She Is The Answer

• Author: Yuko Kinoshita and Kalpana Kochhar

She Is The Answer Finance & Development, March 2016, Vol. 53, No. 1

Yuko Kinoshita and Kalpana Kochhar

Women can help offset the problems of an aging population and a shrinking workforce

The aging of populations around the world has profound implications for economic growth. When the working-age population shrinks, in many cases so does the labor force, and the potential for economic growth diminishes. In many advanced and emerging market economies, the number of working-age people is falling, which puts pressure on government revenue just as the need for spending on pensions and health care is rising.

Women play a critical role in this demographic transition. They make up over half the world’s population. Because women generally outlive men, the share of women in the over-65 age group is notably higher. Yet the percentage of working-age women who actually participate in an economy’s workforce (known as the female labor force participation rate) has hovered around 50 percent over the past two decades. The global average masks significant cross-regional differences in levels and trends. Rates vary from 21 percent in the Middle East and North Africa to more than 60 percent in east Asia, sub-Saharan Africa, the United States, and northern Europe. Although Latin America and the Caribbean have experienced strong increases of some 13 percentage points during this period, rates have been declining in south Asia. Despite the stagnation in female participation, the average gender participation gap—the difference between male and female labor force participation—has been declining since 1990, but only because male labor force participation has fallen more than women’s has risen.

A chasm remainsAlthough the gender gap in education is narrowing, a chasm remains when it comes to other opportunities, such as access to health care and financial services, wages, and legal rights. The ratio of female to male primary enrollment rates is up to 94 percent even in the least developed economies. In secondary education, the ratio of female to male enrollment averages 97 percent, and women are now more likely than men to be enrolled in tertiary studies (college or university). These are positive developments. However, with so many highly educated women, it is even more of a loss that such a large percentage are not in the labor force.

When women are able to develop their full labor market potential, significant macroeconomic gains are possible. For instance, Aguirre and others (2012) suggest that raising female labor force participation to country-specific male levels would boost GDP in the United States by 5 percent, in Japan by 9 percent, in the...