The global economy faces a confluence of structural challenges, including aging populations, slowing productivity growth, and the headwinds of deglobalization. One underutilized resource that could help to lift economic activity in the face of these challenges is women, who represent just 39% of the global labor force currently.1
Nearly half (48%) of women between the ages of 15-64 are currently out of the labor force globally, versus only 20% of men.2 Further investing in women to bring them into the labor force – and removing barriers to help them obtain well-paying jobs, access credit, and generate savings – has the potential to yield long-term returns through higher economic growth in both developed and, particularly, emerging markets.
Doing so could increase the economic pie, while helping to offset the negative growth impact of aging populations. Across the OECD countries,3 raising the female labor force participation rate by 10 percentage points (which would bring it to the same level seen in Germany today) could translate into a ~5% rise in economic output. In emerging markets, the impact could be as much as 3x as large.
As a long-term asset manager and a fiduciary to our clients overseeing a broad range of asset classes – including developed and emerging market fixed income and equities – BlackRock is committed to uncovering additional sources of growth to help improve the creditworthiness and the earnings potential of investments.
A new report from BlackRock’s Long-Term Capitalism research initiative dives into this opportunity and more to unearth new insights and demonstrate the impact that key investments in education and social support can have on economic output.
What investments will make an impact?
Larger investments in education and childcare are needed to bring women into the labor force.
This is particularly true in emerging markets, where women’s educational attainment remains lower than men’s – in some cases significantly lower. In contrast, developed economies that have invested more in women’s education have already seen a higher share of female participation in the labor force.
Investment is also needed globally to ensure that women’s education is aligned with market demand as a way to spur growth and foster diverse workforces. Research suggests that gender-diverse environments tend to outperform. Focused investments around certain types of education and degrees obtained could create even further impact beyond helping to increase the participation rate.
Nations that already make solid investments in education could benefit further from higher public spending on childcare and more generous family leave, including paternal leave - two investments which have coincided with higher female labor force participation rates.
Gender stereotypes and persistent social norms mean that women are disproportionately expected to assume primary responsibility for childcare and domestic tasks.4 A 2015 study by McKinsey estimated that unpaid work undertaken by women amounted to as much as $10 trillion of output per year, or 13% of global GDP at the time.5
Relatedly, the report finds that higher public spending on early childhood education and care and more generous paternal leave are associated with higher female labor force participation rates, as seen in Europe and Japan.
The bottom line
There’s already positive momentum. The share of women aged 15-64 in the labor force has risen around 15 percentage points across OECD countries since the turn of the century, while the rate for their male peers has remained mostly unchanged.6
But untapped potential remains. Even with recent gains, the average female participation rate of nearly 65% across OECD economies is still well below the 80% level among men.7 This underrepresentation of women means that the global economy is operating below its efficiency frontier.
An increase in labor force participation can boost output through more efficient use of available resources. Our estimates point to a ~5% increase in economic output if the female participation rate across OECD countries were to increase by 10 percentage points (bringing the average into line with levels seen in Germany today). Making deliberate investments in women’s education and in social support can help us achieve that goal and accelerate global growth.
