IMF (The International Monetary Fund) | Gender issues
The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
Raising women’s participation in the workforce can give a bigger boost to growth than previously thought (photo: Ahrens/Steinbach Projekte/fotogloria/Newscom)
Despite some progress, the gaps in labor force participation between men and women remain large. To take just one example, no advanced or middle-income economy has reduced the gender gap below 7 percentage points.
This uneven playing field between women and men comes at a significant economic cost as it hampers productivity and weighs on growth. A recent IMF staff study finds that barriers to women entering the labor force—think of tax distortions, discrimination, and social and cultural factors—are costlier than suggested by previous research and the benefits from closing gender gaps are even larger than thought before. Policymakers should therefore focus on removing such barriers urgently.
Gender diversity matters
Our analysis springs from the observation—supported by considerable microeconomic evidence—that women and men bring different skills and perspectives to the workplace, including different attitudes to risk and collaboration. Studies have also shown that the financial performance of firms improves with more gender-equal corporate boards.
Surprisingly, previous studies have not looked at the macroeconomic implications of this micro evidence.
In the standard textbook analysis, the labor force is the sum of the headcounts of male and female workers. Because replacing a man by a woman in this sum does not affect the labor force, there are no gains from gender diversity: men and women are assumed to be perfectly substitutable.
Benefits from closing gender gaps are even larger than previously thought.
But our evidence—from macroeconomic, sectoral, and firm-level data—shows that women and men complement each other in the production process, creating an additional benefit from increasing women’s employment on growth. In other words, adding more women to the labor force should bring larger economic gains than an equal increase in male workers (reflecting the fact that, in economists’ jargon, the elasticity of substitution between women and men in production is low).
Key benefits from narrowing gender gaps
The implications of this finding are significant.
A bigger boost to growth: Because women bring new skills to the workplace, the productivity and growth gains from adding women to the labor force (by reducing barriers to women’s participation in the labor force) are larger than previously thought. Indeed, our calibration exercise suggests that, for the bottom half of the countries in our sample in terms of gender inequality, closing the gender gap could increase GDP by an average of 35 percent. Four fifths of these gains come from adding workers to the labor force, but fully one fifth of the gains are due to the gender diversity effect on productivity.
Higher productivity: When interpreting past data in situations where the gender gap has been narrowing over time, the contribution to growth from improved efficiency (or total factor productivity gains) is overstated. A portion of the gain attributed to productivity is actually due to the increased participation of women over time.
Higher male incomes: Our results suggest that men’s wages will also increase as a result of greater inclusion of women in the labor force since productivity will increase. This is important because these higher wages should strengthen support for removing barriers that hold women back from decent work.
A bigger payoff to reducing gender barriers along development paths: The rise of the services sector driven by economic development brings more women into the labor force. But our work shows that barriers to women’s employment slow this process. These barriers vary across regions and countries, and are very large in some parts of the world—equivalent to tax rates on women’s employment of up to 50 percent. And the corresponding welfare losses (which take into account consumption and leisure time) are large, even when allowing for the fact that “home production” is reduced when women enter the labor force. For example, we find that welfare costs exceed 20 percent in the Middle East and North Africa region and in South Asia.
Reaping the benefits
While there is no silver bullet, there are several policies that can help narrow gender gaps. These include enacting laws to ensure that women have equal rights to own property and access credit. Reforming taxes (for example, by replacing family taxation with individual taxation and providing tax credits) can incentivize labor force participation among low-income earners. Tackling gender inequality in education and health care, including publicly financed maternity and paternity leave, expanded childcare, and elder care availability can increase women’s participation in the labor market. Improving access to transportation, electricity, and water infrastructure can also help lift women’s participation in the workforce.
The big picture
These are not all new concerns, but there is a renewed sense of urgency. For years, the IMF has been at the forefront of policy analysis highlighting the economic costs of inequality andpossible remedies. We know that the unlevel playing field between women and men has substantial economic costs and can impede the economic health of nations. What we are now learning is that these costs are even larger than we thought. Now that we see the full picture, the case for greater gender equity has become even more compelling.
Women are currently underrepresented in fields experiencing job growth, such as engineering and information and communication technology (photo: Vgajic/iStock by Getty Images)
The way we work is changing at an unprecedented rate. Digitalization, artificial intelligence, and machine learning are eliminating many jobs involving low and middle-skill routine tasks through automation.
Our new research finds the trend toward greater automation will be especially challenging for women.
More than ever, women will need to break the glass ceiling.
On average, women face an 11 percent risk of losing their jobs due to automation, compared to 9 percent of their male counterparts. So while many men are losing their jobs to automation, we estimate that 26 million women’s jobs in 30 countries are at high risk of being displaced by technology within the next 20 years. We find that women’s jobs have a 70 percent or higher probability of automation. This translates globally to 180 million women’s jobs.
