The Power of Gender Parity for Business and The Economy

Women matter to companies—they are their employees, their suppliers, their customers, and members of the broader community. A more gender-equal economic and business environment—and society—can benefit companies in a myriad of ways. Businesses mustn’t leave policy makers with the brunt of the responsibility on gender issues; they have a very significant role to play and it is in their interest to do so.

Two new McKinsey reports underscore the economic and business case for gender parity and explore both the hurdles that need to be overcome at work and in society and offer a range of solutions to closing the gender gap.

My colleagues Jonathan Woetzel, Anu Madgavkar and I launched McKinsey Global Institute’s new Power of Parity report at an event with the United Nations Foundation last week ahead of the UN General Assembly in New York. Other speakers included Dr. Phumzile Mlambo-Ngcuka, UN Under-Secretary-General and Executive Director of UN Women, Melanne Verveer, Executive Director at the Georgetown Institute for Women, Peace and Security, Hans Vestberg, CEO of Ericsson, and the United Nations Foundation’s new Global Advocate for Girls & Women Jennifer Lopez. At this event we also announced our commitment to the new Global Partnership on Sustainable Development Data. Our first contribution is the release of a gender parity data visualization tool where users can explore our comprehensive data set on gender equality and economic growth in different regions and countries around the world.

Then, a week after the UN meetings, McKinsey and LeanIn.org published a new survey, Women in the Workplace, to encourage female leadership and gender equality in the workplace. The survey, in which some 118 companies and nearly 30,000 employees took part, revealed that, despite modest improvements, women remain underrepresented at every level of the corporate pipeline, with the disparity greatest at senior levels of leadership.

We believe that our involvement in all these efforts is vital. MGI’s new mapping of women’s role in the world finds that the gender gap is still very significant, despite a great deal of progress since the Beijing Declaration 20 years ago.

We found that women workers currently generate about 37 percent of the world’s GDP despite being about half of the world’s total population. In some countries, women’s contribution is significantly lower—17 percent in India and 18 percent in the Middle East and North Africa (MENA). If we take into account an estimated $10 trillion—or 13 percent of current global GDP—is generated by women from work that is currently unpaid, their contribution is even more significant.

Three factors are in play. Women do not participate in the labor force in the same numbers as men. In India and MENA, they account for only 23 to 24 percent of the workforce. Second, women work fewer hours than men because so many work part-time. In Western Europe, for instance, they work only 80 percent of the hours of men. Third, women work disproportionately in lower-productivity sectors such as education, health care, and agriculture. The share of female agricultural workers is 16 percentage points higher than that of men in India and 25 percentage points higher in South Asia.

Action on four fronts—education, financial and digital inclusion, legal protection, and the reduction of unpaid care work—are critical to accelerating progress on gender parity in work.

Narrower gender gaps in educational attainment not only help to boost female participation in the workforce but are also strongly correlated with the status of girls and women in the family, helping to reduce the incidence of sex-selective abortions, child marriage, and violence from an intimate partner. Women that enjoy parity in education are more likely to share unpaid work with men more equitably, to work in professional and technical occupations, and to assume leadership roles.

Access to financial services, mobile phones, and digital technology are linked to the presence of women in leadership roles and labor-force participation. Despite the rapid spread of these technologies, some 4.4 billion people are offline, 53 percent of them women.

Inequality in legal rights is another major hurdle for women. In 18 of 90 countries, daughters do not have equal inheritance rights to boys and in 16 out of 75 countries there is no domestic violence legislation.

Today’s gap in labor-force participation between men and women partly reflects the unequal sharing of household responsibilities. Seventy-five percent of the world’s unpaid work is undertaken by women, including the vital tasks that keep households functioning such as child care, caring for the elderly, cooking, and cleaning. However, this contribution is not counted in traditional measures of GDP. Using conservative assumptions, MGI estimates that this unpaid work could be valued at $10 trillion per year, an amount roughly equivalent to 13 percent of global GDP.

