The world has a gender problem. It hurts growth
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When it comes to identifying the causes of the two major economic problems currently facing the developed world—rising inequality and a slowdown in economic growth—sex is rarely mentioned. However, as far as Thomas Malthus, the original economic doomster, was concerned, the “passion between the sexes” was central to economic malaise.
If Malthus were alive today, he would no doubt argue that the Western economy is paying the price of excessive population growth in the world’s poorest economies. An increase in global labor supply exerts downward pressure on the wages of Western working classes, those with whom the world’s poorest compete for jobs, raising inequality and encouraging businesses to pursue cheap labor. The result is a reduced incentive to invest and slower global growth.
Malthus’ emphasis on population growth has long been brushed to one side. That’s because for much of the 19th and 20th centuries, his prediction of economic stagnation did not ring true—at least in the West. Not long after he published his “Essay on the Principles of Population” in 1798, Europe and North America entered a period of sustained economic growth. The work of the male inventors of the Victorian age was key to this growth, but it wasn’t the only factor. There was something Malthus didn’t bet on: the empowerment of women.
As women went to work, became economically independent and escaped early marriage, families got smaller. These smaller families boosted economic growth in numerous ways, including by preventing downward pressure on the average wage. Not only did a higher wage help raise the standard of living of the average family, it also provided firms with an incentive to mechanize, pushing forward industrialization. Plus, smaller families could better afford to educate their children and to save. Malthus became history. That is, until now.
With the onset of globalization, the West’s comfortable high-growth, high-wage economic model – one based upon relative freedom for women – has come face-to-face with a very different kind of equilibrium in other parts of the world. As trade barriers have fallen, Western workers have had to compete with an army of low-wage unskilled workers from elsewhere, an outcome of the high fertility rates and low standards of living that tend to exist in countries where women are second-class citizens.
More than 60 percent of the world’s illiterate population are women. Females earn 24 percent less than male workers. Only a fifth of landowners are women and less than a quarter of all lawmakers. What is particularly worrying, however, is the lack of catch-up between the West and the rest.
A gender equality index from the Center for Global Economic History shows that while there has been a general improvement in the relative position of women during the past century, we have seen little in the way of convergence between countries. It is this lack of convergence -- combined with the opening up of the world economy -- that is undermining the equilibrium the West had managed to achieve some time ago.
In a new working paper from the Center for Global Economic History, the authors argue that this lack of convergence reflects the fact that gender inequality is deeply rooted in family structures. Differences in what they call the “female friendliness” of family institutions -- such as the norms of marriage -- go all the way back to ancient times, with early civilizations paradoxically becoming the most patriarchal over time (hunter-gatherer societies were relatively more equal than many of their successors). Today, low female-friendliness of family structure is most often seen in societies where inequality is most pronounced.
The United Nation’s Gender Inequality Index, which includes measures of health, political empowerment, educational attainment and economic participation helps to highlight the difference in the gender gap by region:
In the Arab states, female labor force participation is a particular problem, reaching a low of about 15 percent in Iraq and Syria. By contrast, in sub-Saharan Africa women tend to engage actively in the labor market but carry a high reproductive burden, with a fertility rate of just under five children per woman. Child marriage is a related problem, not just in Africa but also in South Asia, where more than one in two women aged 20 to 49 married as a child.
Had women in places such as India and Africa been able to enjoy something closer to the freedoms of Western women, their economies would have been richer and there would have been less downward pressure on the wages of unskilled workers.
While gender inequality already features in numerous global discussions, it is strikingly absent from economic debates about inequality and growth. Thomas Piketty’s book Capital in the Twenty-First Century was meant to be an exhaustive study of wealth and inequality but contains only one mention of gender. It is missing altogether from Richard Baldwin and Coen Teuling’s noteworthy book Secular Stagnation: Facts, Causes and Cures, whose 21 contributors are male (more or less the norm for an economics book). It’s easy to dismiss Malthus; but also, it seems, to repeat his error. Bloomberg