To Boost Growth: Employ More Women
IMF Blog, September 14, 2016
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Bibliographic details
- Authors: Christine Lagarde
- Published: September 14, 2016
Summary
- Women’s employment supports macroeconomic growth; IMF studies show significant gains when women participate more fully in the labor market.
- A forthcoming IMF study suggests that a 1 percentage point increase in the labor force participation of women with an advanced degree would raise Canada’s overall labor productivity growth by 0.2 to 0.4 percentage point a year.
- Eliminating the current gap of 7 percentage points between male and female labor force participation could make the level of real GDP about 4½ percent higher today.
Evidence and impact
- Tapping into Canada’s highly educated pool of women could:
- offset the shrinking labor force due to an aging population,
- boost growth potential in the medium term,
- raise living standards for all Canadians.
- Canada’s labor productivity is about 20 percent below the level in the United States and is growing at less than 1 percent a year.
- Since 1980, Canada’s female labor force (aged 25–54 years) has increased by 3.2 million, compared with a 2.1 million increase in its male labor force.
Canadian experience and past policy reforms
- Female labor participation progress:
- 1980: 60 percent of Canadian women aged 25–54 years were in the labor market.
- Four decades later: Canada’s female labor participation rate is over 80 percent.
- United States comparison: the rate has fallen since the mid-1990s to about 74 percent.
- Two effective reform initiatives:
- Tax reforms (late 1980s and 1990s):
- Replaced deductions (including on income earned by secondary earners) with tax credits, broadened the tax base, and lowered the marginal tax rate structure.
- Introduced tax cuts and benefits for families with children in the 1990s, improving work incentives for secondary earners.
- Family-support policies (late 1990s onward):
- Lengthened maternity and parental leaves from a maximum of 37 weeks to 52 weeks in 2001.
- Established a national system of early learning and child care, supported by increased government spending on early childhood development.
Remaining gaps and policy recommendations
- Current gaps:
- 2015 participation rates: women 82 percent, men 92 percent.
- Despite more women receiving university degrees in 2015, their labor participation rate is 7 percentage points lower than men’s.
- Canada’s gender wage gap is well above the Organization for Economic Cooperation and Development average.
- Women make up only one in four senior managers.
- Paid maternity and parental leave is the 7th longest in advanced OECD economies, but public spending on early education and care still falls short of many advanced economies.
- Policy recommendations and directions:
- Narrow remaining policy gaps in family support and work incentives for secondary earners.
- Target family support policies to enhance incentives to work:
- The Canada Child Benefit (introduced in the 2016 federal budget) provides benefits to low- and middle-income families and is a step in the right direction.
- Consider better targeting of benefits toward increasing childcare subsidies for working parents whose parental leave has expired.
- Address the “invisible glass ceiling” to increase women’s representation in senior management:
- Provide incentives for women’s representation on corporate boards.
- Reform the parental leave system so more fathers are willing to take leave.
- Bold decisions are needed to change corporate cultures and shift social norms to encourage younger generations of women to pursue professional careers.
Key statistics (preserved exactly)
- 1 percentage point increase in labor force participation of women with an advanced degree → raises labor productivity growth by 0.2 to 0.4 percentage point a year.
- Current gap between male and female labor force participation: 7 percentage points.
- Potential increase in real GDP level if gap eliminated: about 4½ percent higher today.
- Canada’s labor productivity: about 20 percent below the level in the United States.
- Labor productivity growth: less than 1 percent a year.
- Female labor force change since 1980 (aged 25–54 years): increased by 3.2 million.
- Male labor force change since 1980: increased by 2.1 million.
- 1980 female participation (aged 25–54 years): 60 percent.
- Four decades later: Canada’s female labor participation rate is over 80 percent.
- United States female participation rate (mid-1990s to 2015): about 74 percent.
- 2015 participation rates: women 82 percent, men 92 percent.
- Maternity and parental leave expansion: from a maximum of 37 weeks to 52 weeks in 2001.
- Paid maternity and parental leave ranking: 7th longest in advanced OECD economies.
- Women in senior management: one in four.
- Canada Child Benefit: introduced in the 2016 federal budget.
Source: To Boost Growth: Employ More Women, Christine Lagarde, September 14, 2016