Source: AFP.
Source: AFP.
This International Women’s Day, the United Nations is celebrating under the theme “Invest in women: Accelerate progress”. Challenges that we are facing in the world today can only be addressed by solutions that empower women, which make up half of the world’s population. In particular, raising the female labour participation rate and ensuring that women receive adequate representation in leadership positions are two key avenues to closing the gender gap which will have beneficial effects on economic growth.
The current global labour force participation rate for women lags that of men, not because women are not productive, but because they are often informally employed in work that is economically unrecognised. Household and caregiving duties are examples of the work women do that is neither quantified nor captured by standard economic measures. Greater female labour participation is not only central to realising women’s rights, but also to growing economies and alleviating the gaps created by a shrinking working age population.
Within Asia, India is amongst the lowest ranked in terms of female labour force participation rates. Coupled with the fact that it has the largest population in the world, the country is well positioned to grow its economy rapidly in the near future, especially if it is able mobilise more of its female population to join the workforce. This will, however, be contingent on whether the necessary infrastructure to support women are put in place, such as access to affordable, quality childcare and overall safety. On the other end of the spectrum, while Japan has relatively high female labour force participation, the next step would be to improve the quality of that participation, and we see upcoming corporate governance reforms potentially uplifting more women leaders, boding well for improved organisational performance.
Invest in women: Accelerate progress
Women’s development has come a long way, from the 1848 New York Seneca Falls Convention – the first women’s rights convention organized by women – to eight countries electing or swearing in their first woman Head of State or Government in 2021. Yet the journey has been an uneven one, dotted with setbacks such as the Covid-19 pandemic and the overturning of abortion rights (Roe v. Wade) in the US.
It is hence befitting that this International Women’s Day, the United Nations is celebrating under the theme “Invest in women: Accelerate progress”, for challenges that we are facing in the world today can only be addressed by solutions that empower the women that make up half of the world’s population.
When more women work, economies grow
Besides the fact that women’s economic empowerment is central to realising women’s rights and gender equality, when more women work, economies grow. The working age population is also shrinking in most countries, and even for the few countries where it is not shrinking yet, growth rates are declining. Greater female labour participation in the labour force could help by improving the sustainability of public-funded pensions, and alleviate the gaps created by a declining cohort of working age people.
According to the International Monetary Fund (IMF), women’s economic empowerment boosts productivity, increases economic diversification and income equality in addition to other positive development outcomes1. For example, it has been estimated that increasing the female employment rates in OECD countries to match that of Sweden, could boost GDP by over USD 6 trillion2. Conversely, gender gaps could cost the economy ~15% of GDP3.
Which countries, then, have significant potential to grow their GDP by raising their low female labour participation rates? Do low female labour participation rates simply mean that women are just sitting back and relaxing? In the sections below we consider the above questions.
Women at home
Women account for half of the world’s population; yet, according to data provided from LinkedIn4, women accounted for only 41.9% of the workforce across 163 countries in 2023. Many women are informally employed in economically unrecognised work such as unpaid caregiving duties, the value of which is neither quantified nor captured by standard productivity measures like a country’s gross domestic product (GDP).
According to a 2014 study by the OECD Development Centre5, women around the world spend an average of three to six hours on unpaid care activities (i.e. unpaid services provided within a household for its members, such as caring for children and housework, which one could theoretically pay a third person to perform). This is disproportionately higher than the half-hour to two hours spent by men. The disparity could be due to ingrained gender roles, where unpaid care activities are often seen as women’s responsibilities.
This situation was exacerbated during the Covid-19 pandemic. Research commissioned by the Bill and Melinda Gates Foundation found that women disproportionately lost employment and had increased household care responsibilities, especially on the back of disrupted childcare services6.
The OECD estimates that unpaid work could contribute to ~15% of GDP on average across OECD countries, while the International Labor Organization (ILO) estimates that unpaid care and domestic work could be valued up to 10-39% of GDP7.
Women in the workforce
Empowering women to reach their full economic potential not only tangibly supports the key goal of reducing gender inequality, but also has tremendous significance on the advancement, competitiveness, and future-readiness of economies worldwide. In this regard, empirical evidence shows that women’s economic empowerment and the closing of gender gaps in key areas is associated with positive macroeconomic outcomes, including higher economic growth, lower inequality, increased productivity, better financial sector outcomes and greater financial stability.
– International Monetary Fund8
It follows, naturally, that the current global labour force participation rate for women is just above 47%, a whole 25 percentage points (ppt) lower than men at 72.5%9. Labour force participation rates are lower for women than for men across all regions globally and India is a notable laggard.
Exhibit 1: Labour force participation rate, female
Source: World Bank; Data as of 2022
What is required to support women in the workforce? Some considerations are listed below, though they are by no means exhaustive:
India: Awaiting concrete steps to unlock potential
Female labour participation rates in India have historically been amongst the lowest compared to other major regions. This has been attributed to societal attitudes towards the status of women, and the fact that many women in India perform unpaid work that is not captured by economic measures of formal employment, as previously discussed. Moreover, the rise of industrialisation in India since the turn of the century has resulted in an increase in household incomes, which further reduced women’s employment rates since there may be a less pressing need for them to participate in the labour market.
