Financial Times: Gender inequality/economic growth

Financial Times
Gender inequality/economic growth
Published: 13/4/2007 | Last Updated: 13/4/2007 11:50 London Time

In the coming struggle to cope with ageing populations and heavier pension liabilities, governments, though they may not realise it, have a secret weapon: women.

Goldman Sachs estimates that closing the gap between male and female employment would boost US gross domestic product by as much as 9 per cent, eurozone GDP by 13 per cent and Japanese GDP by 16 per cent. But there is no inexorable rise in female employment levels. Goldman reckons that increasing female employment accounts for 0.4 percentage points of the eurozone's 2.1 per cent trend growth since 1995 and projects a further 0.25 percentage points lift over the next 10 years. But relatively high female employment levels in the US have been slipping slightly, and Japan's low female employment rate remains stubbornly flat – so no fillip for either of those.

Yet higher female employment, it turns out, offers a double-whammy, by raising not only total employment (so reducing the proportion of the population dependent on those in work) but also fertility. Italy and Japan, with low levels of female employment and fertility, also share a particularly grim demographic outlook.

The success of Sweden and Denmark in encouraging women to enter – and stay in – the workforce reflects not only their long cultural tradition of female equality, but also policy initiatives such as state-sponsored childcare. The US, on the other hand, has a strong history of equality in the workforce, but little in the way of policies to encourage women to stay in work after childbirth. Other policy issues worth reviewing include equality of tax treatment and of statutory retirement age (Germany, Italy and the UK still have lower retirement ages for women than for men).

Just how equity investors, whatever their gender, should benefit from further likely shifts in working patterns and their impact on economic growth is less clear. Goldman proposes a "Women 30" index which mainly consists of luxury goods brands and fashion retailers – though thankfully stops short of Procter & Gamble and Unilever. More broadly, rising female employment is yet another element of Europe's improving economic prognosis.