Japan’s Economy Would Gain With More Women in Science and Technology

IMF News, November 13, 2023

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Japan has one of the oldest populations globally, with its working-age population shrinking since the late 1990s.
From 2012 to 2019 during “Abenomics,” Japan achieved impressive per capita gross domestic product growth, trailing only the United States.
A major contributor to per capita growth was a rising number of women entering the labor force: the female labor-force participation rate rose to 74 percent in 2022 from 63 percent in 2012.
Japan has the lowest number of foreign workers among Group of Seven countries, accounting for only 2.8 percent of the workforce.

Increased female participation (notably former stay-at-home mothers) helped mitigate chronic labor shortages, raised family income, and fueled growth.
The upward trend in women’s labor-force participation is now slowing and will likely plateau soon.
To raise output without more workers, Japan must boost labor productivity; automation and digitalization are key but require STEM talent.

Only 7 percent of female university students in Japan major in STEM, compared with 36 percent of male students.
This under-representation reflects barriers in Japan rather than a lack of female talent.
Women face both explicit pay gaps (observable in earnings data) and implicit pay gaps (disproportionate family burdens and workplace discrimination).
Women disproportionately step back from their careers when they have care-giving responsibilities, contributing to diverging career paths and earnings gaps.

Using a model with STEM talent as the engine for economic growth, eliminating the barriers faced by women in STEM could accelerate productivity growth by 20 percent in Japan.
Permanent productivity gains mainly reflect an increase in the number of STEM workers who will innovate and push the technology frontier.
With faster productivity growth:
- Output and wages increase faster.
- Consumption and welfare rise.
The average welfare of all Japanese workers would rise by about 4 percent, based on the model calculation.

Winners:
- Female STEM workers would benefit most; their income would converge with male counterparts’, conditional on talent.
- All non-STEM workers benefit from faster productivity growth.
Losers:
- Male STEM workers could receive lower wages as total supply of STEM workers increases.
- The least talented male STEM workers could be replaced by female ones.

Eliminate explicit barriers:
- Increase transparency of gender wage-gap data (recent “framework policies” noted).
- Enforce “equal pay for equal work” regulation.
Address implicit barriers:
- Implement work-style reforms and create a more flexible labor market.
- Reform hiring and promotion to be merit-based instead of seniority-based to improve returns on STEM education for women.
Consider targeted corrective measures:
- Explore quotas and other policies to correct for gender biases, including in STEM fields, while recognizing that eliminating barriers may take years or decades.
Long-run expectation:
- Over time, visible female success in STEM will encourage more talented women to join STEM fields, increasing innovation and contributions to economic prosperity.

Source: Rui Xu, November 13, 2023, IMF NEWS.