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Closing the gender gap could add $5.8 trillion to world economy

Reducing the disparity between men’s and women’s participation in the labour force can significantly raise global employment and output, according to a report by the International Labour Organization (ILO).

by Kanaga Raja

GENEVA: Closing the gender gap by 25% by the year 2025 has the potential to boost global employment by 189 million and raise global gross domestic product (GDP) in 2025 by 3.9%, or $5.8 trillion, the International Labour Organization (ILO) has said.

In its World Employment and Social Outlook report released on 14 June, the ILO said that the achievement of such a goal could also unlock large potential tax revenues. For example, global tax revenue could increase by $1.5 trillion given currently projected government revenue shares in GDP, most of it in emerging ($990 billion) and developed countries ($530 billion). “Consequently, policies promoting gender equality could be self-financing,” it said.

It however noted that larger female participation might shift some home production, which is unaccounted for in GDP, to market production, so that the actual increase in global output will be smaller.

“The fact that half of women worldwide are out of the labour force when 58% of them would prefer to work at paid jobs is a strong indication that there are significant challenges restricting their capabilities and freedom to participate,” said Deborah Greenfield, ILO Deputy Director-General for Policy.

“The most immediate concern for policymakers, therefore, should be to alleviate the constraints that women face in choosing to enter the labour market and address the barriers they are confronted with once they are in the workplace,” she added.

“We need to start by changing our attitudes towards the role of women in the world of work and in society. Far too often some members of society still fall back on the excuse that it is ‘unacceptable’ for a woman to have a paid job,” said Steven Tobin, lead author of the report.

According to the ILO report, in 2014, leaders of the G20 major economies committed to the “25 by 25” target, i.e., to reduce the gap in participation rates between men and women by 25% by the year 2025. Estimates indicate that, under certain assumptions, if such a goal were to be realized across all countries, it has the potential to boost global employment by 189 million, or 5.3%.

The vast majority of job gains (162 million) would be in emerging countries due to their relative size, combined with the fact they also have the widest gender gaps. The impact in developing and developed countries would be smaller, both in absolute terms and as a percentage of current employment levels (due primarily to the presence of comparably narrower gender gaps in labour market participation). Nevertheless, in both instances employment would grow, by 2% in developing and by 3.3% in developed countries.

“Such an outcome would yield significant economic gains, raising global GDP in 2025 by 3.9%, or US$5.8 trillion (equivalent to raising average global GDP growth over the next eight years by almost half a percentage point).”

Perhaps not surprisingly, said the ILO, the regions with the largest gender gaps, namely Northern Africa, the Arab States and Southern Asia, would see the greatest benefits in terms of growth. Nevertheless, even Northern America and Northern, Southern and Western Europe could increase their average annual GDP growth by a quarter of a percentage point, an important contribution during times of near-zero economic growth.

Labour force participation

According to the ILO report, globally, the labour force participation rate for women – at 49.4% – is 26.7 percentage points lower than the rate for men in 2017 and likely to remain unchanged in 2018.

Underlying this gap is a long-term downward trend in participation rates for both men and women, with the combined participation rate decreasing from 65.7% in 1997 to 62.9% in 2017.

The largest gender gap in participation rates, at 30.6 percentage points, is faced by women in emerging countries. The second largest occurs in developed countries, at 16.1 percentage points; however, this has narrowed by more than 5 percentage points over the past two decades and is projected to continue to close.

The ILO said with the exception of Eastern Asia and Southern Asia, the gender gap in labour market participation has narrowed in every region over the past two decades, albeit to varying degrees. This narrowing is largely attributable to improvements in female participation rates. The one exception is Northern America, where the participation rate for men is falling faster than the rate for women, thus leading to an apparent “improvement” in the gap.

Northern Africa has one of the widest gender gaps in labour force participation rates, at 51.2 percentage points (behind the Arab States at 55.2 percentage points). A declining male participation rate and a relatively stable female rate helped narrow the gap by 2.2 percentage points between 1997 and 2007. During the past decade, however, progress has slowly reversed, with a widening of the gap by 0.2 percentage points albeit as participation rates increased for both genders (though at different rates). The region still faces one of the lowest rates of female labour force participation, at 22.9% in 2017, but a continued narrowing in the gender gap is expected through 2021.

