Gender parity could add 12 trillion to global economy

28 September 2015 6 min. read
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Women continue to face considerable barriers to economic and social parity with men across the world. While the treatment of women by individuals, businesses and institutions comes with considerable moral and social issues, the economic issues related to implicit and explicit barriers facing women are considerable – parity with men could add up to $28 trillion extra to world GDP by 2025, with a more achievable ‘best-in-region’ practice likely to add $12 trillion.

For the roles of women in society, gender equality remains a thorny issue across much of the world. While in many respects the central issues are social and moral, for the choice of what a person seeks in their life, and what their “place” is in society, a range of barriers, ranging from political to economic and cultural background, shape the outlook of women. For millions of women around, what they can and cannot achieve in their lives very much depends on where they are born, not merely the location but also often the socio-economic class, as well as the rights they face in civilization and the opportunities they receive in business.

Such barriers women face comes with a hefty price tag however, for not just themselves but also for the global economy, reveals a new report by McKinsey & Company, titled ‘The Power of Parity’. In the study, the consultants assessed the conditions facing women in 95 countries around the world – accounting for 93% of women and 95% of economic activity – and translated these effects into the economic potential for humanity.

Women and global GDP

Economic conditions
As it stands, the economic potential of women differs considerably from that of men. Women in the 95 countries analysed by McKinsey, generate 37% of global GDP today despite accounting for 50% of the global working-age population. This global average contribution to GDP masks large variations among regions. The share of regional output generated by women is only 17% in India, 18% in the Middle East and North Africa (MENA), and 24% in South Asia (excluding India). In North America and Oceania, China, and Eastern Europe and Central Asia, the share is above 40%.

Women further perform around 75% of all unpaid work globally, using conservative assumptions, the consultancy estimates that unpaid work being undertaken by women today amounts to as much as $10 trillion of output per year, roughly equivalent to 13% of global GDP.

Gender equality in work

Gender equality levels
To identify the inequality differences across countries, the consultancy developed a model based on 15 factors, grouped into four main categories: gender equality in work, gender equality in society, legal protection and political voice and physical security and autonomy. Scores for the first two dimensions are based on performance relative to parity, with low inequality defined as being within 5% of parity, medium between 5% and 25%, high inequality between 25% and 50%, and extremely high inequality as greater than 50% from parity. For the other two dimensions, a range of factors were defined, including legal protection, sex ratio at birth, child marriage and violence against women, with scores typically determined by distance from parity / no prevalence.

For gender inequality in work, leadership globally has the most extreme inequality, followed by unpaid care work – women spend three times as many hours in unpaid care work as men. In outliers India and Pakistan, women spend nearly ten times as many hours as men in such activity. Furthermore, there are extremely high or high gaps in 21 of the 78 countries analysed on the share of women vs. men in professional and technical jobs. Perceived wage disparity for similar work remains a significant issue, although this gender gap is more difficult to prove conclusively, write the authors.

Gender equality in essential service

In terms of gender equality in society, the level of inequality is somewhat lower. Unmet need for family planning is a medium inequality issue in 82 of the 94 countries analysed, while 197 million women globally who want to stop or delay having children are nevertheless not using contraception. The gender gap in education has narrowed in many regions, but women still attain less than 75% of the educational levels of men in 17 of the 95 countries studied.

Gender equality in legal and physical being

In terms of legal protection and political voice, women globally are extremely repressed. Politically, participation of women globally is extremely low with the number of women in ministerial and parliamentary roles only 22% that of men. Even in developed economies—and democracies—such as the United Kingdom and the United States, the share of women in such positions is still only 24% and 34% respectively.

In terms of physical security, violence against women remains a key issue, with the report finding that nearly 30% of women worldwide, or 723 million women, have been the victims of violence.

Additional GDP

Economic effect
The economic effect of disparity across all regions remains considerable, with as much as 26% of the world’s potential GDP by 2025 missed out on because women are not able to fulfil their full economic potential. McKinsey adds however that striving for full parity may be too ambitious and outside the social normative conditions of a society. The more achievable goal of bringing regional nations into line with the best practice of neighbouring societies is considered more achievable by the report. In terms of a “best-in-region scenario”, global GDP could increase by as much as $12 trillion annually in 2025, realising some 42% of the opportunity outlined in the full-potential scenario. This is equivalent to the current GDP of Japan, Germany, and the United Kingdom combined, or 1.0% incremental GDP growth per year relative to business-as-usual forecasts.

Regional GDP addition best-in-region

Regional additions
Regionally, bridging the gender gap would for instance add $0.7 trillion to India’s GDP by 2025, for the Middle East as a whole $0.6 trillion could be added. In China best-in-region participation would add an additional $2.5 trillion – while for Western Europe an additional $2.1 trillion of annual GDP could be realised across the region.