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Gender pay gap could cost the world economy $7 trillion, Moody’s says

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BM.GE
06.03.23 23:00
349
Narrowing the difference in wages between men and women in the labor force can boost the world’s economy by about 7% — or $7 trillion, according to a Moody’s Analytics report.

At this rate, it may take 132 years for the world to close the economic gender gap, Moody’s said.

The economic boost will come as more women join the labor force and there’s an increase in productivity. A greater share of women holding more productive managerial and professional roles will also help, the report said.

“Closing the gender gap in labour force participation and the gender gap in management in OECD countries can raise global economic activity by approximately 7%, or about $7 trillion in today’s dollars,” directors Dawn Holland and Katrina Ell wrote in the report.

The report said narrowing the pay gap in emerging markets, such as India, would raise that potential even further.

The calculation is based on the pay increment that women in OECD countries, between ages 25 and 64, would see if their pay was equal to their male counterparts of the same age range in 2021.

“This alone would raise potential output in the OECD by nearly 10% and global output by 6.2%,” Moody’s Analytics wrote.

‘Family responsibilities’

The report pointed to “family responsibilities carried by women” and a lack of similar network connections among root causes of the wage gap between men and women. It highlighted that women were “less likely” to ask for promotions while being held to higher standards than men.

“Shifting social norms is a lengthy and complex process, but politics such as enforcing flexible working conditions, providing affordable childcare, and providing paid paternity and paternity leave help to drive change in the right direction,” Moody’s wrote.

The World Bank in a recent report added that discrimination has kept the gender wage gap in place.

“Gender biases and inequalities that have placed women in low-wage occupations, such as differences in jobs and hours worked, as well as women’s disproportionate caregiving responsibilities, contribute to the gender wage gap,” the World Bank said.

“The persistence of this income disparity between men and women negatively affects the growth of a country’s economy,” it said, adding that 119 economies in the world have room to improve their legal frameworks to reduce the gender wage gap.

The World Bank noted almost half of the world’s economies do not mandate equal pay by law.

Overqualified women

The number of women in OECD countries holding a master’s degree or equivalent exceeds that of men, Moody’s said — but that still remains significantly underrepresented in middle and senior management roles.

This results in what they call a consistent “underskilling” of women, referring to the underuse of women’s skills and time.

As a result, this could lead to “economic loss at the individual and macroeconomic levels,” as economies see “limited and divergent” progress in elevating women over the past 10 years, Moody’s said.

“On average, women make a higher upfront investment in education but tend to land in lower-level and lower-paid positions, employed below their skill level, as measured by their educational accomplishments,” the authors said, CNBC reports.

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