China Research

Even if the position of women in the society and particularly on labor markets has improved during the past decades in quite a number of countries, no one really can be happy about noted developments. So much more can be done – even in Sweden which actually in 2021 was in the lead among EU countries according to the so-called equality index (https://eige.europa.eu/gender-equality-index/2021) – and particularly in emerging markets and other less advanced countries.

Focus on the relationship between equality and economic growth

There are many good arguments in favor of genuine equality between women and men. These arguments may have a social, political, democratic, human or psychological angle. On the occasion of this year’s International Women’s Day, it may be appropriate to focus this time on the mechanisms that lead from female upgrading – particularly on the labor market – to better economic (GDP) growth in the longer run. It is a reaction chain from microeconomics to macroeconomics. What is often neglected: Also men would benefit from such a development.

However, such a win-win situation should be explained more deeply. There are still more than enough skeptics who do not really understand the positive relationship between (more) female equality and GDP growth. Visibly and sustained improving equality for women has to be considered as an economic win-win-position. Another fact that should not be forgotten: The more women are added to the labor force, the more wages are – ceteris paribus – earned in a country.

Unfortunately, this win-win-situation usually is not very well explained by experts and politicians. More should be done – and can be done quite easily. At least if transparency is considered to be important.

In my view, it makes sense to apply a life cycle perspective for achieving positive and visible improvements of female equality. The life cycle goes from birth to retirement in a number of different stages – for example from school, professional education, entry into the labor market to equality at work and job promotions.

However, a visible positive correlation of improved female equality and higher GDP growth in the medium or longer run assumes that such improvement measures are both extensive and sustained. Given this order, there is a stronger scientific relationship than the other way around, i.e. when correlations between good economic growth and improved female equality are measured.

Going more into details, the chain of this microeconomic input to macroeconomic reactions and better GDP growth may practically be implemented as follows:

¤ application of a national strategy to improve female equality – partly simultaneously – on all levels by both law and collective bargaining partners;  if possible provided with numerical objectives and incentives,

¤ annual evaluations, including amendments if necessary,

¤ a first scientific report on achievements and the possible impact on purchasing power, private consumption and GDP after five years,

¤ thereafter further reports on these issues every third year on some more occasions, following up what else has been achieved in this new period for female equality and possible new positive contributions to economic growth.

Theoretically (scientifically), the reaction functions could be described the following way after sustained and sizeable injections of improved equality:

• improved disposable income for women by fairer wages and better / increasing entry into the labor market,
• additional financial contributions to private consumption,
• additional stimuli from private consumption to GDP (favoring also men),  
• (possibly) new additional jobs.

 

Of course, all these assumptions and developments need quite some years and a lot of determination to be come true. However, this is exactly the reason why there is no time to lose to fight for more female equality.

All the conclusions mentioned above can also be applied to emerging market countries and other less advanced countries. Therefore female empowerment should be much more launched in a global perspective.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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