Closing Gender Wage Gap Is Good for the GDP

For years, women’s pay has slowly increased relative to men’s, but, strangely, in 2015 that trend seemed to stall (or even reverse course). This apparent stagnation is discouraging for lots of reasons: More women are working and many are the primary, if not sole, earners in their households. And young women are more likely than young men to hold a college degree.

This is clearly bad for women. It’s also bad for men. And the economy as a whole. A new report from the McKinsey Global Institute finds that greater gender parity in the workforce—in terms of pay, hours worked, and access to full-time jobs—would also benefit the entire country’s economy. The report makes the case for both the government and businesses to take a more proactive role in bringing about gender equality.

Some economists worry that as America’s population ages and retires, there won’t be enough young workers to replace them. The consequences of this would be harmful to the economy: There would be fewer people to provide goods and services, fewer people working and earning wages, and lower levels of worker productivity—all of which could result in a slowing of GDP growth.

But making more room for women in the workforce (and paying them just as much as men for it) could help bridge that gap. Right now, women work fewer hours, largely in lower-paying sectors, and have a lower labor force participation rate than men. Increasing their labor-force participation and helping them enter (and stay) in more lucrative and highly-productive jobs would make it easier to maintain current levels of economic activity and production, even as workers retire, and prevent the deceleration that economist are worried about.

McKinsey puts some numbers on how this gap could be closed. By 2025, its report estimates, complete labor-force parity—if women were paid equally, if they worked the same number of hours as men, and if they were represented equally in every sector—could result in an additional $4.3 trillion being added to the U.S. GDP, which is almost 20 percent higher than current projections. But that figure is a bit pie-in-the-sky, since it assumes that women’s paid labor would precisely mirror men’s. The researchers also come up with what feels like a more plausible scenario, one in which each U.S. state rises to the level of the states that are currently making the most progress toward gender-wage equality. Under those circumstances, the gains are still significant: $2.1 trillion by 2025, which represents a 10 percent increase over the current projections of what GDP will be then.

So how exactly would this work? Who has a hand in increasing GDP growth? Ultimately, this is a goal that companies and the government can actively pursue—they could choose to invest in things that will help working women. Companies, for instance, could put more money toward training their employees and toward hiring bigger staffs, as well as eliminating in-house gender-wage gaps and devoting attention to creating work environments that are inviting to women.

For the government, this could take the form of building up the U.S.’s virtually non-existent child-care support system. That would mean better access to paid leave, daycare, and other programs that would make it easier for women and men to take time off for family without being penalized at work. Those changes would also make it easier to share the burden of unpaid work—activities such as childcare, cooking, cleaning, and caring for elderly relatives, which McKinsey values at around $1.5 billion each year, and which women provide nearly twice as much of as men. “It is clear that, if women are freed from spending some time in unpaid care work, they would have the opportunity to use and improve their skills and pursue higher-paid professions, boosting GDP," the authors of the McKinsey report write.

The McKinsey report makes a fairly persuasive (though at this point well-known) utilitarian case for helping more women work. But even having to address the problem of gender disparities from that angle is pretty disheartening—the U.S. should be working to improve the standing of half of its population simply because it’s the right thing to do.

But it seems that when it comes to framing questions about how to help women, another question inevitably pops up: What about men? Take, for instance, the business of tampons. A recent story in The New York Times, describes the plight of two women engineers trying to raise money to create a tampon that would take advantage of menstruation to collect data about the wearer’s health. As they attempted to address potential funders (most of them men) they found that their audience wasn’t as interested in the project as they’d hoped:

Someone told us that the product would only help women, and women are only half the population — so what was the point?” Ms. Tariyal said. Other potential funders wanted to reimagine their technology as a product for men: Was there some way to re-engineer it so that it would measure testosterone? And one guy suggested they develop a machine that a man could use to covertly test the health of his sexual partners, because “women are liars” who spread venereal diseases.

That, of course, is an extreme example. But again and again it seems that one of the best ways to ensure a break from the status quo is to convince everyone else—i.e. men—that there’s something in it for them, too.