Two decades of research compiled by the Council on Foreign Relations demonstrates that including more women in labor markets will strengthen the global economy.
Women’s economic inclusion has massive sustainable development potential, but serious proposals to harness this potential remain absent from mainstream economic policy, a new report from the Council on Foreign Relations (CFR) argues.
The authors point to evidence such as a 2016 McKinsey Global Institute study, which found that advancing women’s equality could add up to $12 trillion to global GDP by 2025, and that if women were to play fully equal roles in labor markets, this could add $28 trillion or 26% to global GDP by 2025.
Despite this, CFR says, governments worldwide are failing to recognize the economic imperative of women’s participation in the economy. Meanwhile, structural and cultural barriers continue to prevent women from working in formal and high-wage jobs.
Women & Girls spoke with one of the report’s authors, Rachel Vogelstein, senior fellow and director of the Women and Foreign Policy at CFR, about what they found, and how she thinks the U.S. can lead on women’s financial inclusion.
Women & Girls: In the report, you point to India as the country that stands to benefit the most from women’s inclusion in the economy. Why is this the case? And what types of inclusion efforts are working there?
Rachel Vogelstein: What we see in India is that the majority of women work in the informal sector in jobs that really lack social protection and have low wages. What fuels this is a phenomenon known as “occupational segregation,” in which women are disproportionately concentrated into certain sectors and jobs.
So India stands to benefit more than any other country from the economic empowerment of women because the underrepresentation of women in the formal sector leads to what McKinsey Institute estimates to be a lost opportunity of about $2.9 trillion annually in India’s GDP. Another way to look at it is that if the gender-based disparities in the Indian economy were closed, you could see up to a 27% boost to GDP.
I think it is important to note that India has really led the way in the creation of self-help groups, such as the Self Employed Women’s Association. These groups help women move from poverty to be able to create what is essentially a microeconomy. More needs to be done to help move these women from the microeconomy into small and medium-sized businesses, which are so critical to economic growth.
There’s also an important program called Aadhaar, which is a national identification initiative. It relies on fingerprints and iris scans to create a national identity database, and that allows women to open bank accounts using biometric information, which is really important to reach the women who are currently unreached by banking services. And it’s important for women in particular, because it makes it impossible for men to have access to the money in women’s bank accounts.
Women & Girls: What is the relationship between gender-based violence and economic inclusion?
Vogelstein: I think this gets to what we think of as the enabling environment to allow women to participate and thrive in the economy. Research shows that women’s economic potential is undermined because of gender-based violence.
The World Bank found, for example, that in Vietnam, the cost of intimate partner violence amounted to about 3% of GDP due to the income that is missed because of women’s inability to work. In Peru, intimate partner violence reached about 4% of GDP.
So the evidence is really starting to come in that women who experience violence earn less, their healthcare costs are [higher], and their productivity goes down. [Yet] still about a quarter of countries around the world lack a law to address or punish, for example, domestic violence, particularly in the Middle East and North Africa region, and in some countries in Sub-Saharan Africa.
Women & Girls: What are your recommendations for building more inclusive economies?
Vogelstein: Even in an era where we see that budgets – certainly in Washington – are likely to tighten, there is every reason to use existing development funding to promote women’s economic inclusion. Not just as a human rights issue, but as a tool to accelerate economic growth and importantly to reduce poverty.
We recommend that the U.S. government should incentivize legal and policy reform [such as] gender-based job restrictions, whether that’s spousal consent requirements for work, or a lack of sufficient paid leave policies, the absence of which have a disproportionate effect on women’s participation in the workforce.
We also recommend that the U.S. address legal barriers to women’s economic inclusion through diplomacy, and increase women’s access to capital and financial services, and we recommend creating a public-private fund to help spur innovative approaches to promoting women’s economic participation.
I am mindful that the U.S. government is currently exploring an entrepreneurship fund together with the World Bank and a few other governments. I think that the scale of this fund needs to be significant if it’s going to have an impact.
Women & Girls: Are there any countries that you would point to that are doing development aid well, in terms of paying attention to the issues you’re raising in this report?
Vogelstein: I think its been welcomed to see the Canadian government, Prime Minister Trudeau’s government, unveil the first “feminist foreign aid policy” as it’s been termed, and that policy changes along those lines are huge advancements.
Certainly the Norwegians and others in Scandinavia are giving a tremendous amount of their aid to support women as well including economically. That said, the fact remains that, notwithstanding the important policy changes that are on the books and some small initiatives that exist to promote women’s economic participation, a paltry amount of our development funding internationally is focused on women’s economic participation.
And because economic development and poverty reduction is at the heart of the sustainable development agenda, it is disappointing that we still fail to invest as we should in women’s economic potential, and that we are leaving their economic potential on the table.