Why We All Should Care About The Women's Economy

By Linda Scott

Leading international institutions, public and private, including the World Bank, Goldman Sachs and McKinsey & Co., are calling for countries to close the gender gap in economic participation.  Three concerns put pressure behind this cause:

• Unfriendly working conditions for women in the developed nations created a sustained decline in fertility, causing births to fall below the level required to maintain growth and service provision.
•  Nation-level data sets reveal a strong pattern linking gender inequality to poverty, disease, and hostility, as well as a marked correlation between national prosperity and high gender equality.
•  In the post-2008 economy, governments must improve the accountability, transparency, and governance of the private sector, as well as reduce risk—research suggests all can be achieved by putting more women in corporate leadership.

There are implications here for everyone. We will hear more about these trends. For many coming upon these findings for the first time, however, the information is new and the conclusions puzzling. Let me sketch a few illustrations.

I have mapped The Economist Intelligence Unit’s composite, called “Women’s Economic Opportunity,” against “National Competitiveness,” a World Economic Forum index that reflects a country’s use of resources. The Women’s Economic Opportunity index is composed of many factors, including not only conventional economic measures like labor participation, but a wide range of other factors not normally thought to be economic in nature, such as efforts to stop violence against women and adolescent fertility.

Growth. In many Eastern European countries, women are substantially better educated than men and are more likely to be in professional jobs, yet are thinly represented in leadership and earn significantly less. Working mothers have not been accommodated, so young women must make an all-or-nothing choice between career and family. Consequently, these nations suffer from low female labor force participation and low fertility. OECD forecasts for nations like Hungary, Poland, and the Czech Republic predict rapid declines in labor supply during the next decades unless a concerted effort is made now to better include women. GDP will drop and social programs will become unsupportable.

Other regions are in the early stages of this pattern. Indeed, more than half the countries in the world—including most developed nations—are already below the birth rate required to maintain their populations. During the 20^th century, the wealthiest nations, especially the US, benefited mightily from women’s entry into the formal labor force. Today, however, these nations educate women to a high degree, then under-employ them, pay them less for the same work, and make it difficult to manage family. The human capital investment is wasted, causing national competitiveness to suffer. This is why Shinzō Abe, after years as a gender conservative, is now supporting women’s economic inclusion in Japan.

Poverty. The highest fertility rates are in Niger, Somalia, Afghanistan, Mali, Chad, DR Congo, Uganda, Burkina Faso, Zambia, and Malawi. In poor countries, a complex interaction between local conflict, sexual violence, and economic exclusion of women produces a sinister circle of disease, high birth rates, hunger, and resource compromise. Data show women with earning power have greater autonomy and will spend income on their children and communities, creating a beneficial ripple effect with the potential to stop this vicious pattern. This is why we see International agencies and global companies, such as ExxonMobil and Coca-Cola , investing in women’s entrepreneurship in developing countries.

Governance. Research suggests that when women break the insider culture of the C-suite, they are careful, they do their homework, they follow the rules, and they invest judiciously, resulting in better corporate performance. Governments looking to reassure citizens rocked by the bad decisions of a closed elite look to adopt policies—even impose quotas—that will push women through the pipeline to the top. This is why the European Union’s proposed gender quota on corporate boards got so much traction—nearly 90% of EU citizens think it’s a good idea.

Notice that the core challenge for all three scenarios here is to include a previously excluded group:  women. When we look at women as a global economic force, a picture of unprecedented potential becomes visible.  Yet half the species is constrained from full participation.

Linda Scott is DP World Chair for Entrepreneurship and Innovation at Saïd Business School, University of Oxford and founder of the Power Shift forum, focusing on women and finance. Linda is best known for her creation of the concept of the Double X Economy – a perspective which describes the global economy of women in both the developed and developing world, and the roles of women as consumers, investors, donors and workers.