Why everyone benefits from closing the gender gap

Christine Lagarde, the International Monetary Fund’s managing director, recently warned that the world risks a new “mediocre normal” of slower growth. She is not alone in her concern.

Economic policymakers around the world are looking for ways to boost growth, with infrastructure investment topping most lists. But, as Lagarde regularly reminds her audiences, another, often-overlooked remedy is to increase the economic participation and advancement of women.

Women account for half of the global labor supply and about 70% of the world’s consumption demand. Yet there remains a long way to go in realizing their economic potential, as the World Economic Forum’s just-released Global Gender Gap Report 2014 confirms.

In many countries, both developed and developing, men and women are at or near parity when it comes to education and health, according to the report, which covers 142 countries and 94% of the world’s population. But, as the attack on the heroic Pakistani schoolgirl and Nobel Peace Prize laureate Malala Yousafzai demonstrated, girls and women are still blocked from education in many places, sometimes through violence.

Moreover, in terms of economic participation and opportunity, women continue to lag behind men by a considerable 15-25% even in the most gender-equal societies. Globally, only about half of working-age women are employed, and they earn three-quarters as much as men, even when they have the same level of education and are in the same occupation.

Meanwhile, women are over-represented in informal, temporary, and part-time jobs, most of which are low-productivity positions with low pay, no benefits, and limited opportunities for advancement. Based on the rate of progress over the last nine years, it will take another 81 years to close the world’s economic gender gap and unlock the associated economic benefits.

By one estimate, women hold about 24% of top management positions globally, with comparable figures across regions and development levels. A recent study by the Credit Suisse Research Institute (CSRI) of 3,000 companies in diverse sectors and countries, however, yields a more depressing conclusion: women occupy only about 13% of top management positions (CEOs and people who report directly to them), on average, with even the highest rate, in North America, amounting to only 15%.

Women’s participation, moreover, is skewed toward positions in less influential areas like shared services, in which opportunities for promotion to top positions are limited. And, though female participation on company boards has increased in almost every country and sector over the last three years, with the largest gains occurring in countries that have introduced quotas, women hold only about 12.7% of board positions, on average.

The gender gap does not hurt only women; it hurts everyone. Healthy, educated women are more likely to have healthier and more educated children, creating a virtuous circle of development. WEF data suggest a strong correlation between a country’s progress in closing the gender gap – particularly in education and the labor force – and its economic competitiveness.

The business case for women in leadership is strong. Companies with more women in top management and board positions better reflect the profiles of their customers and employees, benefit from more diverse views when solving problems, rank higher on indicators of organizational cooperation and health, and report higher profitability and returns on equity. Furthermore, the CSRI study indicates higher returns on equity, higher valuations, and higher payout ratios, with no discernible differences in risk-taking.

Realizing the economic potential of women requires changes in policies, business practices, and attitudes. Developed countries should invest in affordable child care, early childhood education, and parental leave; shift from family to individual taxes; and provide more generous tax credits, benefits, and protections for low-wage and part-time workers. In developing countries, legal reforms that give women equal rights in land ownership, inheritance, and access to credit are essential.

Businesses can commit to gender parity by taking several concrete steps. They can set targets for recruitment and retention levels; initiate affirmative searches to meet those targets; introduce mentorship programs and diversity training to attract, retain, and promote women; and establish transparent salary bands to help track and reduce gender pay gaps.

At the same time, human-resource practices should take account of unconscious biases, risks of stereotyping, and documented gender differences in behaviour. For example, research finds that women tend to be less confident and less likely to negotiate for pay raises and promotions than equally qualified men.

Companies can also use their influence with suppliers, distributors, and partners to support women-owned businesses and encourage gender-neutral advertising. And companies can change how jobs are structured and remunerated to enhance flexibility, thereby helping both men and women balance work and family demands.

Gender gaps in economic participation and opportunity for women vary significantly across regions. The WEF’s findings show that the Middle East and North Africa suffer from the widest gender gap, with women reaching only 40% of parity in the workplace, on average, compared with nearly 80% in North America. Indeed, the overall gap has widened in Jordan and Tunisia.

Even so, there are positive trends. Over the last nine years, Saudi Arabia has reduced its economic gender gap, relative to its starting point, more than any other country.

Lagarde challenges policymakers and business leaders alike to make changes that broaden economic participation and opportunity for women. The economic gains from doing so are significant. In the words of Klaus Schwab, the WEF’s founder, “Only those economies which have full access to all their talent will remain competitive and will prosper. But, even more important, gender equality is a matter of justice.”

It would be difficult to identify more compelling reasons to accelerate progress toward gender parity.

Published in collaboration with Project Syndicate

Authors: Laura Tyson, a former chair of the US President’s Council of Economic Advisers, is a professor at the Haas School of Business at the University of California, Berkeley, a senior adviser at the Rock Creek Group, and a member of the World Economic Forum Global Agenda Council on Gender Parity. Saadia Zahidi is a senior director and Head of the World Economic Forum’s Human Capital and Constituents and Gender Parity programs.

Image: A woman stands in an office in front of windows overlooking the city.