Mind the gap

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The on-going issue of gender equality has been in the spotlight since late 2017. The high-profile sexual discrimination in the workplace campaigns (such as MeToo and TimesUp) may have started in Hollywood but have since gone global. The 2018 publication of gender pay-gap (the average difference between the remuneration for men and women who are working) data by thousands of UK companies revealed stark pay inequalities still exist between the sexes.
Why now?

Conversations about improving diversity at work have sprung up in homes and offices up and down the country. These have mainly focused on the advantages to society of greater gender equality. Less well recognised are the potential economic benefits of increasing the number of women in the workplace (and supporting them while they are there). Benefits that could have significant implications for investors.

Women and men around the world tend to enjoy comparable levels of education. That’s the case even in countries like Saudi Arabia where women have only recently been allowed to drive and enter sports stadiums. But, while women make up half of the world’s population they generate just 37% of global GDP1. This suggests women’s educational attainments are being seriously under-utilised.

Research by the McKinsey Global Institute analysed current and potential economic output in 95 countries around the world. It found that if women and men contributed equally to the workforce – same hours worked, equal pay, equitable representation across all fields – it would add US$28 trillion to global GDP by the year 2025.2

If you think that sounds unrealistic, you’d be right. A host of cultural, social and economic reasons mean that the prospect of women participating equally with men around the world is highly unlikely. However, under a more achievable scenario, McKinsey still estimates greater gender equality than is present today would add US$12 trillion to the overall world economy.  This suggests there is huge potential in harnessing the female labour force. So, what is holding the world back?

Inflexible practices

Often cited as reasons for this lack of progression is the lack of women in leadership positions, both professional and political, typically considered a result of the traditional care-giving role of women.

One controversial theory put forward by Harvard economist Claudia Goldin, is that the gender pay-gap isn’t driven by discrimination in the workplace but by female demand for ‘flexibility’. She suggests women look for employment with flexible working arrangements and generous parental leave policies as they are the primary caregivers to children or other dependents. As a result, women are more likely to drop out of the workforce early to meet caring commitments. They also tend to work in less productive sectors and in less senior roles in order to accommodate their need for flexibility. Consequently, they earn less.

While Goldin’s theory is contentious, there is little doubt that more progressive and flexible working practices (for both genders) would help retain talent and save money.  According to a study by KPMG and Vodafone, recruiting and training new employees to replace women who do not stay in their workforce after having a baby costs global businesses US$47bn every year.3

Lessons learned

As research into this topic continues to grow, it increasingly indicates encouraging more women to participate in the workplace would be good for the economy. It could also be positive for investment by cutting costs for companies and driving economic growth. Investors would do well to keep a close eye on this debate.

1 GDP is the measure of the size of an economy.

2 McKinsey Global Institute, The Power of Parity: How advancing women’s equality can add US$12 trillion to global growth, September 2016.

3 Vodafone/KPMG. Women’s empowerment 2017. 01 June 2017.


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