She Is The Answer
The aging of populations around the world has profound implications for economic growth. When the working-age population shrinks, in many cases so does the labor force, and the potential for economic growth diminishes. In many advanced and emerging market economies, the number of working-age people is falling, which puts pressure on government revenue just as the need for spending on pensions and health care is rising.
Women play a critical role in this demographic transition. They make up over half the world's population. Because women generally outlive men, the share of women in the over-65 age group is notably higher. Yet the percentage of working-age women who actually participate in an economy's workforce (known as the female labor force participation rate) has hovered around 50 percent over the past two decades. The global average masks significant cross-regional differences in levels and trends. Rates vary from 21 percent in the Middle East and North Africa to more than 60 percent in east Asia, sub-Saharan Africa, the United States, and northern Europe. Although Latin America and the Caribbean have experienced strong increases of some 13 percentage points during this period, rates have been declining in south Asia. Despite the stagnation in female participation, the average gender participation gap-the difference between male and female labor force participation-has been declining since 1990, but only because male labor force participation has fallen more than women's has risen.
A chasm remains
Although the gender gap in education is narrowing, a chasm remains when it comes to other opportunities, such as access to health care and financial services, wages, and legal rights. The ratio of female to male primary enrollment rates is up to 94 percent even in the least developed economies. In secondary education, the ratio of female to male enrollment averages 97 percent, and women are now more likely than men to be enrolled in tertiary studies (college or university). These are positive developments. However, with so many highly educated women, it is even more of a loss that such a large percentage are not in the labor force.
When women are able to develop their full labor market potential, significant macroeconomic gains are possible. For instance, Aguirre and others (2012) suggest that raising female labor force participation to country-specific male levels would boost GDP in the United States by 5 percent, in Japan by 9 percent, in the United Arab Emirates by 12 percent, and in Egypt by 34 percent. Cuberes and Teignier (forthcoming) estimate GDP per capita losses attributable to the gender gap in the labor market to average as high as 27 percent in certain regions (see Chart 1).
How do better opportunities for women to participate in the labor force contribute to higher incomes and growth? When women get a fair shake economic development overall can benefit. School enrollment may increase because women are more likely than men to spend their earnings on their children's education. With equal access to inputs female-owned company productivity rises, and with fair hiring companies can make better use of the talent pool, with positive implications for potential growth. And in advanced and emerging markets with aging populations, boosting female labor force participation can mitigate the impact of a smaller workforce and spur growth.
To step up participation of women in the workforce, government and the private sector can play an important role. Government policies can target reduction in the gender gap in health, education, and infrastructure services as well as in access to financial services and can encourage provision of parental leave and child care facilities. Taxing individual incomes rather than family income has been shown to reduce the disincentive for the secondary income earner-typically the woman-to work. And in countries with gender-based legal restrictions such as constraints on female ownership of real estate or businesses, removing such limits can help lift female labor force participation (Gonzales and others, 2015). The private sector can play a role through flexibility in contracts and in the work environment and by adopting evaluation methods that reward performance rather than seniority or hours worked.
In addition to raising the number of female workers, improving the quality of jobs can boost productivity and economic growth. Women dominate nonregular and informal sector jobs. In most countries, these jobs offer fewer benefits and little job security relative to regular or full-time work. However, in Nordic countries and the Netherlands, for example, nonregular workers (including part-time workers) generally receive partial benefits and allowances. Such benefits can facilitate women's labor participation, raise their productivity, and narrow the gender wage gap in the medium term (Kinoshita and Guo, 2015).
Work and fertility
A common concern is that with more women in the workforce, fertility rates will fall and exacerbate the decline in population. Indeed, for individual countries, there is evidence of a drop in the number of births as the number of women in the labor force goes up. For instance, Bloom and others (2009) find that each birth on average decreases women's labor supply by almost two years during a woman's reproductive life.
While there is a negative relationship between these variables at the individual country level, there is a positive relationship between fertility and female labor force participation at the cross-country level. Researchers have explained this apparent contradiction by looking at the contribution that men make to their households (De Laat and Sevilla-Sanz, 2011). They find that women in countries where men participate more in housework and child care are better able to combine motherhood and a job, which leads to greater participation in the labor force at relatively high fertility levels.
Moreover, the relationship between female labor participation and fertility seems to have shifted from negative to positive in Organisation for Economic Co-operation and Development advanced economies since 1985 (Brewster and Rindfuss, 2000). This shift implies that when more women work and bring home a paycheck households can support more children. This trend also reflects changes in social attitudes toward working mothers, fathers' involvement in child care, and advances in technology that allow more workplace flexibility. Public policies such as more generous parental leave and greater availability of child care also helped (see Chart 2).
In the early phase of a demographic transition, women who join the labor force may choose to have fewer children. As the population shrinks, a further decline in fertility is no longer desirable or sustainable over the medium term, so policies and society at large must help support conditions that enable more women to balance work and family.