The economic case for reducing gender gaps in the labour market

Female labour force participation rate remains 27 percentage points lower than male. According to the 2017 World Economic Forum’s Global Gender Gap Report, if the current trend continues it could take another 100 years to close the overall global gender gap. Still, closing participation rates is just the first stepping stone to achieving a more egalitarian labour market. Women also face severe segregation, both occupationally and vertically. This means that, while some occupations are considered ‘female’, such as domestic service; others have very low female participation, as it is the case of Science, Technology, Engineering and Mathematical fields, and that women’s participation declines as one climbs up the career ladder.

Additionally, women earn, on average, less than men do and they carry out a heavier burden of unpaid work.

This paper seeks to make the case that reducing gender inequality is not just a human right but also a human development and economic concern. In fact, we present some findings that help to argue that closing gender gaps is beneficial not just from a macroeconomic perspective but also at the micro level, as it has proved to be more profitable for companies.

McKinsey Global Institute (2015) affirms that if female labour force participation were equal to men’s, this could input an extra $28 trillion into the annual global GDP by 2025, compared to a ‘business-as-usual’ (BAU) scenario (in which gender gaps remain unchanged). More strikingly, GDP under the scenario in which women participate in the same way men do ―the ‘full potential’ scenario― could be up to 60% higher than GDP under the BAU scenario. This is most significant in emerging economies since gaps between men and women are widest. Besides, another benefit of closing gender gaps for emerging and developing regions is the positive effect that it can have on both current and future poverty reduction rates (Sinha et al., 2007).

At the company level, the International Finance Corporation (2015) has found that better employment opportunities for women can contribute to increased profitability and productivity, and other studies, such as that of Credit Suisse Research Institute (2014), argue that higher female participation in boards or managerial positions within a firm positively impacts on their performance. Furthermore, fostering female participation seems to also translate into higher employee productivity, since Cuberes & Teignier‐Baqué (2011b) estimate that male-dominated industries in many developing countries could increase their productivity between 3% and 25% simply by increasing female labour force participation.

Moreover, we review existing policies that aim ―or have the potential ―to tackle these problems in order to contribute to the design of policies that can bridge gender gaps. While some policies have a long-term goal of deconstructing cultural beliefs which cause gender inequality and the sexual division of labour, others have more specific and short-term goals to increase female labour force participation.


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