One of the greatest challenges currently facing our leaders is how to promote the economic growth and prosperity for all of our countries and people. We face many potentially daunting factors, among them rapidly shrinking and aging societies, increasingly limited natural resources and sources of capital,
and the income gap within our own countries and between the developed and developing world. What is the solution? I propose one that is very clear and simple—the full economic integration of women into our economies.
THE ECONOMIC CASE FOR WOMEN in the Economy
At the first-ever, Asia-Pacific Economic Cooperation (APEC) High-Level Policy Dialogue on Women and the Economy held September 2011 in San Francisco, Secretary of State Hillary Rodham Clinton made the evidence-based case for the inclusion of women as a vital source of economic growth. She noted the advent of “The Participation Age,” when every individual is provided the opportunity to be a contributing and valued member of the global economy. However, we can realize these gains only if we take steps to remove barriers that have prevented women from being full participants in the economy. The path to economic growth is through the full empowerment of women and girls.
What is the economic evidence supporting the benefits of fundamentally transforming our economies by eliminating the barriers to women’s economic participation? What type of economic gains are we talking about?
The World Economic Forum Gender Gap Report shows that where the gender gap is smaller in a range of areas—including access to education, health survivability, economic participation, and political participation—countries and economies are more competitive and prosperous. A Goldman Sachs paper notes that a reduction
in barriers to female labor force participation would increase the size of America’s gross domestic product (GDP) by 9 percent, the Euro Zone’s by 13 percent, and Japan’s by 16 percent.
These GDP gains are evidenced in history. The Economist points out that the increase in employment of women in developed countries, during the past decade, has added more to global growth than has the economic emergence of China. In the United States alone, women own nearly 8 million businesses, accounting for $1.2 trillion of our GDP. A McKinsey study found that when women went from holding
37 percent of all US jobs to nearly 48 percent over the past 40 years, the productivity gains associated with this modest increase accounted for approximately one-quarter of our current GDP. In other words, more than a stunning three and a half trillion dollars was generated by the increase of women’s participation in the economy. This gain is greater than the GDP of Germany and more than half of the GDPs of both China and Japan.
The Barriers That Prevent Economic Growth
Given such strong evidence of the potential gains from giving women a greater role in our economies, what holds us back from achieving this fundamental transformation? Why aren’t we rushing to make the changes that can help our economies grow? The answer is found in a range of social norms and market barriers that prevent the full participation of women in the economy.
Laws, customs, and values are roadblocks to full inclusion. In the United States and around the world, women are still relegated to the sidelines—denied meaningful employment in the most productive and lucrative sectors of the workforce. And even those who do enter the workforce sometimes are relegated to lower positions in the face of legal and social restrictions that limit their potential. Others are prevented from rising to the top because of what some call “the sticky floor”—practices and customs that prevent their rise to the most senior positions.
Here are some examples. Only 13 of the CEOs of the Fortune Global 500 companies are women—less than 3 percent. In many countries, women do not have the same inheritance rights as men. Many women have told me that they are denied access to credit and prohibited from opening bank accounts, signing contracts, purchasing property, incorporating a business, or filing lawsuits without a male guardian. And women are often not considered “creditworthy.” I recall one woman entrepreneur telling me several years ago of her struggles to start a small business. The problem, she said, was not that women lack the desire to become entrepreneurs, but the fact that “the best ideas die in bank parking lots.”
These barriers and restrictions, some structural, some customary, erode the abilities of women to participate fully in their economies and to support their families, whether as employees or entrepreneurs. But regardless of the reasons, the fact remains that we are denying ourselves the economic growth we need to build stronger societies. And while these barriers are unhealthy and deny women the chance to contribute fully to that growth, the bottom line is they deny us all the chance to achieve greater prosperity.
What Does Women’s Economic Empowerment Means
In a world where many countries face serious demographic challenges from shrinking and aging societies, we don’t have many options to achieve dramatically positive rates of economic growth with relatively little effort. Therefore, while the further integration of women into our economies has always been the right thing to do, the evidence now clearly indicates that it is the smart thing to do as well.
In noting the potential GDP gains to be made with women’s economic progress, we must also consider that rising incomes mean increased spending, which helps fuel additional growth. And women, because of the way they spend their increased income, make a substantial contribution to our economies in ways that surpass the benefits of added income to men. What does this mean? A Boston Consulting Group survey notes that globally, women will control $15 trillion in spending by the year 2014. And by 2028, women will account for about two-thirds of consumer spending worldwide. Studies have shown that increasing women’s income has a strongly positive economic stimulus effect because they spend it on food, health care, home improvement, and education for themselves and their children.
The data also show that women save more than men. A look at 20 semi-industrialized countries
suggests that for every percentage point increase in the share of household income generated by a woman, aggregate domestic savings increases by roughly 15 percentage points. And here are some other points to consider.
The Food and Agriculture Organization of the United Nations estimates that if women had the same access to productive resources as men, they could increase yields on their farms by 20 to 30 percent. This increase could raise total agricultural output in developing countries by 2.5 to 4 percent and reduce the number of hungry people in the world by 12 to 17 percent, or up to 150 million people.
Research shows a correlation between the number of women on boards and higher corporate profits. Companies with more women board directors outperform by 66 percent in terms of return on invested capital, by 53 percent in terms of return on equity, and by 42 percent in terms of return on sales. Another study indicates that one-third of executives reported increased profits from their investments from employing women in emerging markets.
Other research shows that integrating women into our economies can yield a broad range of economic gains from increased profits, productivity gains, better corporate leadership, and more efficient utilization of all of our resources and talents.
A Call to Action for More Inclusive Economic Growth
As Secretary of State Hillary Clinton outlined in her APEC remarks,1 there are specific steps and programs that can help achieve greater growth and prosperity. And governments, civil society, and individuals must make countless decisions to encourage young women and girls to stay in school, acquire business skills, seek mentors, break through legal and cultural obstacles, and obtain the support they need to achieve their full economic potential. But it seems to me that the effort to achieve these gains are well worth it. We need to take steps to unleash the full potential of all women, not only for our economic gains, but to better our societies and communities. When women thrive, we all benefit.
President Barack Obama appointed Melanne Verveer as Ambassador-at-Large for Global Women’s Issues in April 2009, an unprecedented move that recognizes that the progress of women and girls around the world is central to US foreign policy. Ambassador Verveer coordinates foreign policy issues and activities to promote the political, economic, and social advancement of women and girls around the world.