We must understand the impact of these trends on women’s lives if we are to gain gender equity in the work place.
What policies can countries implement now to ensure that women contribute to the economy, while moving toward greater automation?
Women at higher risk
Hard-won gains from policies to increase the number of women in the paid workforce and to increase women’s pay to equal men’s may be quickly eroded if women work predominantly in sectors and occupations that are at high risk of being automated.
Women who are 40 and older, and those in clerical, service, and sales positions are disproportionately at risk.
Nearly 50 percent of women with a high school education, or less, are at high risk of their jobs being automated, compared to 40 percent of men. The risk for women with a bachelor’s degree or higher is 1 percent.
The chart below shows how the automation of jobs effects people in different countries. Men and women in the United Kingdom and the United States face about the same amount of risk for job automation. In Japan and Israel, women’s jobs are more vulnerable to automation than men’s. Women’s jobs in Finland are less vulnerable to automation than men’s.
Opportunities and challenges
Women are currently underrepresented in fields experiencing job growth, such as engineering and information and communications technology. In tech, women are 15 percent less likely than men to be managers and professionals, and 19 percent are more likely to be clerks and service workers performing more routine tasks, which leaves women at a high risk of displacement by technology.
More than ever, women will need to break the glass ceiling. Our analysis shows that differences in routineness of job tasks exacerbate gender inequality in returns to labor. Even after taking into account such factors as differences in skill, experience and choice of occupation, nearly 5 percent of the wage gap between women and men is because women perform more routine job tasks. In the US this means women forfeit $26,000 in income over the course of their working life.
There are some bright spots. In advanced and emerging economies, which are experiencing rapid aging, jobs are likely to grow in traditionally female-dominated sectors such as health, and social services―jobs requiring cognitive and interpersonal skills and thus less prone to automation. Coping with aging populations will require both more human workers and greater use of artificial intelligence, robotics, and other advanced technologies to complement and boost productivity of workers in healthcare services.
Policies that work
Governments need to enact policies that foster gender equality and empowerment in the changing landscape of work:
Provide women with the right skills. Early investment in women in STEM fields, like the program Girls Who Code in the US, along with peer mentoring, can help break down gender stereotypes and increase women in scientific fields. Tax deductions for training those already in the workforce, like in the Netherlands, and portable individual learning accounts, like in France, could help remove barriers to lifelong learning.
Close gender gaps in leadership positions. Providing affordable childcare and replacing family taxation with individual taxation, like in Canada and Italy, can play an important role in boosting women’s career progression. Countries can set relevant recruitment and retention targets for organizations, as well as promotion quotas, like in Norway, and establish mentorship and training programs to promote women into managerial positions.
Bridge the digital gender divide. Governments have a role to play through public investment in capital infrastructure and ensuring equal access to finance and connectivity, like in Finland.
Ease transitions for workers. Countries can support workers as they change jobs because of automation with training and benefits that are linked to individuals rather than jobs, like the individual training accounts in France and Singapore. Social protection systems will need to adapt to the new forms of work. To address deteriorating income security associated with rapid technological change, some countries may consider expansion of non-contributory pensions and adoption of basic income guarantees may be warranted.
Automation has made it even more urgent to step up efforts to level the playing field between men and women, so that all have equal opportunities to contribute to, and benefit from, the new more technology-enabled world.
Vera Songwe: Closing the Tech Gender Gap - SoundCloud (723 secs long, 95 plays)Play in SoundCloud
Children in early childhood education in Indonesia: more money put into education helps countries achieve their Sustainable Development Goals (Photo: Ajun-Ally/Pacific Press/Newscom)
World leaders are gathering at the United Nations to discuss how to deliver on development for all that is economically, socially, and environmentally sustainable—“The 2030 Agenda for Sustainable Development,” and its 17 Sustainable Development Goals (SDGs).
The long road towards development
The world has achieved a tremendous amount in the past five decades on the development front. Since 1990 alone, over a billion people have lifted themselves out of extreme poverty. Never before in human history have we witnessed progress on this scale. It reflects a combination of important economic reforms that led to robust economic growth in most of the developing world and the concerted efforts of the international community to support countries in achieving the Millennium Development Goals, agreed in 2000.
Let’s look at two Indonesian women: Sri, the grandmother, and Tuti, her granddaughter. Sri’s annual income was US$1,500. If she had not died during childbirth, then she surely would have lost one of her seven children before the age of one. Tuti, on the other hand, has an annual income of US$11,200 and is hardly at risk of either dying during childbirth or of losing a child.
Indonesia continues to progress along its development path. The Indonesian government is forging ahead with plans to fund development needs in education, health, and infrastructure, to be financed by increasing tax revenues. Boosting revenues by an additional five percentage points of GDP over five years would ensure that Indonesia is on track to meet the SDGs by 2030.
