What is the issue?

Despite substantial progress in several aspects of gender equality over the past decade, including reductions in the workforce participation rate gap, the gender pay gap and unemployment rates in OECD countries, problems persist in developed and developing countries alike. These challenges have been amplified by the COVID-19 pandemic and a subsequent increase in unpaid labour – PwC’s Women in Work Index regressed to 2017 levels in 2021. Growth towards gender parity must be twice as fast as pre-COVID rates to combat pandemic-induced setbacks and bring about a more sustainable and prosperous future.    

Here are some figures to illustrate how much more there is to achieve:

• Women earn, globally, 24% less than men
• Women do $10.8trn worth of unpaid labour annually
• 2.4bn women are denied the economic opportunity to work
• 1 in 2 women work worldwide

Why is it important to achieve parity?

Aside from the obvious moral justification for addressing the issue, achieving economic parity in both developing and developed economies presents a lucrative growth opportunity. Women comprise half the world’s population, so barriers to economic parity (in workforce participation and pay) waste a valuable economic resource, if nothing else. PwC estimates that increasing the national female labour force participation rates to match that of the south-west of England (the nationwide top-performer) could add £48bn per annum to the UK economy. In the US, that figure is $4.3trn.

Figure 1: Graph from EIGE (European Institute for Gender Equality) showing GDP/Capita projection assuming improvement in gender equality. The EU increase amounts to $3.15Trn.

How can we change the status quo?

First, we must overcome existing societal and cognitive biases, many of which can be influenced by effective economic incentives in tandem with the efforts of NGOs. Combatting legal/institutional discrimination is harder; 104 economies still have laws preventing women from working in specific jobs, and nearly 70% of all women are legally barred from choosing certain jobs available to men. In the most extreme cases, husbands can legally prevent their wives from working in 18 countries. These discriminating laws and policies do not only hinder female labour force participation, but also evade the reach of top-down economic policies, so primarily do not feature in this article.

Education

“Every literate woman marks a victory over poverty.”- Ban Ki-Moon

The utilisation of government spending in targeted areas is a crucial factor in the economic empowerment of women and girls. To allow women to work, governments must enable easy access to infrastructure such as schools to increase literacy rates in women, enabling them to work in male-dominated, higher-income jobs, thus bridging the 20% workforce participation gap. Although the education gap between the sexes has dissolved in many developed countries, the average literacy rate for men is 70%, compared to 54% for women, in low-income countries. This is a result of a combination of factors, including the prioritisation of boys’ education over girls’, often fuelled by poverty. By investing in education for girls, returns in the form of social and economic development are visible for generations. According to Ban Ki-Moon, ex-UN General-Secretary, educated women are more likely to send their daughters to school. He added, “by acquiring literacy, women become more economically self-reliant… investment in literacy for women yields high development dividends.”  These ‘development dividends’ are especially visible in developing economies, where the World Economic Forum estimates that every $1 that goes into girls’ education returns $2.80. So providing the opportunity to girls to remain in school as long as boys do, on average, offers lucrative long-term benefits for developing economies, as well as integrating the generation of women into the economy and breaking generational cycles of poverty.

Childcare

Childcare support is crucial in enabling women to narrow the workforce participation gap. The labour cost of raising a child is disproportionately burdened on the woman, who spends on average 2.5x more time than men doing unpaid, domestic care work. According to the UN, the unpaid work that women do is estimated to constitute between 10% and 39% of GDP if assigned a monetary value.

Unsurprisingly, this figure bears a negative correlation to female workforce participation rates. 43% of 27,000 mothers surveyed in the UK reported that the cost of childcare forced them to consider leaving their job; a further 40% mentioned working fewer hours than they would have liked to for the same reason. Government help could arrive in the form of tax breaks or cash benefits for a mother – but this alone is not enough. Women are paid less favourably by employers after months/years of childcare-induced unemployment. As a consequence, pensions are also adversely affected – the gender pension gap was 37.9% in 2019/20, primarily due to women taking time out of the workforce to care for their children. In order to resolve the issue, governments should enact childcare subsidy policies and mandate paid maternity leave for longer among other things, granting freedom to women (particularly those from low-income households) to participate in the workforce. 

The graph on top shows the average childcare fees in several European countries, from highly subsidized economies like Sweden and France to the US and UK, the other end of the spectrum.  The one below depicts maternal employment rates in many of the same countries. Unsurprisingly, Sweden, the country with the lowest childcare expenses and highest subsidy rates, leads the way in maternal employment. However, the Netherlands represents an interesting exception to the trend: despite childcare costs being more than 50% of an average wage, maternal workforce participation rates are some of the highest in Europe.

Childcare subsidy policies are already in place around much of the Western world, albeit yielding varying degrees of success. The good news is that countries with less expensive childcare, on average, tend to have high workforce participation rates, especially amongst mothers. Policymakers should bear in mind that lower-income women often sacrifice a job to take care of their children, while higher-income women tend to opt for paid childcare rather than give up a well-paying job. In this regard, the Child Care and Development Fund has been a success in its aims to encourage mothers from low-income households to join the workforce. 

Critics argue that a subsidy aimed at lower-income households like CCDF simply sacrifices quality of education/childcare for higher employment rates; the two goals, they argue, are mutually exclusive. Another drawback of the childcare subsidy policy is the possibility that the widespread availability of affordable childcare institutions may replace other forms of non-parental childcare (e.g., grandparental care), therefore having no significant effect on workforce participation rates. In 2004, France increased the subsidy to parents of children under the age of three, resulting in a 50% reduction in fees. Although the policy greatly increased the utility of subsidized childcare, it did not have any dramatic impact on employment of mothers. This implies that parents who were already hiring a childminder, for example, started sending their children to day-care instead, simply rerouting the cashflows with no real impact on employment. This is perhaps not a effective use of taxpayer money. In other countries such as Canada and the US, childcare subsidy policies seem to be effective, although we cannot determine for sure whether high maternal workforce participation rates are merely down to liberal social norms. The UK, for example, stands out with high childcare costs but also high workforce participation rates among women.

Conclusion

In conclusion, the economic empowerment of women lies largely in the hands of effective government policies providing both a quality education as well as sufficient social protection for working women in the form of potential childcare subsidies; longer, paid maternal and paternal leave encouraging both parents to bear the burden of unpaid domestic work, and a secure pension which remains unaffected by time taken off by a mother to care for her children. In this article I have largely considered the economic policy angle – however this alone is not enough to create meaningful change. Legal and societal reforms are necessary in tandem with economic ones, such as the reform of inheritance and family law, to progress sustainably.