01 January 2007
2006/07 Rybczynski Prize Essay
Gender Inequality, Growth & Global Ageing
Kevin Daly, Managing Director, Economics, Goldman Sachs
Increasing female employment has already been an important driver of European growth in the past 10 years. A narrowing of the difference between male and female employment rates has accounted for half of the rise in Eurozone’s total employment rate and 0.4pp of its 2.1% trend growth since 1995. Encouraging more women into the labour force has been the single-biggest driver of Eurozone’s labour market success, much more so than “conventional” labour market reforms. The US and Japan, while starting from very different positions, have both made little progress in narrowing the gap between male and female employment in the past 10 years.
For some European countries, there are hopeful signs that the narrowing in the male-female employment gap is likely to continue. Female participation rates among younger age cohorts in the Mediterranean countries (and in Spain in particular) are high, suggesting that total female participation is likely to continue to rise. The same is not true for the US and Japan, where age-specific participation rates have been broadly stable for some time. In addition to raising incomes, facilitating women’s labour force participation would help to boost low fertility rates in the developed world. Women in many countries are effectively faced with the choice of either working or
having children (because the tax and benefits system penalises second household earners and because childcare is expensive). In countries where it is relatively easy to work and have children, female employment and fertility both tend to be higher. It is no coincidence that the economies where the problem of population ageing is most acute namely Italy and Japan are also those where female employment is lowest.
Governments could do much more to close the male-female employment gap: reducing tax distortions that discourage female employment, eliminating differences in retirement policies and subsidising childcare are three obvious examples. Progress in this area would both significantly boost potential growth and help to solve the Global Ageing problem.
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