What is good for greater gender equality is also good for the economy and society as a whole

COVID-19 and its economic fallout are having a regressive effect on gender equality, affecting the life and livelihoods of the global population. Its has impacted women’s jobs by significantly increasing the burden of unpaid care, which is disproportionately carried by women. Among many other factors, the pandemic is having a drastic impact on women’s employment meaning women are dropping faster than average, even accounting for the fact that women and men work in different sectors.

Given trends observed over the past few months, in a gender-regressive scenario in which no action is taken to counter these effects, McKinsey Global Institute (MGI) estimates that global GDP growth could be $1 trillion lower in 2030 than it would be if women’s unemployment simply tracked that of men in each sector. Conversely, taking action now to advance gender equality could be valuable, adding $13 trillion to global GDP in 2030 compared with the gender regressive scenario. A middle path—taking action only after the crisis has subsided rather than now—would reduce the potential opportunity by more than $5 trillion. The cost of that delay amounts to three-fourths of the total global GDP we could potentially lose to COVID-19 this year. Based on the McKinsey Global Institute’s (MGI’s) Power of Parity work since 2015, the economic impact of gender equality research maps 15 gender-equality indicators across four categories: equality in work, essential services and enablers of economic opportunity, legal protection and the political voice, and physical security and autonomy. (The latter three categories together indicate equality in society.) Using a Gender Parity Score, or GPS, calculated using these indicators, MGI has established a strong link between gender equality in society and gender equality in work—and shown that the latter is not achievable without the former.

Even before the coronavirus, the 15 indicators used by McKinsey Global Institute showed that tangible progress toward gender parity had been uneven and that large gender gaps remained across the world. Now, without intervention to address the disproportionate impact of COVID-19 on women, there’s a risk that progress could go into reverse. This would not just set back the cause of gender equality but also hold back the global economy. Conversely, taking steps to redress the balance now could improve social and economic outcomes for millions of women globally and help boost economic growth.

Women are more vulnerable to COVID-19–related economic effects because of existing gender inequalities

The analysis finds that the gendered nature of work across industries explains one-fourth of the difference between job-loss rates for men and women. The lack of systemic progress to resolve other societal barriers for women explains the rest. The nature of work remains significantly gender-specific: women and men tend to cluster in different occupations in both mature and emerging economies. This, in turn, shapes the gender implications of the pandemic: MGI analysis shows that female jobs are 19 per cent more at risk than male ones simply because women are disproportionately represented in sectors negatively affected by the COVID-19 crisis.

Another factor could be COVID-19’s disproportionate impact on female entrepreneurship, including women-owned micro-enterprises in developing countries (where such enterprises account for a high share of female labour-force participation). The crisis may have made some family resources scarce, such as financial capital to invest in businesses or digital devices that families must now share as children’s schooling has gone online. The MGI Power of Parity research showed that both digital and financial inclusion, notably access to credit from financial institutions and access to mobile banking, are closely related to the presence of women in the labour force.

Attitudes also shape how women experience the economic consequences of a crisis relative to men. These aren’t new beliefs but rather traditional societal mindsets about the role of women. They may be reflected in current decisions, at the organisational level or indeed within the family, about who gets to keep their jobs. For example, according to the global World Values Survey, more than half the respondents in many countries in South Asia and MENA agreed that men have more right to a job than women when jobs are scarce. About one in six respondents in developed countries said the same.

Looking ahead, other structural forces could further compound gender inequality. MGI previous research on the impact of long-term automation trends on work concluded that, worldwide, 40 million to 160 million women—7 to 24 per cent of those currently employed—may need to transition across occupations by 2030 as automation transforms the nature of work. (The range reflects different paces of automation.) This is roughly the same level of impact that automation would have on men. However, long-established barriers to acquiring new skills and making mid-career shifts, as well as other factors, make the transition harder for women.

Three scenarios of GDP in 2030 highlight the value at stake from greater gender equality

MGI estimates that the global value of achieving best-in-region gender- parity improvements by 2030 could lead to $13 trillion of incremental GDP in that year, an 11 per cent increase relative to the do-nothing scenario. McKinsey Global Institute (MGI) defines three potential scenarios in the post– COVID-19 world of women at work. The first is a gender-regressive “do nothing” scenario. It assumes that the higher negative impact of COVID-19 on women remains unaddressed, and it compares GDP outcomes in 2030 to the case in which women’s employment growth tracks that of men in the recovery. The second is a “take action now” scenario, which would improve parity relative to the gender-regressive one. The third is a “wait to take action” scenario continuing until the economic impact of COVID-19 subsides. MGI has modelled this on the assumption that action to improve gender parity starts only in 2024.

