Schwab, The Fourth Industrial Revolution.
22 See Leader-Chivee, New Study: Diversity Drives Serial Innovation and Deloitte, Waiter, is that inclusion in my soup? A new recipe to improve business performance.
23 See McKinsey & Company, Women Matter and Credit Suisse Research Institute, Gender diversity and corporate performance.