Yet other countries lag behind. In too many parts of the world, poverty remains a fundamental barrier to economic advancement. Take Benin, for example. A girl born in Benin today has the same life expectancy as an Indonesian woman born 40 years ago. Benin has about the same income per capita as Indonesia did at that time. Even if Benin were to replicate Indonesia’s fast progress, it would be 2050 before Benin’s girls would reach the development standards available to Indonesian girls in 2030.
Low-income countries need to increase spending in education, health, water and sanitation, roads, and electricity.
The big challenge
This is not good enough. The SDGs are about making sure that all children, wherever they are born, are given a fair chance by 2030.
The IMF has done some analytical work to see what it would take for low-income developing countries such as Benin to meet the SDGs. We looked at five areas that are critical for sustainable and inclusive growth: education, health, water and sanitation, roads, and electricity.
How much more spending in these areas is needed to put countries on track to meet the SDGs? We estimate that low-income developing countries need additional annual outlays of 14 percentage points of GDP on average. Across 49 low-income developing countries, additional spending needs amount to about US$520 billion a year—an estimate that is in the same ballpark as that of other institutions. Clearly, significant new spending is needed.
Addressing SDG spending needs
So how can we tackle this immense challenge—one that is essential to the well-being of whole generations?
We all need to make a concerted effort, most importantly individual countries, but also international organizations, official donors and philanthropists, the private sector, and civil society.
As a necessary first step, low-income developing countries must own the responsibility for achieving the SDGs. Country efforts should focus on strengthening macroeconomic management, enhancing tax capacity, tackling spending inefficiencies, addressing the corruption that undermines inclusive growth, and fostering business environments where the private sector can thrive. Action in these areas will support the growth that is fundamental to SDG progress—and the IMF will work closely with its member countries to actively support this reform agenda.
Secondly, countries have substantial scope to raise tax revenues. An ambitious but reasonable target for many countries is to increase their tax ratio by 5 percentage points of GDP; this will require strong administrative and policy reforms, where the IMF and other development partners can play a key supporting role.
Boosting tax revenues by this amount may be sufficient to put achievement of the SDGs in reach for emerging market economies such as Indonesia, but it will not be sufficient to meet the financing needs of most low-income developing countries, including Benin.
For low income countries, in addition to using existing resources better, financial support will be needed from bilateral donors, international financial institutions, and philanthropists—and from private investors. These investors can make an important contribution in sectors such as infrastructure and clean energy if the required reforms are put in place to improve the business climate. Encouraging private investment that supports national development is precisely the goal of initiatives such as the Compact with Africa.
Extra financing can also be obtained from international financial markets and lenders. In general, borrowing on commercial terms is a double-edged sword if funding is not used for high-return projects. As the IMF has emphasized in recent years, debt burdens are rising: forty percent of low-income developing countries are now assessed by the IMF and World Bank to be at high risk of debt distress or in debt distress—debt distress that would significantly disrupt the economic activity and employment growth on which progress towards the SDGs depends.
Foreign aid, preferably in the form of grants, remains crucial in supporting the development efforts of poorer countries. Advanced economies can do more, including by moving towards 0.7 percent of gross national income in aid—and can also better target their aid budgets to support countries most in need of such assistance. Budget conditions are tight in many advanced economies, but the economic returns on well-targeted aid—in terms of poverty reduction, job creation, and improving security and stability—are very high.
Yet the challenges go beyond ramping up development outlays.
The example of Indonesia shows that development and economic growth reinforce each other. An important aspect of the broader challenge is the environment in which countries seek to generate and sustain stable growth. This requires a variety of global public goods including geo-political stability, open trade, and climate initiatives, as well as good governance, which depends on tackling both the supply and demand elements of corruption. These important foundations for development underscore the need for joint action by all stakeholders for the SDGs to be realized.
Kofi Annan, whose recent death we still mourn, once said: “We have the means and the capacity to deal with our problems, if only we can find the political will.” This is true for the entire SDG agenda. Let us summon that political will to give all of our children a chance.
A group of women attend an event in Sao Paolo to promote women’s participation in the financial sector: women account for 51% of borrowers in Brazil (Sebastio Mareira/Newscom)
Women are underrepresented at all levels of the global financial system, from depositors and borrowers to bank board members and regulators.
Our new study finds that greater inclusion of women as users, providers, and regulators of financial services would have benefits beyond addressing gender inequality. Narrowing the gender gap would foster greater stability in the banking system and enhance economic growth. It could also contribute to more effective monetary and fiscal policy.