The implications: You need to act now

The strong message emerging from MGI research is that the faster policymakers and business leaders act to push for greater gender equality, even as the COVID-19 crisis continues, the bigger the benefits not just for gender equality but also for economic growth. Conversely, there is a real risk of losing even more economic output—and the economic security it could mean for millions of women—than COVID- 19 would normally imply for all workers. Women stand to lose both in terms of parity and in terms of economic benefits if nothing is done and the stagnating record of the past five years settles in as the norm—on top of the gender-regressive shock we are seeing as a result of COVID-19. In previous research, MGI found that the cost of making sufficient investments in five areas (education, family planning, maternal mortality, digital inclusion, and unpaid care work) could amount to $1.5 trillion to $2.0 trillion in incremental public, private, or household annual spending in 2025, or 1.3 to 1.7 per cent of global GDP in that year. This is 20 to 30 per cent more than what would be spent in a business-as-usual case in 2025 (as a result of rising population and GDP). Yet MGI found that the economic benefits of narrowing gender gaps are six to eight times higher than the social spending required. And it is not just countries that stand to gain from investing in women and girls; McKinsey research has also found a diversity dividend for companies. For example, those in the top quartile for gender diversity on executive teams were 25 per cent more likely to have above-average profitability than companies in the fourth quartile. Moreover, companies now pulling back on diversity and inclusion may be placing themselves at a disadvantage in terms of resilience and the ability to recover from the current crisis; they could be limiting their access to talent, diverse skills, leadership styles, and perspectives.

The ability to ‘internalise’ markets is a defining feature of the multinational enterprise

Multinational enterprises (MNEs) have become one of the most important actors for channelling investment to the developing countries. These firms use foreign direct investment (FDI), the largest type of cross-border financial flow to developing countries, to establish a presence in foreign markets. Multinationals base their decisions to invest on a broad range of factors including market size, labour force skills, macroeconomic and institutional stability, physical infrastructure, and natural resources in the case of extractive industries. Multinationals and the FDI they generate are particularly relevant for the SDGs for a variety of reasons, including (but not limited to):

- Their use as a channel for the transmission of new technologies; - Their use as a channel for access to new international markets;
- Their ability to overcome market failures and fill gaps that domestic investors and other investors or sources of financing can’t reach;
- Their tendency to adopt modern production techniques and accelerate productivity growth; - Their ability to pay higher wages;
- Their capacity for financing and managing large-scale infrastructure projects; and
- Their tendency to create business linkages in the economy that support domestic enterprises.

The contribution (or potential contribution) of business investment to the SDGs

The contribution (or potential contribution) of business investment to the SDGs can vary significantly depending upon which SDG to consider, and in some cases, the net benefits are unclear as to when private investment is seen to be making a positive and negative contribution simultaneously. Adding to the complexity of determining what sort of contribution private investors are making is the fact that different sectors might be making positive contributions to one SDG and a negative contribution to another. Given the orders of magnitude importance of private flows in the overall financing envelope available to the developing countries, developing a better understanding of the complex relationships between private flows and the SDGs clearly needs to be given priority as an important part of the SDG policy agenda going forward, not least to help governments better identify and understand the levers at their disposal for supporting a closer alignment of business motivations and the SGDs. Since different types of business investment will support the SDGs in different ways (even without having this as an objective), governments should integrate policy initiatives to improve business climates into their broader efforts to achieve the SDGs. In addition, governments also have an important role to play to help better align business interests and the SDGs, thus generating more development impact from less investment. Fostering such closer alignment can also be achieved through the promotion of responsible business conduct.