All this imposes significant costs on the world economy. If women were to participate in the economy identically to men—a “full-potential” scenario that is a theoretical, if unrealistic, possibility in the short term—as much as $28 trillion or 26 percent could be added to global GDP by 2025. That’s roughly the combined size of the economies of the United States and China today. Even in an alternative scenario in which countries matched the progress toward gender parity of the best-performing country in their region, as much as $12 trillion could be added to GDP in a decade. That’s the equivalent of the combined GDP today of Japan, Germany, and the United Kingdom combined. Female workers would contribute about double the GDP growth they are set to achieve in business-as-usual scenario. Both developed and developing countries would make economic gains in this “best-in-region” scenario. In 46 of the 95 countries MGI has analysed, GDP would increase by more than 10 percent over a business-as-usual scenario.

More growth broadly creates a more benign backdrop for business. But there is a myriad of reasons why companies should step firmly onto the front foot on gender: it makes business sense to be more proactive than many companies have been to date as previous McKinsey research shows. Boosting gender diversity within their own operations gives firms access to a broader pool of talent, may improve retention, and lower the considerable costs of staff turnover. MGI research suggests that likely skill gap of 18 million too few college-educated workers in 2025 can be partially bridged – to the tune of 3.2 million – by raising female participation. There is evidence that increasing the presence and responsibility of women is correlated with improved company performance. Enhancing their understanding of their female customers helps them to target them more effectively. Supporting women can be a way of broadening a company’s customer base and reach. Unilever’s Shakti program has trained more than 70,000 rural women in India as micro-entrepreneurs to sell its products and used that as a means to extend the company’s brands into rural locations.

Areas where women’s needs are not being met—such as education, skills, financial services, and Internet and mobile technology—could all be new business opportunities. Garanti Bank in Turkey, for example, specifically targets female entrepreneurs, through products and services, and training programs. In 2009, China’s Bank of Deyang set up its first branch dedicated to women with the aim of serving more than 4,000 women-owned small and medium-sized enterprises by 2013

Action need not be confined to core operations. Companies can encourage change through their relationships with suppliers and distributors, spreading a gender-neutral business model throughout the supply chain. US retailer Walmart has deliberately increased its sourcing from businesses owned by women in the belief that empowering women will make the company more successful. Even more broadly, firms can be powerful voices helping to drive social change.

MGI sees six major ways that companies can contribute to tackling gender inequality, complementing the efforts of governments and NGOs.

The first type of intervention is using financial mechanisms to support women wanting to play a more active role in the workforce. For example, companies could offer scholarships to girls to help them to improve their science, technology, and math skills. The Schlumberger Foundation offers fellowships for women from developing countries to pursue PhD in math and science-related fields.

Second, companies are in a strong position to use technology to solve gender-related problems. Telecom firm Vodafone has developed mobile apps designed for women to help them boost their reading skills, and connect them quickly to emergency services if they are subjected to violence.

Third, companies can embed gender diversity to help create economic opportunities for women, both within their firms and outside. One example of a company embedding policies to empower women within its own organization is Renault-Nissan, which has established goals for gender diversity, including publishing annual updates of female advancement. Outside their firms, companies can offer vocational training to women linked to future employment opportunities, securing female talent at a time when skills shortages are rife and increasing. Retailer H&M is setting up a skills training and certification program for the many female workers in the garment industry.

A fourth way that companies can make the difference is by helping to build women’s capabilities through support for girls’ and women’s education, and capability building in institutions managed by the private sector. The AllState Foundation offers financial training for survivors of violence. Similarly, Intel’s “She will connect” program provides digital literacy training in developing countries.

Fifth, companies can use the power of their brands and their marketing expertise to help to shift often entrenched attitudes that disempower women, as well as address unconscious biases within their own companies. Verizon’s #inspirehermind campaign uses digital and social media to encourage girls to enter math and science fields. British supermarket chain Asda has implemented unconscious bias training for top management to tackle gender biases.

Finally, companies can support efforts by policy makers to implement gender-neutral laws, policies and regulations. This could include ensuring their organizations comply with laws (e.g., laws on equal pay), as well as acting as advocates for change with policy makers.

Enabling women to be equal partners in society and in the world’s workforce would not only be equitable in the broadest sense, but is good for economics and business. Companies can use their skills to help to close the gender gap—to a greater extent than they have to date. More businesses should consider how they can join the many companies already engaged in this issue and be part of a new coalition for change that tackles this most pressing of human and economic issues.

Written by
James Manyika