How fostering gender equality could add up to $28 trillion to global growth

A study recently published by McKinsey examines the status quo of gender equality around the world and the implications for the economy. They calculated the opportunity costs of missing parity between men and women and conclude: A lack of gender equality is very costly for the whole economy – both in developed and developing countries. In this article, we summarise the key aspects of the study for you.

Women make up about 50% of the world’s population, but only contribute about one third to the global gross domestic product. As we all know, the reason for this fact is not that they would not want to work or were less productive than men but rather the fact that they often – at least in some regions of the world – are not allowed to work or, if they are, have to work in poorly paid jobs. Furthermore, they are often considered as fully responsible for domestic or care work (both for children and elderly). This is work, too; but it is unpaid work and hence it is not taken into account for calculating the GDP.

The McKinsey Global Institute (MGI) has developed a new score for gender equality that consists of 15 different indicators and examined the status quo of gender parity in 95 countries around the world. Some of the indicators are e.g.: equal access to education for boys and girls, protection from violence for women, the prevalence (or absence) of equal pay, or the presence of women in top management positions.

This new Gender Parity Score (GPS), developed by the MGI, measures the distance each country has travelled towards gender equality. The score has a minimum of 0.00 and it’s maximum is at 1.00. The regional GPS is lowest in South Asia (excluding India) at
0.44, followed by the Middle-East and North Africa with 0.48. It reaches the highest number in North America and Oceania at 0.74, slightly ahead of Western Europe, which reaches a GPS of 0,71. The GPS establishes a strong link between gender equality in society, attitudes and beliefs about the role of women, and gender equality in work. According to McKinsey, the latter is not achievable without the former two elements.

The results show that in 40 out of the 95 countries a strong inequality can be observed for at least half of the indicators. These countries are mainly located in the Middle-East, North Africa and South-East Asia. The biggest problems in those regions are the absence of equal access to the labour market as well as career options for women, a high degree of maternal mortality, legal discrimination, violence, and a weaker say in politics.

But this issue is not only a question of justice, but also of business. The study shows: The opportunity costs of gender discrimination are very high. If every country would score at 1.00 on the GPS, or in other words, if there was full gender equality all around the world, this would add up to $28 trillion, or 26%, to the annual global GDP in 2025 compared with a business-as-usual scenario.

As an alternative and maybe more realistic calculation, the MGI also analysed a “best-in-region” scenario in which all countries match the rate of improvement of the best-performing country in their region. The study concludes: „This would add as much as $12 trillion in annual 2025 GDP, equivalent in size to the current GDP of Japan, Germany, and the United Kingdom combined, or twice the likely growth in global GDP contributed by female workers between 2014 and 2025 in a business-as-usual scenario.“

The way towards higher gender equality depends on regional characteristics and other aspects. Hence, there is no „silver bullet“ for this challenge. However, the study suggests some measures that would make a difference and could help to end a great amount of gender inequality around the world. But most important, the authors conclude that no actor can do it all alone; instead, collaboration between state, business, and society is indispensable: „Tackling gender inequality will require change within businesses as well as new coalitions. The private sector will need to play a more active role in concert with governments and non-governmental organizations—and companies could benefit both directly and indirectly by taking action.“

The whole study is available for download on this website.