Cutting the gender employment gap in half could boost global GDP by 6%

Fifteen years after producing a key report on women in the global workforce, Goldman Sachs Research finds there’s been progress since then in women’s education and participation in the job market. But even so, gender gaps in pay and employment are still persistent, and these inequities threaten to hold back many economies that are beset by a shrinking working-age population.

Even just halving the current pay and employment gap between men and women could raise the level of GDP across developed and emerging markets by between 5% and 6%, Senior Portfolio Strategist Sharon Bell and Emerging Market Strategist Sara Grut write in the team’s report. Closing those gaps completely could generate a 10% GDP boost for developed-market economies and a 13% lift for emerging markets, they find.

“Looking at these issues afresh, we find that shrinking working age populations mean that it is now more important than ever to utilize the full resources women have to offer (and to reward them fully),” Bell and Grut write.

Women’s gains over the last 15 years include a slow but steady increase in their labor force participation, adding up to about 6 percentage points across both developed and emerging market economies. Even after that progress, though, their respective participation rates remain relatively low – at about 73% in developed markets (85% of the male labor force participation rate) and about 58% in emerging markets (71% of the male labor force participation rate).

Focusing on women in employment as opposed to the labor force (ie, excluding those looking for jobs), most of the improvement for women in employment came in the late 1990s and early 2000s. The gap between male and female employment has declined steadily over the period, and it’s now around 22 percentage points in emerging markets and about 10 percentage points in developed economies — a decline of almost 10 percentage points across both regions since the 1990s, despite the negative impact from Covid.

Employment for women varies greatly from country to country. Some of the biggest improvements have come from Singapore and Spain, both of which already boast relatively high participation rates. Meanwhile, some of the countries with the lowest female labor force participation rates, such as India and Egypt, have seen their situations worsen.

As more women join the labor force across most parts of the world, they’re also closing differences in compensation, Bell and Grut write. The gender pay gap has edged lower across many economies, with the smallest difference in countries such as Colombia, Spain, and Norway, and the biggest gaps in Korea and Japan.

Much remains to be done. The median female worker in developed markets still earns 23% less than her male counterpart, and that gap stands at 18% for the median woman in emerging economies. “While men tend to work in higher-paying industries, we find that the gender pay gap remains high even when we control for differences in the composition of work for men and women,” the authors write.

They found similar story when it comes to women’s representation in leadership roles across most metrics and regions. Women now make up about a third of company managers in many regions, for example, and almost every country has seen women’s representation on company boards climb. At the same time, men account for 92% of CEOs in listed, large-capitalization companies in developed markets, and 94% in emerging economies.

“Women are moving into positions of leadership in politics and business,” Bell and Grut write. “But, as with much of the recent progress, it is slow, and representation at the very top remains elusive.”

Adding more women to the global workforce is going to be critical if demographic trends continue to hold, according to Goldman Sachs Research. Driven by aging workforces and falling fertility rates, the working age population is shrinking in most countries, and even in places where it’s not falling in absolute terms the growth rate is declining.

The rise of investing that takes environmental, social and governance (ESG) factors into account could also help close the gender gap, the report notes. One-third of emerging market fund flows have gone to ESG-focused funds over the last six years. In addition, Goldman Sachs Research finds that countries with higher ratings on gender equality also tend to have higher ratings on other ESG metrics. “ESG funds focus on the key standards of women’s representation in the workforce and in leadership,” the authors write.

But women are also more likely to be affected by the loss of jobs due to artificial intelligence, which is already automating many tasks in service-based industries. Since women are more likely than men to work in services across both developed and emerging market economies, they are “likely to be disproportionately impacted by AI automation,” Bell and Grut write.

They find that policymakers, corporations, and investors can help close gender gaps in employment by stepping up their support of some of the policies that have contributed to the recent gains:

• Education: Women with a higher level of education are both more likely to work and more likely to earn more when they are employed.
• Family-friendly policies: Maternity and paternity leave, as well as subsidized, high-quality childcare, are associated with higher female labor force participation.
• Pay gap disclosures: Research suggests that the pay gap has closed more in places where employers are required to disclose how women and men are paid for the same work, though individual choices about the type of work done and total hours worked also factor in.
• Broadening leadership pipelines: Employers need to do more to provide executive leadership opportunities to women outside of highly coveted board positions, especially in the technology and financial sectors where female representation lags and the implications for AI on work patterns for both women and men will likely be pronounced.

“If policies continue to increase female employment, as well as reduce women's pay gaps, it is likely that they will also add to countries' economic potential over time,” Bell and Grut write.