Investing in gender equality is a win-win, explains Stephanie Kelly, deputy head of Aberdeen Standard Investments Research Institute.
True equality globally between men and women would not just be ‘a nice thing to have’, the research is now clear that it would be hugely beneficial for economic growth, human health and wellbeing, and even potentially help with the climate crisis[1].
Just like robust environmental, social and governance (ESG) credentials, improved gender equality turns out to be not just a first-world luxury add-on, but a progression that could be much better for businesses, individual countries and the world economy than previously estimated.
Aberdeen Standard Investments Research Institute (ASIRI) has been carrying out gender equality research for the past 18 months and we continue to be amazed at what a ‘no brainer’ it would be for companies and countries to fully facilitate levelling up women’s pay, and their access to both the workforce and leadership roles.
Currently, the world’s women are under-represented in the workplace. When women are in work, they are paid less for it and they are much less likely to achieve leadership roles, to hold public office or to run their own companies. The lost wealth that could be generated if all these areas were improved has been estimated at $160 trillion, according to the World Bank – it’s about $40–$50 trillion each for North America and Europe – twice the value of current global GDP[2].
The evidence is clear that women don’t progress, not because they don’t want to take part in the workforce, but because three forces: macroeconomics, legislative policies and cultural empowerment often stand in their way. ASIRI has created a Gender Equality Index that shows the difference in these forces on all 29 developed countries. It’s clear that where the deck is stacked in favour of women taking part and being treated equally in the workforce, they take the opportunities and boost national wealth and productivity. In countries where barriers are in place, this has an obvious effect on women’s progress and equality.
To create our index, we measured: macroeconomic factors (to show the current economic situation for women); the existing policies in place to support women; and something we’ve called ‘an empowerment score’ measuring business and political opportunity and involvement.
For the benefit of investors, we wanted to give a reliable guide to where gender equality was higher and lower, so they could make informed investments. This index can be used to identify countries with strong female participation – a key factor for long term productivity and growth – and to track when policies change and there’s a chance for equality to improve and the economic boost to follow.
The countries that scored highly on our index were, perhaps unsurprisingly, the Nordics. Known for their strong equality policies – shared paternal leave and equal pay – we also found that the macroeconomics matched and on the empowerment front, women are very well represented in politics, state jobs and business. Following closely behind the Nordics were Germany and Estonia.
It is disappointing to see that both the UK and the USA, countries that consider themselves at the economic, political and cultural forefront, were well below their developed contemporaries. The UK placed 23 overall in the index, while the USA lagged at 27. With gender equality playing such an important role in boosting a country’s economy, where are the equality blocks in these two countries?
For the UK, the problem is primarily one of ‘empowerment’: the lack of women in leadership roles, politics, state jobs and state business opportunities has to be addressed. In the US, there are more obstacles in terms of empowerment and progressive policy. The US has one of the world’s best education systems, and just as many women as men benefit from it. But the female ‘brain drain’ happens as women drop out of the workplace because there isn’t enough support to keep them in once they have families. Examples of policy changes which could reverse this for American women include: legislation to enshrine maternity and paternity leave, to reinforce equal pay, and outlaw sex discrimination. Subsidising childcare and lowering the tax burden on parents and single parents would also help.
Compiling the index, we found that Covid has had a measurable effect on setting gender equality back. Now that our index has given us a baseline, we will watch with interest to see what next year brings. As the hard data shows, gender equality can only boost the world’s health, wealth and wellbeing.
[1] Women more concerned about climate change than men
[2] $160 trillion in wealth lost to earnings gaps between women and men – according to World Bank about $40-$50 trillion in North America and Europe. This is twice the value of global GDP. Human capital wealth could increase by 22% globally with gender equality in earnings.
