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Female Participation Benefits to the Labor Force

September 16, 2018

Men and women are not represented equally in the workforce. Despite being 50% of the population, women comprise only 39.2% of the total global labor force.[1] While a few outliers, such as Rwanda, see equal representation, most countries do not. The MENA region, or Middle East and North Africa, sees the greatest discrepancy, with women on average representing only around 20.5% of the workforce. In most of these countries, political and social norms, as well as actual laws, keep women out of the workforce. However, studies have shown societal and economic benefits of female participation in the workforce. In light of this, to increase female participation in the labor force, it is crucial to expand female access to education across the globe.

According to the 2015 McKinsey Global Institute report, every economy in the world could stand to improve by increasing the percentage of women in their labor forces.[2] In fact, the report noted that in a “full potential scenario,” where women play an identical role to men in the workforce, around $28 trillion could be added to the global GDP by 2025. Currently, women around the world are not being utilized in the labor market to their fullest potential. Though they comprise half of the world’s population, their efforts contribute only 37% of the global GDP.

Image: In 2017, only 39.2% of the global labor force was female, Source: The World BankImage: In 2017, only 39.2% of the global labor force was female, Source: The World Bank

In part, this is because women disproportionately take on a larger share of unpaid household labor.[3] As analyzed by McKinsey scholars, the unpaid labor market amounts to around $10 trillion a year, which is roughly 13% of the global GDP. If men took on a more equal share of the household labor, allowing more women to enter the paid labor market, global GDP could increase by 23% annually. This translates to 240 million more workers added to the global labor force. In underdeveloped parts of the world, such as in the MENA region and in South Asia, the effects of female participation in the workforce will be even more staggering. In these regions, because there are so fewer females currently in the labor force, increasing female employment would provide an even greater surge in the region’s GDP and vastly improve their economic prospects.

Image: Effects of female participation in the labor force throughout the world, Source: McKinsey & CompanyImage: Effects of female participation in the labor force throughout the world, Source: McKinsey & Company

Gender-diverse groups perform better financially than male-dominated ones. In a study of 800 business units from 2 companies, Gallup found that gender-diverse units in the retail company earned a 14% higher average revenue than the single-gender-dominated units.[4] Additionally, the gender-diverse units in the hospitality company earned a 19% higher average quarterly net profit than the male-dominated units. As noted by Gallup, men and women have varying perspectives on a variety of issues; this allows gender-diverse groups to think of a wider range of solutions when solving problems.

To increase female labor force participation, it is essential we increase access to education for girls and young women around the world. According to the World Bank, female education provides a tremendous positive investment for society, since each year of secondary education correlates with a 25% increase in wages for women when they enter the workforce.[5] Educated women are more likely to get better jobs, as well as hold a job, which can promote social mobility as well as increased socio-economic access. Additionally, increasing female education will increase their literacy rate, which widens the type of jobs available for these women. Increased access to education also accounts for the increase in countries’ GDPs. According to the UN, the increase in female education in the OECD countries accounted for about fifty percent of their economic growth over the past fifty years.[6] This goes to show that when women are educated and working, the workforce grows, allowing countries to be more productive and their economies to vastly improve.

To bring more women into the workforce, we also need better maternity leave policies so women do not feel forced to choose between their careers and their families. Mandatory maternity leave policies will help increase female labor output. For example, job-protected maternity leave has been shown to increase female employment by 7% in Taiwan.[7] However, maternity leave is funded differently throughout the world—it is either funded entirely by the government, entirely by the company, or by a mix of the two. Through its research, the World Bank has shown that firm-funded maternity leave policies are actually detrimental to women, since when a company must fully pay for maternity leave, it causes them to shy away from hiring women to avoid this extra expense.[8]

Additionally, countries with paternity leave policies have a significantly higher ratio of male to female participation in the workforce.[9] Paternity leave policies help achieve a more equal division of work between husband and wife; with a shared division of labor at home, more women feel they have the time to spend on their careers, allowing more to enter the work force. Paternity leave policies also allow for the fathers to become more invested in the care of their new-born children. More effective family leave policies allow for families to take time to be with their new-born children as well as to develop their careers, ensuring they remain valuable members of their companies.

By implementing effective family leave policies and increasing access to female education, we can increase the female presence in the labor force, which will stimulate the economy and have positive effects on global GDP.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1] https://data.worldbank.org/indicator/SL.TLF.TOTL.FE.ZS

  [2]https://www.mckinsey.com/~/media/McKinsey/Featured%20Insights/Employment%20and%20Growth/How%20advancing%20womens%20equality%20can%20add%2012%20trillion%20to%20global%20growth/MGI%20Power%20of%20parity_Full%20report_September%202015.ashx

  [3] https://hbr.org/2012/11/more-women-in-the-workforce-could-raise-gdp

  [4] https://news.gallup.com/businessjournal/166220/business-benefits-gender-diversity.aspx

  [5] https://www.globalpartnership.org/blog/why-educating-girls-makes-economic-sense

  [6] http://www.unwomen.org/en/what-we-do/economic-empowerment/facts-and-figures#notes

  [7] https://www.forbes.com/sites/kaytiezimmerman/2017/06/18/8-ways-to-retain-female-talent-after-maternity-leave/#17adfaf97f2d

  [8]http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/AliceNewtonPolicyNote.pdf

  [9]http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/AliceNewtonPolicyNote.pdf

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