The impact of foreign direct investment and MNEs on promoting women’s empowerment around the world

There are several theoretical reasons to expect foreign firms to also transfer best-practice policies toward women. The role of MNEs in bringing a package of tangible and intangible attributes that have the potential to improve local productivity and enhance local job opportunities. Rising labour productivity and increased employment, together, contribute to stronger economic growth, significantly reducing poverty rates. Among the intangible benefits, the cross-border investment can spread cultural norms and practice, in addition to know-how and technology. A key policy recommendation for researchers, the international community, and policymakers is the need for strong local labour policies, particularly to build absorptive capacity. The research of UNCTADin this illustrates the benefits from foreign direct investment on gender-equalising employment opportunities for women (as with several other benefits from foreign investment) are enhanced and reinforced in places with strong initial conditions. Therefore, another key recommendation is to continue to build the technological capacity within countries, in order to facilitate the absorption of knowledge and best-practice policy toward women. Moreover, national education policies and training programmes should be improved and expanded, specifically for women. In many developing and emerging economies, the supply of skill remains hindered; therefore, education and training programmes should prioritise the required technical skill sets to perform in the changing work environment of a globally- integrated firm.

Companies implementing the Women’s Empowerment Principles strengthen their contribution to Sustainable Development Goal 5.5, which calls for equal women representation, participation and leadership in business globally

In the global policy context in which MNEs operate, the Sustainable Development Goals are increasingly becoming a focus of investor and company reporting for impact. Environmental, Social, and Governance (ESG) reporting is now also a mainstream expectation of markets and a rapid transition to reporting has been observed in the last ten years. Importantly, companies are increasingly expected to report on gender equality; about 70 per cent of the world’s 5,000 largest MNEs now report on progress in this area, and globally about 80 per cent of companies have published a diversity policy (UNCTAD, 2020a).

Yet, overall, women’s representation remains unequal. Regulation and investor pressure have led to better representation at the board level, but not at managerial levels. In addition, the implementation of gender-equalising policies related to flexible work and services, such as childcare, remains weak. ESG reporting could contribute to and inform policy decisions regarding good practice in labour policy, including better working conditions and benefits for women. The degree to which such policies translate into concrete and positive outcomes can be approximated by the presence of flexible working arrangements, or the provision of services that might positively benefit women and facilitate their participation in labour markets.

Another policy area that demands more research and attention is the role of gender provisions in international agreements. UNCTAD research shows that the advancement of gender as a provision in international trade and bilateral investment agreements could serve as a foundation for sustainable and equitable economic growth. Thus, the policy should place a stronger emphasis on making gender provisions distinctively part of the agreements, meanwhile avoiding that gender provisions related to trade and investment be seen as increasing “behind-the-border” restrictions. Finally, from the perspective of host countries, investment promotion agencies (IPAs) and female entrepreneurship policy can be instrumental in promoting and facilitating investment and female empowerment. IPAs can facilitate the greater impact of foreign operations on gender equality in the host country. According to a recent survey, IPAs are promoting gender-inclusive linkages between MNEs and the local economy (UNCTAD, 2020b), by identifying opportunities where investment projects can have a positive impact on gender equality and by facilitating women’s access to capacity-building and supplier development programmes. Building capacity for female entrepreneurs can also help MNEs to advance their gender equality agendas.

Creating a solid social and economic foundation for the future development of all populations is a must to set the stage for more evolving and civilised socioeconomic paradigms. All over the globe, countries and companies face a common challenge: How to best strengthen their economy and workforce, while also taking societal concerns into consideration? Given the current global fallout on worldwide economies and the persistent gender economic gap that affects national performance for economic recovery and resilience, it is fundamental to look at the entire market system, analysing major gender gaps in the labour market, to design and implement interventions that address the core constraints that affect the social and economic system as a whole.

The role of FDI and MNEs is to support the rising aspirations of all countries to build the human capital needed for the economies of the future

Globally, countries are losing $160 trillion in wealth because of differences in lifetime earnings between women and men. This amounts to an average of $23,620 for each person in the 141 countries studied by the World Bank Group. The study, Unrealized Potential: The High Cost of Gender Inequality in Earnings, examines the economic cost of gender inequality in lost human capital.

“The world is essentially leaving $160 trillion on the table when we neglect inequality in earnings over the lifetime between men and women,” said World Bank CEO Kristalina Georgieva. “This is a stark reminder that world leaders need to act now and act decisively to invest in policies that promote more and better jobs for women and equal pay at work.”

Women not only represent half of the global economic and societal potential; Women are the mothers of the global human capital.