Over the past two decades, Latin America and the Caribbean has recorded the largest percentage-point reduction in the labour participation gap of all regions. The gap narrowed by 9.5 percentage points over the period, to 25.6 percentage points in 2017, most of which took place between 1997 and 2007 (7 percentage points). The overall trend was driven by a steady decline in the male participation rate combined with an increase in the share of women entering the labour force. The ILO said between 1997 and 2007, the female participation rate rose by 5.3 percentage points, but since then it has increased by a more modest 0.8 percentage points, reaching 52.7% in 2017. A further modest narrowing in the gap is anticipated from 2018 to 2021.

In Northern America, the participation gender gap has narrowed by 3.4 percentage points over the past 20 years, to reach 12.1% in 2017. Since 2007, the participation rate for men has declined by 3.8 percentage points and that for women by 2.5 percentage points, bringing the female rate to 56.2% in 2017. Both the female and male rates are anticipated to decrease marginally in 2018, but at similar paces, and so the gap should remain unchanged through 2021.

The widest gender gap in labour force participation – at 55.2 percentage points – continues to persist in the Arab States. The participation rate for women is still the lowest globally, but it has been rising steadily – reaching 21.2% in 2017. However, said the ILO, progress has been too slow to bridge the gap and catch up with the male counterpart rate of 76.4%. Moreover, progress has slowed over the past 20 years, as the gap has narrowed by only 0.2 percentage points since 2007, following a reduction of 2.6 percentage points between 1997 and 2007. The gender gap is expected to continue to close through 2021.

Eastern Asia is one of only two regions (with Southern Asia) where the female labour force participation rate has declined markedly since 1997. For Eastern Asia, this has resulted in a widening of the labour force participation gap to 15.5 percentage points in 2017. In fact, the participation rates for both men and women declined significantly between 1997 and 2007, but over the past decade the male participation rate has declined by 1.3 percentage points, while the female rate has declined by 2 percentage points, resulting in a widening of the gap. Despite this, the participation rate for women in the region remains the second highest globally at 61.3%. A further decline in female participation through 2021 is expected to widen the gap further.

Over the past decade, Southern Asia has experienced the largest widening of the gap of all regions. The gap increased by around 2.1 percentage points from 2007 to 2017, resulting in a gap of 50.8 percentage points in 2017. From 2007, the rising participation rate of women observed during 1997-2007 began to reverse, resulting in a decline of 4.5 percentage points in the rate of female participation, to 28.6% in 2017. A slight increase in the female rate and narrowing in the participation gap are anticipated from 2018 to 2021.

In Northern, Southern and Western Europe, the gap in the labour force participation rate has narrowed by 8.3 percentage points in the past 20 years, to reach 12.5 percentage points in 2017. “This trend has been driven by a declining male participation rate, while the rate for women has increased, reaching 51.3% in 2017.” This trend was amplified in the wake of the global financial crisis. A modest narrowing in the gap is anticipated between 2018 and 2021, as participation rates are expected to decrease for both women and men.

Unemployment gap

The ILO report found that while women are less likely to participate in the labour force, when they do participate, they are more likely than their male counterparts to be unemployed.

Globally, the unemployment rate for women stands at 6.2% in 2017, representing a gap of 0.7 percentage points from the male unemployment rate of 5.5%. This is projected to remain relatively unchanged going into 2018 and through 2021.

Since 1997, the global gender gap in unemployment has stayed around 0.8 percentage points. In emerging countries, however, the gap has widened in the past decade: from 0.5 percentage points in 2007 to 0.7 percentage points in 2017. In contrast, since 1997 the gaps in both developing and developed countries have narrowed, by 0.2 and 0.8 percentage points respectively. Accordingly, as of 2017, developed countries have the least difference between male and female unemployment rates, with a gap of 0.5 percentage points.

Women in the Arab States experience the highest rate of unemployment across all regions, at 21.2% in 2017. This is more than twice the rate for their male counterparts, at 8.3%, resulting in the largest regional unemployment gender gap, at 12.9 percentage points. Since 2007, the region has experienced a substantial widening of the gap, by 1.8 percentage points, mostly due to an increase in the unemployment rate for women. The gap is expected to narrow somewhat between 2018 and 2021.

