How women in the workforce are reshaping the global economy

The growth in women’s contributions to the labor force in recent decades is difficult to overstate, and it’s transforming economies around the world. But much remains to be done.

Goldman Sachs Research first published a report on women's participation in the labor force, and the economic possibilities opened up by greater participation, in 1999. The report was led by our then-head of Japan Portfolio Strategy, Kathy Matsui, and titled Womenomics: Buy the Female Economy. Twenty-five years on, Goldman Sachs Research’s Sharon Bell, senior strategist on the European Portfolio Strategy team, and analyst Yuriko Tanaka take a fresh look at those issues on a global scale, in a new report called "Womenomics: 25 Years and the Quiet Revolution."

They find that women’s labor-force participation has grown across many developed economies. (Listen to our Exchanges podcast on women in the global workforce.)

Joining the workforce has offered improvements in welfare and opportunity for women, but it has also had an enormous economic impact. Italy’s workforce, for example, would have shrunk if not for greater participation from women. In Japan, women’s growing share of jobs, even as the population shrinks, has kept the labor market stable.

What has driven these changes? In previous work, Goldman Sachs Research has shown that family-friendly benefits and policies improve female participation in the workforce, as do changes in legislation on worker protection. More women are highly educated and skilled than ever before, and society and investors now have a greater focus on corporate diversity.

Of course, there is still plenty of progress to be made. The propensity to work is lower for women than for men, particularly in emerging markets. And women are more likely to do part-time jobs. Some of these differences may also account for the gender pay gaps that persist, given that part-time work tends to be lower paid.

Non-paid work, such as family caregiving, is a major barrier to women’s participation in the workforce, and to equality more generally, including the ability to reach the top echelons in corporations, academia, or politics. Non-paid work takes up a larger share of a woman’s day in every country.

A commonly voiced worry is that as more women work, families find it more challenging to raise children, which reinforces the trend toward lower =birth rates. But the link between women's workforce participation and birth rates isn’t strong. In recent years, if anything, there has been a modest positive relationship between the two. Perhaps because of better availability of childcare or equality legislation, it is increasingly becoming a social norm, especially in developed economies, for women to work and have children.

In fact, as birth rates fall dramatically almost everywhere, and as aging populations become a growing source of concern for governments and investors, women’s labor-force participation is more critical to the global economy than ever.

In the absence of a major productivity boost, if economies aren’t to shrink, they will need higher participation by women, older workers, or both. Continued migration may be part of the solution. But UN forecasts, which project shrinking working-age populations in many countries, already assume migration patterns of recent years will continue.

Meanwhile, as more women join the labor force, the gender pay gap has edged lower more or less everywhere. Part of the reason the pay gap persists is that women and men tend to do different jobs, have varying levels of experience, and work different hours. But even so, the European Commission reports, the “largest part of the gender pay gap remains unexplained in the EU and cannot be linked to worker or workplace characteristics such as education, occupation, working time, or economic activity."

Women have made significant progress with respect to labor force participation, pay gaps, and leadership roles. But the scarcity of women in the most senior ranks of firms, and especially at the executive level, is notable and persistent. The ratio of women diminishes higher up in the power structure of companies.

European companies have had undoubted success in bringing women into their boardrooms: Women make up almost 40% of the average STOXX Europe 600 board. This has been achieved by a combination of quotas (as in Norway, France, Germany) and soft pressure (such as attention from the media).

That said, while a focus on boardrooms in Europe has yielded an improved representation of women at that level, that hasn’t been the case at other levels, such as executive director or CEO. While the share of female CEOs is increasing, the base is low and the numbers remain small.

Different sectors show different rates of progress (or lack thereof) on employing women. In Europe the share of women in construction and in the sciences has risen in recent years (for construction, it’s from a low base) whereas it has fallen for tech. In the US, the share of women employees in technology and financial services (high-paying industries) has fallen.