The surprising reason we need more women in the global workforce

July 2, 2013

The IMF is pushing for policies that would lead more women into the global workforce. (Andrew Harrer/Bloomberg)

Could getting more women in the workforce be the key to a stronger and more stable global economy? Some leading thinkers, including at the International Monetary Fund, argue exactly that.

“Growth is the lens through which we view the issue of female labor force participation, as women can make a critical contribution to it,” IMF deputy managing director Nemat Shafik said at an event last week focusing on “Women as a Driver for Economic Growth” at the Peterson Institute for International Economics in Washington.

The IMF has raised issues around women in the workforce in its regular reviews of the economies of Japan, Italy, Germany and other nations. But Heidi Crebo-Rediker, chief economist at the State Department, noted during the event that research on the relevance of gender to economic policy is still in the early stages, even though tackling gender in the field of human rights and development dates back decades. She called on the IMF to grab “the tremendous opportunity” to address the issue in its annual economic assessments of countries around the world.

“To the extent that the IMF can mainstream gender, it might actually prove decisive to getting us there,” Crebo-Rediker said.

IMF managing director, Christine Lagarde is also pushing the issue, writing in the fund's magazine "Finance and Development"  that putting more women in jobs is good for the world economy. Lagarde has cited research that predicts a permanent rise in GDP, from 4 percent in France and Germany to 34 percent in Egypt, once the employment gap between men and women closes in those countries. Gender work parity is also predicted to increase GDP by 12 percent among all OECD countries.

The IMF is has been recommending ways to give women more incentives to join the labor force across the world.

In crisis-hit Portugal, for example, tax policy discriminates against second-earners, as it does in France and the United States. Because those earners tend to be women, the policy can act as a disincentive for entering the labor force. But countries that offer tax credits for low-wage earners, many of whom also tend to be women, see higher female labor force participation. The IMF thinks that such tax advantages for low-wage earners can also help women.

Shafik gave the example of Germany, which does not tax "mini jobs" that earn less than 450 euros per month. One in five German workers now has such a job. Many of them are women, as the flexible hours and part-time nature of these jobs make it easier to balance work and motherhood. Yet those mini-jobs have also been blamed for trapping people in low-paid employment, without benefits or the chance for advancement. Hence, the IMF is suggesting that Germany takes measures to promote full-benefit jobs by lowering the tax bills for low-wage earners.

In its last annual assessment of the Italian economy, the fund recommended measures to address Italy's very low female employment rate -- one of the lowest among the developed economies of the OECD. In addition to providing more child-care and maternity support, the IMF suggested that “reducing the marginal tax rates for married second earners would help raise female labor participation” in Italy.

The IMF took a similar view in its most recent evaluation of the Japanese economy, calling for the full integration of Japanese women into the economy to compensate for the nation’s demographic decline and spur growth. The government of prime minister Shinzo Abe has pledged to provide child-care facilities for all by 2017.

Those gaps are particularly wide in some of the southern European countries that are receiving financial bailout help from the fund, perhaps enhancing the IMF's leverage. Said Shafik in an interview, "In countries with IMF programs, we are happy to advise them on how other countries have successfully increased female labor force participation.”

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