What's good for women is good for growth

#CriticalThinking

Digital & Data Governance

Picture of Francesca Bettio
Francesca Bettio

Professor of Economics at the University of Siena, Italy

Imagine making the case that it is vital to bring more women into employment if Europe’s economy is to grow. Then imagine that delivering such a message at a public event or even in a private conversation is met by scepticism or even annoyance. Ask yourself “why?” Is the argument weak? Is it problematic? Or does it need revisiting in the light of lessons learnt from the economic crisis?

That annoyance may come from unexpected quarters. Even people who care passionately about gender equality are growing weary of what they see as instrumental arguments. As policy makers increasingly justify the promotion of gender-aware growth strategies by using evidence that what’s good for women is good for growth, there’s a growing risk that women’s aspirations to freedom and economic emancipation are legitimised only insofar as they bring economic advantages. (http://cins.ankara.edu.tr/6_5.html)

There’s a growing risk that women’s aspirations to freedom and economic emancipation are legitimised only insofar as they bring economic advantages

The International Monetary Fund is one of the latest international agencies to endorse the view that increasing female employment is efficient for growth – the so-called efficiency argument. IMF Managing Director Christine Lagarde voiced this argument unambiguously at the 2014 World Assembly for Women in Japan. She insisted it was a lesson that developed as well as emerging countries need to take on board. (www.imf.org/external/np/speeches/2014/091214.htm)

There are many critics of the efficiency argument. However, even they concede, that although what is good for women need not be unfailingly good for the economy, there is a wide consensus among experts on the catalogue of likely gains.

Start with productivity growth. More women in employment means more goods and services being produced in the market, leading to greater specialisation and economies of scale that are bound to raise productivity.

Proceed to demographic gains. In Europe, fertility tends to be higher where female employment is higher, thanks to better childcare infrastructure, more employee-friendly flexibility at work, more egalitarian gender roles in the family, or any combination of these factors.

Add fiscal gains. The advantages of more women in employment can be reaped in full if there is no collateral damage in terms of lower fertility. This means more young people paying pensions, more workers paying taxes, fewer demands on social assistance.

Women’s earnings served as safety nets during the recession thanks to the comparative resilience of female employment

The fiscal gains can be topped up with welfare gains since earnings remain the best insurance against poverty.

Finally, we can dismiss the argument that Europe doesn’t need more women in employment since it can rely on a long queue of migrants. Migrants may be needed, but alongside rather than as alternatives to local female workers. The economic impact of employing migrants in lieu of women is vastly different for households, the economy as a whole and the social fabric.

The Great European Recession has added a social inclusion dimension to the efficiency argument. During the continuous surge of unemployment between 2008 and 2010, the share of couples where the woman was the only earner increased by between 2% and 5% in the worst-hit countries – Estonia, Greece, Latvia, Lithuania, Spain, and Portugal.

That unusual increase illustrates just how important women’s salaries have become as a safety net for the whole family and not only in times of recession. We have all become aware that young families ‘start fragile’ across Europe. Young workers frequently experience spells of of work, unemployment and inactivity (http://ec.europa.eu/justice/gender-equality/files/documents/130902_starting_fragile_report_2013_en.pdf). In this increasingly fluid market, having young, low-education mothers who can stay in employment, or quickly re-enter the market if their partner is out of work, is the best way of providing a safety net for households. It also acts as an effective stabiliser of consumption for the whole economy.

Women’s earnings served as safety nets during the recession thanks to the comparative resilience of female employment (http://ec.europa.eu/justice/gender-equality/files/documents/130410_crisis_report_en.pdf). That very resilience may elicit criticism of the efficiency argument from those who believe that women no longer need protection or encouragement in order to fully integrate into the labour market – at least not in Europe.

The missing female workers of Europe are primarily women with low educational attainment, particularly among mothers

Thanks to brisker growth before the recession and lower losses during the crisis women make up more than 80% of overall, net employment growth since the turn of the century. For some, that raises the question of whether men rather than women should be targeted by equality policies. Alternatively, since women are already catching up, would it not be wiser to let the market get on with the job and forget about policy?

To answer, we have to look below the surface of aggregate EU trends since what they conceal may be as important than what they show.

In pre-recession years, countries with low female employment were catching up. However divergent trends set in during the recession. The majority of low female employment countries entered comparatively slower or even negative employment paths for women. That included southern EU countries such as Croatia, Cyprus, Greece, Italy and Spain, as well as Ireland and Bulgaria, both middle-to-low female employment countries.

Austerity measures fuelled divergence as the fiscal compact axe fell on feminised branches of the ‘social infrastructure complex’ such as education, health and the care economy . As a result, it will take over 50 years for the so-called GIPSI group of countries (Greece, Italy, Portugal, Spain and Ireland) to meet the 75% target for women’s employment, at the average rate of increase recorded between 2002 and 2013. The whole of Europe would ‘only’ take 24 years to reach the target, but this aggregate projection may be flawed because the largest female labour reserves are ‘trapped’ in the diverging countries. he message is clear: any growth strategy pivoting on female employment should be directed at bridging regional divides. Past experience shows that markets cannot be trusted to do that on their own.

Low work levels for less educated women is another important divide that ought to be bridged. The missing female workers of Europe are primarily women with low educational attainment, particularly among mothers. While this holds across Europe, bottom values for poorly educated women inevitably single out countries where the overall figure for female employment is low. In Italy and Hungary, for example, where the share of working-age women in paid work ranges from 32% to 34%, between eight and 10 points lower than the EU average.

In this increasingly fluid market, having young, low-education mothers who can stay in employment, or quickly re-enter the market if their partner is out of work, is the best way of providing a safety net for households

These divides are so entrenched and interconnected that the truism ‘what’s good for women is good for the economy’ may no longer sound cogent. We have to ask which women and which economies? In order to put women at the centre of the European growth strategy we need to form an idea of growth – or development – that addresses these issues head on.

We have learnt that the ‘social infrastructure complex’ withstood the crisis much better than traditional sectors like manufacturing, construction or even banking – although in some countries austerity eroded that advantage. Research shows, in fact, that one dollar invested in social infrastructure actually results in more jobs than the same amount invested in physical infrastructure such as housing and roads, or even in the green economy (link to levy’s policy brief).

Because social infrastructure tends to be less developed in low (female) employment countries – think of how scarce formal elderly care provisions are in much of Eastern or Southern Europe for example – investment there would be good news for regional divides. Moreover, the number of the jobs created in the social infrastructure complex that do not demand high educational qualifications would be good news for the educational divide.

Prioritising social infrastructure is not an entirely new idea at the European Union level. Education and health already feature as important employment drivers in the EU’s 2020 growth strategy. However, it is the high-tech, high-education, R&D dimension that has attracted most policy interest, not the care dimension. Yet both are needed.

The Great Recession has also been an eye opener with regard to future labour markets. The fluid labour market that young men and women face today in most European countries has more ‘female’ than ‘male’ traits. They include intermittency; frequent sideways job changes rather than upward career moves; and weaker access to welfare provisions. Take ‘own-account’ workers in Spain whose numbers have grown amid mounting unemployment. Do they have the same access to the maternity and parental provisions granted to workers on ‘standard’ contracts? As stable and standard work paths are withering, revisiting the current design of welfare provisions must be part of a new vision of social and economic Europe. Of course, the financial issues are complex, but we cannot let them kill growth.

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