In Northern Africa, women who participate in the labour force face the second highest unemployment rate globally, at 20%, more than twice the rate for men. Significant narrowing in the unemployment gap was achieved between 1997 and 2007, with the gap being reduced by 2.5 percentage points. However, progress has since reversed; the gap widened by 0.7 percentage points between 2007 and 2017 and is expected to continue to widen, albeit marginally, through 2021.

Northern America is one of three regions in the world where women in the labour force have a higher likelihood of being employed than men. The unemployment rate for women, at 4.9% in 2017, is 0.4 percentage points lower than the rate for men, at 5.3%.

Gender segregation

The ILO report said that a comparison of the sectoral distribution of employment by sex reveals strong evidence of gender segregation.

The global average segregation across all sectors has increased between 1997 and 2017, from 15.0 percentage points to 20.5 percentage points.

“In other words, to achieve matched allocation of men and women in every sector would require a shift of one in every five men or women to different sectors.”

At the global level, education, health and social work is the sector with the highest relative concentration of women, followed by wholesale and retail trade. In contrast, the sectors of construction and transport, storage and communication tend to have the highest relative concentration of male workers.

“Labour market segregation at the sectoral and occupational levels is potentially self-reinforcing because some occupations are more common in some sectors than in others.”

Furthermore, said the ILO, such segregation also affects gender gaps related to incomes and working conditions, and could even affect gaps in labour force participation and unemployment.

In other words, if women are segregated into certain occupations and those occupations are not growing, this phenomenon can have a severe impact on labour market outcomes, the ILO cautioned.

The report found that globally, the share of wage and salaried employment in total employment has increased from 48.4% in 1997 to 54.8% in 2017. Over this period, the share for women increased by 8.9 percentage points, from 46.5% to 55.4%, while for men the share increased by 6 percentage points, from 48.4% to 54.4%. As a result, the gender gap was reversed, so that in 2017 the share of workers in wage and salaried employment is higher for women than for men.

In developing countries, only 13.6% of women enjoy wage and salaried employment, compared with 24.3% of men. At the other end of the spectrum, the share of women in wage and salaried employment in developed countries is 89.1%, compared with 83.7% of men. The difference is marginal for emerging countries (around 51% for both).

By region, the greatest disparities are observed in sub-Saharan Africa, where the male share in wage and salaried employment, at 36.3%, is 13.7 percentage points higher than the female share, at 22.6%. The gap has also widened over the past decade, from 12.9 to 13.7 percentage points.

Southern Asia also has a large gender gap in the wage and salaried employment share, in which the male rate, at 26.8%, is 8.6 percentage points higher than the female share at 18.2% in 2017.

In contrast, said the ILO, the share for women is higher than that for men in four out of 11 regions in 2017 – the biggest difference is in Northern, Southern and Western Europe, where the share for women is 88.6%, 7.7 percentage points higher than that for men, at 80.9%.

Overall for developed countries, the higher the average wage, the wider the gap in wages. In these countries, the gender wage gap is particularly magnified among the highest-paid occupations, such as managers and CEOs: this is known as vertical segregation, or the “glass ceiling”. For instance, in Europe, the overall gender pay gap reaches close to 20%; however, among CEOs the gap is twice as large, at nearly 40%, and it continues to widen to 50% among the top 1% of earners, said the report.

“Given the importance of social norms and gender role conformity in explaining gender gaps in the world of work, appropriate policy responses must address the root causes of segregation and diversify traditional employment opportunities for women and men,” said the ILO. Only then can the constraints on women’s roles in the workplace be broken down. This means combating discrimination both within and outside the workplace.

In particular, appropriate policy responses, with a view to achieving the targets of the Sustainable Development Goals (notably Goal 5, Gender Equality), need to principally address the differential treatment and perception of women relating to their place both in the world of work and in society more broadly.

According to the ILO, these include, but are not limited to, promoting equal remuneration for work of equal value; tackling the root causes of occupational and sectoral segregation; and transforming institutions to prevent and eliminate discrimination, violence and harassment against both women and men. (SUNS8483)                                            

Third World Economics, Issue No. 641, 16-31 May 2017, pp14-16


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