Improving gender equality to best-in-UK could add £111 billion to economy

21 September 2017 Consultancy.uk

By 2025, gender equality in the workplace could add more than £444 billion annually to the UK's GDP. However, with pay parity still a distant prospect, were a more attainable 'best-in-UK' level to be achieved across the board, the GDP could still be lifted by a hefty £111 billion. Women continue to be under represented in highly productive, well paid jobs, and over represented in poorly paid, less economically productive work.

The effect of different forms of discrimination has potential negative impacts on businesses as well as individuals. Various studies have shown that, were women to be better engaged in business processes and enabled to climb the ranks in a similar fashion to men, up to $12 trillion could be added to the global economy, while this could add up to $74 billion to FTSE 350 companies alone.

The UK remains a relatively unequal employer with board level positions, for instance, predominantly in the hands of men. In a bid to improve the situation, various wide-ranging studies have been conducted into conditions affecting outcome of women in organisations, such as the 'Gender Balance on British Boards’ Lord Davies report, while the management consultancy industry’s main body, the MCA, is also investigating the phenomenon.

Employment across various sectors inequality

A report from the McKinsey & Company, titled ‘The Power of Parity: Advancing Women’s Equality in the United Kingdom’, takes a macro-look at the effect that policies and cultural changes could have on female employment and wider GDP in the UK. While conditions have improved, with the report noting that participation rates among women have increased 3%, from 69% in 2004 to 72% in 2015, there is still a long road ahead on the route to parity.

Considerable disparities exist in terms of employment for a wide range of sectors, with different sectors highlighting disproportionate concentrations of men and women, respectively. The most productive sectors, such as management, directors and the executive, tend to have lower representation of women in contrast to lowly paid, less production-focused positions such as care work and administration.

The headline result of a potential abolition or narrowing of the gender gap in work is considerable, in terms of additional GDP. Researchers modelled various aspects of the market between 2015-2025, including business-as-usual growth of GDP as well as incremental potential boosts to growth, one reflecting the improvement of the situation across the UK to the current best performing UK region in terms of diversity, while the other considers the full-potential scenario.Narrowing the gender gap

Men contributed close to $1.1 trillion to the UK economy in 2015, while women contributed £518.21 billion in the same period. In the ‘business as usual’ growth scenario, in which the same proportion grows in line with projected GDP growth, an additional £310.19 billion in GDP could be added to the economy by 2025. The boost from an incremental best-in-UK GDP scenario addition would see a 6.8% boost to the UK economy. The full-potential scenario sees a premium of 19.2%, with total additions hitting £333.13 billion on-top of the incremental additions.

Economic boost across the UK

The comparison of contribution to GDP reflects three key differences among the male and female employees across the UK. The first is the result of fewer women being economically active (72% vs. 83% for men), while the second is that women tend to reside chiefly in part-time positions, working fewer hours on average – (29 per week vs. 37 for men). Finally, women are more often employed in less growth-intensive sectors, such as care, which while it is wrong to regard as “unproductive”, are not drivers of GDP growth, resulting in a relatively lower output.

The additional GVA, stemming from the major regions in the UK, differs substantially. The North West and North East could stand to gain up to 8% in additional GVA, in line with London. Meanwhile, Scotland and the middle of England are able to add considerably, but Wales, the West Midlands and the East are likely to make smaller gains, respectively.Regional boosts

In terms of the incremental addition of GDP scenario, the gains are booked from three major areas from which gains could be derived. The biggest impact results from higher levels of participation, with 38% of the total additional GDP flowing from an increase of participation rate from 76% in the business-as-usual scenario, to 79% for the best-in-UK scenario. A further 35% can be won from women moving into more productive sectors; and finally, the addition of around 25-30 minutes more work time per day, would add an additional 27% to incremental GDP.

Gender parity in pay and conditions is a major concern for a growing number of workplaces. Perhaps the most high-profile ongoing example of this is the recent news that the BBC have hired PwC to examine gendered pay at the Broadcast Corporation, which earlier announced a number of startling disparities, summed up by the wages of top talent, as top-paid female star Claudia Winkelman earned just a quarter of the highest paid male star Chris Evans’ annual salary – a gulf of £1.5 million between the two of them. The BBC had previously committed to ending its gender pay gap by 2020. However, following the publication of salary information, 40 women working at the BBC penned an open letter to Director General Tony Hall, criticising the fact that “women at the BBC are being paid less than men for the same work,” and calling for immediate and transparent action.

Organisations across the UK, like in most developed countries globally, continue to be affected by structural differences in the recruitment process, as well as individual bias in managerial positions, highlighting that, among others, implicit biases push women in one direction and men in another. In order to achieve the level of even partial equality talked about in McKinsey’s report, substantial efforts need to be made across all sectors.

Related: UK gender pay-gap costs women £85 billion in lost wages.

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