Does gender equality spur growth?

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What does gender equality have to do with economic growth? The answer may be much more than many people think. Gender might go some way to help explain the gap in growth that has opened up between OECD countries in recent years. For the authors, it may determine long-term growth in developed industrial countries too.

Gender equality strengthens longterm economic development. This assertion is not some wild, passionate claim, but is based on a new analysis of the relationship between birth rates and attitudes toward gender equality in a range of countries.

What we have found may seem surprising to some: more traditional family structures in modern economies face chronically low birth rates, whereas the birth rate trend is positive and the demographic structure more balanced in countries where gender equality in the workplace is more developed.

For these countries, that points to fewer problems with ageing, as well as higher labour activity and a more robust economy.

The global economy is undergoing fundamental change on many fronts, though two stand out: population change on the one hand, and economic and institutional change on the other.

The importance of the link between institutional reform and economic growth is now taken for granted, and was one of the great successes of economic research in the late 1990s, resulting in a Nobel Prize in Economics for economic historian Douglass C. North. But we must now also take demographic change seriously, not just because of pension pressures and so on, but because of the proposition that those populations that evolve and adapt are likely to be economically stronger in the long run.

According to projections of the United Nations, the European Union and others, the populations of most west European countries and Japan will decline sharply during the next few decades. The working-age population will decline even more rapidly, resulting in slower economic growth and an increasingly uneven (and unsustainable) dependency ratio.

The European Commission has even completed an analysis which points to a fundamental shift in the global economy’s distribution and balance of power between now and 2050. If, as projected, Japan’s population decreases from 126 to 105 million, that country’s share of total world GDP will be cut in half, from 8% to 4%. The EU’s share of world GDP will drop from 18% to 8-10%, while that of the United States will increase from 23% to 26%. The shares of China and several other countries are expected to increase sharply as their economies catch up with developed ones.

Such a catch-up effect is not a luxury that most OECD countries can draw on, as they already apply the most advanced production technology available. Further increases in productivity may be extracted (through management innovations and use of technology, for instance), especially in the service sector, though it is uncertain to what extent such gains would help these countries stay ahead in the global economy. A major factor that will influence, if not determine, long-term growth of mature economies is the labour supply and how effectively it is utilised. And this in turn will be conditioned by attitudes and institutional change or inertia.

It is striking how widely European countries vary with regard to birth rate and population structure. In Sweden and in other Nordic countries, demographic issues are the subject of much discussion, though their population trends are expected to be relatively favourable by international standards, with a rising birth rate (though not high) and strong female participation in the workforce. The same could be said for France (see references). But the opposite applies to Germany and Italy, whose populations are expected to decline, from 82 to 73 million and from 57 to 41 million respectively by 2050. Russia is also expected to see a decline, from 147 to 121 million.

In theory, such sharp falls in labour supply will undermine growth. Simply calling for higher labour force participation or reforming labour markets is not enough. A shift in mindset is needed. In mature economies, attitudes toward gender equality and the actual possibilities for combining parenthood with gainful employment are decisive. Countries governed by traditional male-dominant attitudes run the risk of long-term economic stagnation, as weak motheroriented family policies lead to low participation, low birth rates and low growth: a vicious circle will set in.

The UN survey asked respondents if they agreed or disagreed with the statement that “a man’s job is to earn money; a woman’s job is to take care of the home and family.” Hardly a contemporary notion in OECD countries, yet even in socially egalitarian Sweden, nearly a tenth of respondents agreed with the statement. Still, it was among the lowest proportion of all the countries surveyed and, as our graph indicates, there is a wide variation in attitudes toward gender equality across different countries.

Roughly similar results to Sweden’s were recorded for the other Nordic countries, the US and Canada. Ireland, now a booming economy, also finds itself in this “progressive” group. France was not in the survey, but in Germany, Italy, Japan and several other countries, the percentage that agreed with the statement ranged from 30% to 60%. In Poland, nearly 70% of respondents agreed with the statement.

On their own, these results make interesting reading, though we decided to go a step further and compare them with birth rates. Our hypothesis was that, in modern societies, attitudes that keep men at work and women at home make it difficult for both to combine family life with other priorities, particularly gainful employment but also education, and that this holds down the birth rate.

The findings, as the graph shows, appear irrefutable. The countries represented can be sorted into two main categories. One includes the Nordic countries, the US and Canada, for which the data indicate strongly or moderately favourable attitudes toward gender equality. In those countries, the birth rate is comparatively high or rising and, in our view, provides more favourable conditions for long-term demographic and economic development. The other category includes countries such as Germany, Japan, Italy and Spain, for which the data indicate much less favourable attitudes towards gender equality and, if our proposition holds, will continue to face a “fertility trap” of lower birth rates and low growth.

Interestingly, these two groups of countries correspond closely to those groups held up by OECD economists when they decry the gap in GDP growth performance that afflicts their member countries, a gap that has widened in recent years. But their economic explanations are mostly based on productivity, technology or market reform. The need to raise female participation employment is widely recognised, but the problem is seen as regulatory, and the challenge of underlying social attitudes seems to be underestimated, even overlooked. Put simply, women in societies with traditional values towards family and gender equality ironically postpone or abstain from childbearing. This affects long-term growth for these countries.

A more detailed analysis of the data from the survey indicates that positive attitudes towards gender equality are widespread within all active age-groups in countries like Sweden, and among both men and women. In countries with more negative attitudes, however, the tendency is for younger men and women to have as positive attitudes as those in Sweden, while there is comparatively weak support for gender equality among older groups.

While over time societies will evolve, change may be slow, and we should expect bouts of inter-generational conflict. Of course, healthy long-term development requires fertile economic conditions, including a good business climate, a welleducated labour force, and the right institutional framework. But our reading of the UN survey offers further proof that it is also necessary for women, in particular, to be provided with the means to balance family demands with those of gainful employment.

At the OECD and elsewhere, trends in gender equality should be incorporated more firmly into economic models for long-term growth. Such models would probably show two things. First, that the gap in performance between OECD economies has a compelling genderrelated dimension. And second, that without a change in attitudes, the growth prospects of many OECD countries will remain severely compromised.

References

Jaumotte, Florence (2005), “Women and work: Resolving the riddle”, in OECD Observer No 248, March 2005, available at www.oecdobserver.org.

United Nations (2002), World Population Prospects.

International Social Survey Programme (1994), Family and changing gender roles II (see link below).

©OECD Observer No 250, July 2005




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