Is Gender Equality Smart Economics?

Clodagh MoriartyThis blog post is the fifth  in a series of posts that come from students of our capitalism and democracy undergraduate course. As part of the course, students were asked to write about an issue pertaining to the political economy of distribution. The best blog posts have been selected to provide an opportunity to exceptional young scholars at UCD to contribute to the debate on the future of European and global economic governance, and to promote the insightful scholarship being undertaken at UCD to a wider public audience.

This blog analyses the Global Gender Gap Report (2013) by the World Economic Forum, and the effects of gender equality on labour participation and the overall economic performance of a country.

The Global Gender Gap Report is a worldwide measure of gender-inequality. It rates countries gender equality across several areas including education, health and labour participation. Countries are then ranked according to their performance on this scale (World Economic Forum, 2013, p 3). The Report does not factor in a country’s overall resource availability. Rather it measures the access that individuals have to resources and opportunities based on gender bias (World Economic Forum, 2013, p 3).

Much like the Human Development Index used by the UN, it is limited in its scope to a few key factors. As such there are criticisms that the Report does not accurately portray the situation in a given country (Kabeer and Natalia, 2013, p 7). However, these are issues which arise with any large scale international report. The Report functions to allow a general cross-country analysis of gender based discrimination over time rather than a detailed and thorough analysis of any one country (Knowles et al., 2002, p143). For that purpose, it allows us to look at general emerging trends and patterns in relation to gender equality. The significance of the Report can be looked at in two ways. Primarily, there is the argument that a country should be concerned with their performance in the area of gender equality because it is inherently morally correct to do so.

There is a second argument, however, which is emerging from recent studies that countries ought to pay close attention to gender discrimination within their societies because of the impact that such inequality has on that country’s capabilities on an international level (Kabeer and Natalia, 2013, p 6). It is this second point which I will look at in further detail.

There are a number of barriers preventing women from entering the workforce and from advancing within the workforce to top positions. Of these, parental leave and childcare facilities in a country play a crucial role in determining the level of this disparity.

Female graduates between the ages of 25-35 who are seen to be of child-bearing age, are 40% less likely to be employed compared to male graduates of the same age with the same qualifications (Guardian online, 12/08/14). The possibility of a woman to take maternity leave has a massive negative impact on her employment prospects, despite legal policies against this discrimination. Employers argue that the economic loss that they suffer through providing paid maternity leave puts them at an unsustainable disadvantage (Buzzanell and Liu, 2005, p5). However, the overall economic detriment to a country through this when weighed against the cumulative benefits of a diverse workforce results in a greater disadvantage to the economic situation as a whole (Ward et al., 2010, p4).

Global gender gap

 

The Global Gender Gap Report 2013 includes a focused study on the parental leave rights across a variety of countries. It concludes that well developed parental leave systems and affordable childcare facilities improve a countries economic efficiency and capabilities to the point where the costs of this are negated in the long-term (World Economic Forum, 2013, p63). A parental leave system which does not discriminate against a father’s ability to act as a care-giver has the indirect effect of promoting equality in recruitment of young women with the potential to become mothers (Buzzanell and Liu, 2005, p15). It is interesting to note that in countries such as Iceland with equal levels of maternity and paternity leave as a social norm, pregnancy based gender discrimination as a factor preventing women from entering the workforce is proportionally negated (World Economic Forum, 2013, p63).

The costs and availability of child care can also be a major disincentive to women returning to work following childbirth (World Economic Forum, 2013, p63). It is accepted almost universally (with a few notable exceptions) that women are entitled to a certain period of paid leave for pregnancy and childbirth. Paternity leave, however, is often regarded as an “optional extra” which means that in many situations a father may not be entitled to any sort of career break around the time of childbirth. This encourages a norm where it is the mother who remains out of work to care for a child if affordable childcare cannot be sourced. In countries with well-developed affordable childcare, there are a far greater percentage of mothers returning to work following childbirth (World Economic Forum, 2013, p84). The Global Gender Report 2013 emphasises the significance of this for a country’s GDP stating that this dramatically improves the efficiency of labour markets and even impacts childbirth rates (World Economic Forum, 2013, p63).

It is clear that, through improvements in parental leave and childcare arrangements, we can see greater numbers of women participating and advancing in the labour force. However, the question remains as to why this is the best economic choice for a country. The primary rationale here is that increasing the number of women in the workforce leads to a greater selection of potential employees. Logically, the greater the number of candidates for a position, the more qualified and well-suited to the role the eventual successful employee will be (Ward et al., 2010, p17). This leads to greater specialisation and optimised work efficiency in a business and prevents what Klassen (1999, p 19) refers to as artificially restricting labour market.

Diversity is also considered a key component of innovation by many top-performing business strategists. Research by Forbes shows that 85% of the highest profit margin international companies considered a diverse workforce to be crucial to their success (Kerby and Burns, 2012, p2). This is unsurprising considering a business operating within a capitalist market must appeal to as wide a range of customers as possible in order to maximise profit. Through recruiting employees from a wide range of backgrounds, a business gains an insight into the needs and wishes of a larger number of potential customers (Revenga and Shetty, 2012, 42).

Women and men are also predisposed to certain behaviours. Some of these are instinctive while some are socially learned. For example, economic experiments show that men are more prone to risk taking behaviour while women are more cautious (Eckel and Grossman, 2008, p 517). Traditionally, the observation that women are more adverse to risk-taking behaviour has led to a greater exclusion from male-dominated fields such as military strategizing and stock market trading (Almenberga and Dreberb, 2012, p1).