“Human capital wealth accounts for two-thirds of the global changing wealth of nations, well ahead of natural and other forms of capital,” said World Bank Group Lead Economist and author of the report Quentin Wodon. “Because women earn less than men, human capital wealth worldwide is about 20 per cent lower than it could be.”

“There are estimates showing the costs and benefits of gender equality to key economic sectors and economic growth,” said World Bank Group Senior Director for Gender Caren Grown. “By focusing on wealth, this study is a unique addition to that literature since wealth, and especially human capital is the assets base that enables countries to generate future income.”

Under the circumstances, what measures should policy and business leaders consider? Just as we have seen variations among countries in progress toward gender equality, so too the policies to be put in place will need to be tailored to the national context.

It is not the purpose of this paper to give an exhaustive set of suggestions. But there is a role — for all stakeholders, as well as some overarching themes that pick up ideas we have already aired in our previous publications on gender equality. They include the following:

> Interventions to address unpaid child care. The importance of reducing gender imbalance in responsibility for care cannot be overstated. Interventions to tackle this problem include better recognition of unpaid work, reducing the amount of unpaid work, and rebalancing it between men and women. MGI has determined that the value of unpaid care work done by women is $10 trillion, or 13 per cent of global GDP.

> Interventions to address digital and financial inclusion. Closing the gender gap in digital inclusion is an urgent priority in the pandemic. Many essentials, such as food and groceries, have migrated to online channels, making it hard to manage the day-to-day business of living without access to digital devices. From a labour-market standpoint, COVID-19 is accelerating remote-work and independent- work platforms. This could be a boon for women, who can benefit from the flexibility that such platforms offer, especially for workers in remote, digitally delivered services, such as software, design, or sales and marketing. But a persistent gender gap in digital access may keep work opportunities away from millions of women. Furthermore, many stimulus programs targeted at individuals or small enterprises depend on reliable identification and digital channels to reach the intended beneficiaries. Women are disadvantaged, as they disproportionately lack both digital access and the means for reliable identification. For example, 45 per cent of women over the age of 15 lack identification in low- income countries, compared with only 30 per cent of men.

> Interventions to address attitudinal biases. Any drive toward gender parity arguably starts with efforts to change entrenched, widespread attitudes about women’s role in society. This is an extremely difficult and complex challenge that will require all stakeholders to play a sustained part over the long term. Governments, businesses, and other stakeholders can run campaigns and enlist male champions to help drive home the idea that a larger number of women at work represents socially and economically beneficial progress.

The three scenarios show that there may not be enough time to ponder these issues. Procrastination is a losing game. The time for action is now.

Interventions to address the economic participation of women must also address broader societal aspects of gender inequality. Governments and businesses must therefore consider how to safeguard girls’ education, tackle violence against women, and protect maternal health, to name a few important issues. More data are needed to better understand the links between women in society, women at work, and economic growth—particularly the factors that drive job loss and recovery among women. Some important questions also remain, including how future trends such as automation might amplify or blunt the impact of COVID-19 on women and how the pandemic affects the wages, job security, and benefits of women. Answering such questions could shape future decisions by governments, multilateral organisations, and companies. But our scenarios show that there may not be enough time to ponder these issues. Procrastination is a losing game. The time for action is now.

Resources:
Gestrin, Michael V. (2019), The contribution of international business investment to the Sustainable Development Goals: Key actors and recent trends, OECD, Paris www.oecd.org/ investment/The-contribution-of-international-business-investment-to-the sustainable development-goals.pdf
UNCTAD (2014). Investment by TNCs and Gender: Preliminary Assessment and Way Forward, Geneva. UNCTAD (2020a).
World Investment Report: International Production Beyond the Pandemic, United Nations: Geneva and New York. UNCTAD (2020b).
Mainstreaming Gender Equality in Investment Promotion, The IPA Observer, November 2020, Issue 10. UNCTAD (forthcoming).
The International Transmission of Gender Policies and Practices: The Role of Multinational Enterprises, Geneva. Watson, James L. (2006). Golden Arches East: McDonald’s in East Asia, 2nd Edition, Stanford University Press.
https://www.mckinsey.com/featured-insights/future-of-work/covid-19-and-gender-equalitycountering-the-regressive-effects www.worldbank.org/gender