Tuesday, October 03, 2006

Women Driving Global Growth?

by Edward Hugh

Aude Zieseniss de Thuin (that's quite a name that, isn't it?) has a comment article in today's Financial Times on the economic role of female labour force participation. The article itself is behind the great firewall, but it does draw our attention to an earlier Economist article which was fairly interesting (and which we here at DM somehow missed). As de Thuin points out, one of the key phrases in the Economist article was:

Over the last 10 years the increase in women [in the workplace] in developed countries has made more of a contribution to global growth than China has,

Or in other words, and as she says, "the arrival of this new workforce has done more to encourage global growth than increases in capital investment and improvements in productivity". This conclusion is drawn by the application of a simple, rough and ready, growth accounting framework, the rise in female participation improved collective productivity by changing the ratio of the non-economically-active (or economically dependent) population to the total population. There is no great mystery here.

The Economist drew our attention to a number of important details. In the first place, they provided a breadown of female labour force participation by country.

In the second place they use this comparison to highlight the fact that it is not increasing female participation as such that affects fertility, but rather an unsupportive institutional environment - whether in the home or in society at large.

It is sometimes argued that it is shortsighted to get more women into paid employment. The more women go out to work, it is said, the fewer children there will be and the lower growth will be in the long run. Yet the facts suggest otherwise. Chart 3 shows that countries with high female labour participation rates, such as Sweden, tend to have higher fertility rates than Germany, Italy and Japan, where fewer women work. Indeed, the decline in fertility has been greatest in several countries where female employment is low.

It seems that if higher female labour participation is supported by the right policies, it need not reduce fertility. To make full use of their national pools of female talent, governments need to remove obstacles that make it hard for women to combine work with having children. This may mean offering parental leave and child care, allowing more flexible working hours, and reforming tax and social-security systems that create disincentives for women to work.

The Economist's points are well made here, but they should not blind us to the fact that, with the noteable exception of the US, fertility levels in all the other societies referred to are still significantly belwo replacement, so a 'mother' friendly environment helps, but it doesn't resolve the problem. This also doesn't tell us either how those societies - like Japan, Germany and Italy - which now have significant 'fiscal overhangs' are going to find the resources to ever remedy this deficiency.


Anonymous said...

While better data might not have been available, an age range of 15 to 64 is too wide for a meaningful survey of labor force participation. Most people in developed countries have several years of schooling ahead of them at age 15 and typically retire some years before reaching age 64. This will significantly reduce the figures for female (or, for that matter, male) labor force participation, and can complicate multi-country comparisons because years of education and retirement ages aren't the same in all developed countries.

Iron Rails & Iron Weights

joeimp said...

Female labour force participation is a result of a strong economy, and not a cause of a strong economy. It acts as a buffer/negative feedback mechanism when there is a labour force shortage.

Unfortunately many economists have incorrectly identified female labour force participation as an economic stimulus. This is because they are blinded by the short-term economic boost created by an improved worker to dependant ratio. They seen to extrapolate the short-term economic boost into the future, ignoring its transient reality. The worker to dependant ratio is high because the female workers have not reproduced. After many generations of low fertility and high female labour force participation economic stagnation, like that seen in much of Europe, is the result.

Developed nations that keep their fertility up will do better economically than nations that focus on encouraging female abour force participation.

Anonymous said...

Let's keep in mind the fundamental fact that the economy is a _means to an end_, but reproduction is an _end in itself_.

In fact, it is _the_ purpose; it's what human life, considered collectively, is _for_.

Randy McDonald said...

"After many generations of low fertility and high female labour force participation economic stagnation, like that seen in much of Europe, is the result."

I'm not sure about that. That doesn't seem to be the case in Norden, for instance.