Exhibit 2: India’s female labour force participation (%) has historically been amongst the lowest globally, but we are starting to see an uptick from 26% to 28% after the pandemic
Source: World Bank; Bank of Singapore
Closing the gender gap in employment could expand India’s GDP by close to a third by 205010. We believe that there is significant growth potential if India is able to increase female labour participation rates – though this will be contingent on policy support and reforms, amongst other factors.
Equality for women is good for business
Companies also greatly benefit from increasing employment and leadership opportunities for women, which is shown to increase organizational effectiveness and growth. It is estimated that companies with three or more women in senior management functions score higher in all dimensions of organizational performance11.
Female leaders can set in motion a virtuous cycle by not only implementing workplace policies that promote gender equality (e.g. reducing the pay gap between men and women, and attracting a more diverse workforce), but also by being role models and providing unique mentorship to other women12. Studies have also shown that female leaders help to increase productivity, enhance collaboration, inspire organisational dedication, and improve fairness13.
According to MSCI’s Women on Boards and Beyond 2023 Progress Report14, women held only 25.8% of board seats at large- and mid-cap companies on the MSCI All Country World Index (ACWI), up 1ppt from 2022. The proportion falls to 17.1% in Emerging Markets (EM), and only 14.5% of constituents of the MSCI EM Index have at least 30% of women on boards (MSCI ACWI: 41.2%). Globally, board leadership roles were still dominated by men, with women only occupying 9.1% and 6.5% of chair and chief executive officer (CEO) roles, respectively.
Japan: Shifting from quantity to quality
In Japan, the Abe administration’s “Womenomics” has received mixed reviews. While the Japanese government has pointed out that a significant 3.3m women had joined the workforce between 2012 to 2019, and that the number of women in private sector management positions approached 10% across the same period, other statistics show that in 2017, half of the 28m women in the Japanese labour market were in non-regular jobs with shorter working hours, lower pay, and fewer benefits, compared to just 16.7% of Japan’s 35m male workers. By 2019, these proportions had risen to 56% and 22.8%, respectively15. In 2023, the Tokyo Stock Exchange (TSE) also had a female board ratio of only 13%, less than half the average of global peers16. Therefore, while female labour participation in Japan improved in quantity, this is less clear in terms of quality.
Exhibit 3: Japan’s GDP per capita (JPY m) rose as female labour force participation (%) increased, notwithstanding the initial dip in the early 1970s
Source: World Bank; Bank of Singapore
Nonetheless, the TSE reforms proposed in March 2023 aim to herald the next era of gender parity. The TSE has set a target of getting women to occupy 30% of executive roles by 2030, with companies listed on the TSE Prime Market Index being urged to fulfil the requirement before 2030. This could help endear more Japanese companies to foreign institutional investors like BlackRock and Goldman Sachs Asset Management, which have committed to vote against Japanese firms with few or no female board members17.
Exhibit 4: Japan lags the G-7 in female board representation and has significant potential to grow
Source: OECD; Bloomberg; Bank of Singapore
Note: Data shows female share of seats on boards of the largest publicly listed companies in each country as of 2022.
Implications for investors
As discussed earlier, closing the gender gap in employment could expand India’s GDP by close to a third by 2050, and there is significant growth potential if India is able to increase female labour participation rates. As for Japan, while female labour participation rates are not low, there is still a gap in terms of gender parity and the next step should be a focus on the “quality” of participation. More benefits for companies and businesses can be reaped, for instance, by raising the percentage of women in management positions, and this is promising from the corporate reforms that are being undertaken by the country. Indeed, Japan’s corporate governance reforms have been cited as one of the catalysts for the market rally since last year. We currently have an Overweight rating on Japan equities, and believe that there is further room for these reforms to play out.
Separately, microfinancing initiatives have gained traction in recent years as a potential solution to uplift women and encourage female economic participation. Microfinancing provides capital and training, often to women living in rural, poverty-stricken regions, so they can engage in income producing activities and even set up small businesses, thereby using their business profits to improve household living conditions. Investors looking to gain exposure to microfinancing could consider impact funds, which could cut across both public and private markets.
2 https://www.pwc.com/gx/en/news-room/press-releases/2020/women-in-work-index-2020.html
3 https://doi.org/10.1787/5jm2hz8dgls6-en
4 https://www.weforum.org/publications/global-gender-gap-report-2023/
5 https://www.oecd.org/dev/development-gender/Unpaid_care_work.pdf
7 https://www.oecd-forum.org/posts/redefining-reality-the-truth-behind-the-unpaid-care-economy
9 https://www.ilo.org/infostories/en-GB/Stories/Employment/barriers-women#intro
12 https://www.rockefellerfoundation.org/wp-content/uploads/Women-in-Leadership-Why-It-Matters.pdf
13 https://www.apa.org/topics/women-girls/female-leaders-make-work-better
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