However, transferring this behaviour norm to a stock-market situation, (Barber and Odean, 2001, p265) famously hypothesised that too much risk in this industry will result in crashes, while being overly cautious will not yield enough profit. A balance of both is required to optimise returns. This demonstrates that where there are genetic differences that generally prevail amongst men and women (not including environmental factors such as societal expectations and gender roles from early childhood), the mix of these contrasting perspectives are crucial to optimal economic success.

Women’s access to wealth and control over spending power also directly influences family planning choices. Educated working women are monumentally more likely to use contraception and avoid crisis pregnancies (Elborgh-Woytek et al., 2013, p3). This reduces the amount of pregnancies resulting in state dependency (Elborgh-Woytek et al., 2013, p4). Women are also more likely to invest in education for children (of both genders) which has the long-term effect of improving the skills set and productivity of the next generation of workers in a country (Kabeer and Natali, 2013, p21).

At present, women face high levels of gender based discrimination in relation to their ability to join and perform in the workforce. This is not an inequality which is limited to developing countries. It is a pattern which can be seen globally, from 1st to 3rd World countries. Combined parental leave schemes and the availability of affordable childcare are key in achieving gender equality in labour participation. The Nordic region countries which have begun to take measures against this inequality rank the highest on the Global Gender Gap Report 2013. These countries have not only enjoyed international recognition on the basis of this, but have additionally reaped social and economic benefits.

As equality breeds greater equality, these benefits are self-perpetuating. Gender equality in labour participation is important, not only in its own right, but for the corollary consequences that it has for a country’s population socially, politically, economically and in terms of international relations. Countries with increased levels of female labour participation show marked economic improvements due to an optimised workforce with greater efficiency and use of human capital.

“Clodagh Moriarty is a final year Law with Politics student at UCD. She chose to write about this topic as part of an assignment for her “Capitalism and Democracy” class because she has a strong interest in gender equality. She is also interested in environmental protection and in the future, she hopes to continue her studies with a Masters in Environmental Law.” 

References:

  • Almenberga J. and Dreberb, A. (2012) Gender, Stock Market Participation and Financial Literacy. SSE/EFI Working Paper Series in Economics and Finance No 737
  • Barber, B. M. and Odean, T., (2001), Boys will be boys: gender, overconfidence, and common stock investment. Quarterly Journal of Economics, Vol. 116(1), p. 261-292.
  • Buzzanell, P. M., and Liu, M. (2005). “Struggling with maternity leave policies and practices: A poststructuralist feminist analysis of gendered organizing”. Journal of Applied Communication Research, 33(1), 1-25.
  • Croson, R and Gneezy, U. (2009) “Gender Differences in Preferences”. Journal of Economic Literature 2009, 47:2, 1–27
  • Deaves, R., Lüders, E., Luo, G. Y., (2009), An Experimental Test of the Impact of Overconfidence and Gender on Trading activity. Review of finance, Vol. 13(3), p. 555–575.
  • Eckel, C. C. and Grossman, P. J., (2008), “Differences in the Economic Decisions of Men and Women”. Handbook of Experimental Economic Results, Vol. 1, pp. 509-519
  • Elborgh-Woytek, K., Newiak, M., Kochhar, K., Fabrizio, S., Kpodar, K., Wingender, P., Clements, P. B. and Schwartz, G. (2013) “Women, Work, and the Economy: Macroeconomic Gains from Gender Equity”. International Monetary Fund Strategy, Policy, and Review Department and Fiscal Affairs Department
  • Guardian Newspaper. (12/08/14) 40% of managers avoid hiring younger women to get around maternity leave”. Accessed at: http://www.theguardian.com/money/2014/aug/12/managers-avoid-hiring-younger-women-maternity-leave
  • Kabeer, N. and Natali, L. (2013) “Gender Equality and Economic Growth: Is there a Win-Win?” Institute of Development Studies Working Paper Volume 2013 No 417
  • Kerby, S. and Burns, C. (2012) The Top 10 Economic Facts of Diversity in the Workplace: A Diverse Workforce Is Integral to a Strong Economy.
  • Klasen, S. (1999) “Does Gender Inequality Reduce Growth and Development? Evidence from Cross-country Regressions” Policy Research Report on Gender and Development, Washington DC: World Bank.
  • Knowles, S., Lorgelly, P. K. and Owen, P. D. (2002) “Are Educational Gender Gaps a Brake on Economic Development? Some Cross-country Empirical Evidence”. Oxford Economic Papers (54)1: 118-49
  • Nowell, C and Tinkler, S. (1992) “The influence of gender on the provision of a public good” Journal of Economic Behavior and Organization Vol. 25 (1994) 25-36
  • Revenga, A. and Shetty, S. (2012) “Empowering Women is Smart Economics”. Finance & Development. pp. 40-44.
  • Thelen, K. (2012) “Varieties of Capitalism: Trajectories of Liberalization and the New Politics of Social Solidarity”. Annu. Rev. Polit. Sci. 15:137–59
  • Ward, J., Lee, B., Baptist, S., and Jackson, H. (2010) Evidence for Action: Gender Equality and Economic Growth. The Royal Institute of International Affairs: London.
  • World Economic Forum (2013). The Global Gender Gap Report 2013. World Economic Forum: Geneva

 

 

 

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