Women on average accounted for just 40 percent of bank depositors and borrowers in 2016, according to IMF survey results published this year—the first time such data became available. Underlying these aggregate figures are large variations across regions and countries. For example, women accounted for 51 percent of borrowers in Brazil, compared with only 8 percent in Pakistan.
Growing evidence suggests that increasing women’s access to and use of financial services can have both economic and societal benefits. For example, in Kenya, women merchants who opened a basic bank account invested more in their businesses. Female-headed households in Nepal spent more on education after opening a savings account.
More inclusive financial systems can magnify the effectiveness of fiscal and monetary policies.
Such benefits illustrate why economic growth increases with greater access to financial services. The same benefits result from increasing female users of these services. More inclusive financial systems in turn can magnify the effectiveness of fiscal and monetary policies by broadening financial markets and the tax base.
When women lead in finance
What about the financial system itself? Does it matter whether women are represented among bankers and their supervisors?
In a previous paper, we showed that large gaps persist between the representation of men and women in leadership positions in banks and banking supervision agencies worldwide.
We found that women accounted for less than 2 percent of financial institutions’ chief executive officers and less than 20 percent of executive board members. The proportion of women on the boards of banking-supervision agencies was also low—just 17 percent on average in 2015.
As with users of financial services, we found considerable regional variation in the presence of women in banking leadership roles. Sub-Saharan African countries had the highest shares of female banking executives, while Latin America and the Caribbean had the lowest. Advanced economies were in the middle.
We found that the gender gap in leadership does make a difference when it comes to bank stability. Banks with higher shares of women board members had higher capital buffers, a lower proportion of nonperforming loans, and greater resistance to stress.
We found the same relationship between bank stability and the presence of women on banking regulatory boards.
What can explain these findings? There are four possible reasons why a higher share of women on bank and supervisory boards may contribute to financial stability:
Women may be better risk managers than men;
Discriminatory hiring practices may mean that the few women who do make it to the top are better qualified or more experienced than their male counterparts.
More women on boards contributes to diversity of thought, which leads to better decisions; and
Institutions that tend to attract and select women in top positions may be better-managed in the first place.
Based on evidence in our paper and related literature, we find that the observed higher stability is most likely due to the beneficial effects of greater diversity of views on boards, as well as discriminatory hiring practices that lead to hiring better qualified or more experienced women than men.
Our findings strengthen the case for financial inclusion of women to enhance economic growth and foster financial stability.
We need more research and better data to explain how to achieve these benefits and to identify the conditions that facilitate the entry of women into leadership roles in banks and supervisory agencies.
We acknowledge important contributions from previous co-authors Papa N’Diaye, Adolfo Barajas, Srobona Mitra, Annette Kyobe, Yen Nian Mooi, and Seyed Reza Yousefi, as well as from the Financial Access Survey team in the IMF’s Statistics Department.
This blog post is the first in a series stemming from the IMF’s research on gender. Posts on technology and productivity will follow.
The G7 countries, which are committed to the need for closing the gender gap, have a wage gap average of about 16 percentage points (photo: iStock by GettyImages).
In the battle for the parity of the sexes, some countries have made progress in reducing inequality—such as in access to health care, education, and financial services—but worldwide, men still have more economic opportunities than women.
Countries can fix the problem with the right policies that reduce the gender wage gap and level the playing field.
Our Chart of the Week, from the latest paper after the G7 Ministers and Central Bank Governors meeting, highlights these wage gaps. It measures the differences between men and women’s pay, and considers hours worked, type of employment, education levels, age and experience. Our chart shows that developing and advanced countries alike are in the same predicament.
The chart shows that the wage gap is most pronounced in South Korea, which has a 37 percentage point difference in wages between men and women. The United States and Canada hover at around an 18 percentage point disparity, while Luxembourg comes in at the lower end of the scale, with a 3 percent point wage gap. The G7, which has emphasized and is committed to the need for closing the gender gap, has a wage gap average of about a 16 percentage points.
Gender inequality is directly linked to income inequality, which in turn can weaken the sustainability of growth in a country. Women getting paid less than men directly contribute to income inequality, and higher gaps in labor force participation rates between men and women result in inequality of earnings, unequal pensions and savings. Closing the gender wage gap can lead to greater equality in the overall income distribution.
The right policies can reduce the gender wage gap.
Overall, to reduce gender inequality and wage gaps, countries should focus on policies that improve education, health, infrastructure, increasing financial inclusion, and promoting equal rights.
In advanced economies and some developing countries, some of the policies that may help reduce wage gaps include:
Offering publicly financed parental leave schemes. Long absences from the workforce to take care of children could lead to lower earnings upon return to work, as well as a reduced skill set.
Removing the tax burden for secondary earners (mostly female). Replace family taxation with individual taxation.
Use tax credits or benefits for low wage earners. These tax credits would reduce the net tax liability and increase the net income gain from accepting a job.