Secret to Rebuilding the World’s Economy
November 3, 2010
A consensus is forming among global business leaders that investing in one of the world’s leading untapped resources is critical to future growth.
That resource? Women.
Reports released recently by Goldman Sachs Group Inc. and Ernst & Young LLP, among others, conclude that exploiting — in the most positive sense — the talents of half the world’s population is a business imperative.
“Now is the time to realize and harness the positive effect that women’s economic empowerment and leadership can have on the global economy,” said an Ernst & Young report titled “Groundbreakers: Using the Strength of Women to Rebuild the World Economy.” World Economic Forum researchers echo this point, noting that the issue of women’s economic empowerment is receiving more global attention than ever.
Business schools are focusing on this trend, too. A Harvard Business SchoolWorking Knowledge paper published in August said that many multinational corporations are starting to understand that adding women to the workforce is part of the solution to heightened competition and aging workforces.
Professors from Harvard and the Massachusetts Institute of Technology and researchers from the Korea Labor Institute recently interviewed executives to explore whether a foreign corporation could boost profits by hiring women from the local labor markets where it operates, particularly in regions where women have traditionally been excluded.
Profitable Hiring Practices
They found that firms which hire and promote women to positions of authority enjoy greater profitability, a gain seen in both multinational and local companies. This competitive advantage was especially true at companies that hired women at senior levels.
Even though there are compelling reasons to harness women’s economic contributions, progress remains slow. While gender disparities in health and education have narrowed dramatically, an economic gap persists, according to the World Economic Forum’s Global Gender Gap Report released last month.
This sluggish pace of change in part stems from government officials assuming that their increased spending on women’s health and schooling would automatically mean that women would see their economic condition improve.
“Once you have made that investment into educating women, you have to ensure those barriers to women’s economic participation are removed so you can achieve the return on your investment,” says Saadia Zahidi, an economist at the WEF and one of the authors of the report. “There is not always a clear understanding that this is better for the economy in the long term.”
Price of Exclusion
This lack of progress is costly. The United Nations has said that constricting women’s opportunities in Asian and Pacific nations is costing those regions more than $40 billion annually. In 2004 a World Bank report concluded that women’s low levels of labor participation resulted in real losses of per capita gross domestic product growth.
On a brighter note, a number of nations that have focused on helping women achieve greater economic advancement are reaping the rewards. Of the emerging economies in the WEF report, some of the greatest progress is being made among those nations that previously lagged farthest, including the United Arab Emirates and Bangladesh.
Zahidi praises policy makers in the UAE who, she says, understand that they need the young women now getting educated in the nation’s universities to contribute to their economy once they have finished their studies. “It is very much a competitiveness argument,” she says.
‘Investing in Women’
A mix of business, political, academic and women’s group leaders met recently at New York University’s La Pietra campus in Italy to discuss how to capitalize on the recent attention to women’s empowerment issues. Their immediate goal: to figure out how to keep improving women’s economic opportunities in the aftermath of the global financial crisis.
“Investing in women is proven to be smart economics,” said Beth Brooke, Ernst & Young’s global vice chair of public policy, sustainability and stakeholder engagement. This isn’t a matter of benefitting one gender over another, she said. The point is that assembling and deploying different perspectives helps the bottom line — for everyone’s sake.
“Women as consumers represent one of the largest ‘emerging markets’ in the world next to China and India,” Brooke said, pointing out that women control more than 80 percent of household spending decisions. The focus now is on women as entrepreneurs, employees and consumers, all of which offer unique business opportunities for companies agile enough to take advantage of them.
For all these reasons, some of the world’s leading companies are beginning to view women as the next big growth opportunity. The next few years will show whether all of this attention translates into substantial gains — for women, for companies and for the global economy — or fizzles into a faded moment of broken promise and unrealized potential.
For the sake of global prosperity, let’s hope it is the former.