What would it be worth to New Zealand's economy if women
participated in the labour force at the same rate as men? Goldman
Sachs answered that question in a
report published last month: NZ's gross domestic product (GDP)
would grow by 10%. Put in nominal dollar terms, 10%
translates to approaching $20 billion. That's the kind of number
guaranteed to grab the attention of Treasury and of Government
policy developers.
Indeed, in late August it was enough to bring the Prime
Minister, the Chair of the NZX (Andrew Harmos), the Chair of
Goldman Sachs (Stephen Fitzgerald) and the Minister for Women's
Affairs (Hekia Parata) to a very well-attended breakfast in
Auckland.
Size of the prize
Fitzgerald shared the story of how their
"womenomics" research was kick-started by a female Goldman Sachs
employee in Japan in 2002. She was analysing the structural issue
of a shrinking labour force as Japan's population aged and
identified non-employed women as an underutilised pool to replenish
the workforce. It was an exciting insight: in Japan the GDP impact
was calculated to be a thumping 21%.
Goldman Sachs ran the same analysis in Australia 2 years ago
where the upside GDP growth was 1 point higher than ours -
reflecting that Australia's women start from a lower employment
rate so their prize is slightly larger.
Big ticks
To me, there are two great things about the gender /
productivity angle.
First, because it is a macroeconomic argument rather than a
micro-economic one, it engages the attention of the Government more
than individual firms. In turn, that means it complements the
angle that we talk about a lot at Professionelle, namely the
business case for more women at the top of organisation. Having
two barrels is better than one!
Second, it brings into the spotlight the really big
interventions which only the Government can action. I'm referring
to issues like the tax treatment of child care costs, and the
gender pay gap.
In a nutshell, this research appeals to the Government's fiscal
interests and therefore encourages it look afresh at interventions
that could really make a positive difference to working women
throughout NZ.
One other specific aspect in the Goldman Sachs report really
resonated with me. They expressed it as an "improvement in the old
age dependency ratio", in other words, that if more women worked
over the next generation, the pension burden on all the workers of
New Zealand would be less. I saw it from a related but
different perspective: if more women worked, more women would have
the chance of extra financial reserves to carry them through the
pensionable years. This isn't a new message at
Professionelle. Women's lower level of formal participation in the
economy, the gender pay gap, and their longer lifespan all combine
to make women more exposed to poverty in their old age.
Excellent material
The Goldman Sachs research is well worth reading. I particularly
liked the crystal clear
breakdown on page 4 of men's and women's employment patterns
with numbers and % which I have not seen elsewhere. It is also
encouraging to read a thoughtful piece based on domestic
statistics. So often we have to infer the NZ situation from
offshore statistics and patterns!
Hesitation
Given all these ticks, I should be shouting this research from
the rooftops, shouldn't I? The truth is that from the day I read
the Australian research I've struggled with it. I'll list my key
concerns below and perhaps wiser heads among our readers can clear
things up for me.
- If we move women from unpaid jobs like homecare and childcare
into paid ones we simply make their output easier to measure and
thus to include in GDP. The fact the women are currently
working for no pay does not mean they are unproductive (except
perhaps in a limited macroeconomic definition). A simple test to
prove this is to substitute paid labour into these women's unpaid
roles.
I will happily concede that if the
substitute were truly retired/unemployed and producing no service
or good of value prior to being hired for childcare and homecare,
then this would represent economic growth.
- Goldman Sachs is concerned that women gravitate to non-cyclical
community sectors like health. The implicit economic argument seems
to be three fold. First, these sectors are low-output (or: hard to
measure output!). Second, these sectors' resistance to cycles
means that in troughs the women remain employed and push down
productivity as measured by GDP per full time equivalent worker.
Third, perhaps, that more cylical sectors are constrained in growth
for want of workers.
My response is that NZ cannot
function without these community roles. Maybe they could be made
more efficient - goodness knows millions have been spent trying -
but we can't do without them. If we suck labour away
from them we need to backfill. Unless the backfill labour is
cheaper or is currently truly unproductive, how are we better
off?
- Are the skills of women who are currently in unpaid and
community roles suited to the needs of the paid, cyclical sectors?
Goldman Sachs indirectly address this by referring in places to
encouraging "highly educated" women back to work. The
implication is that they, at least, will have the right skills for
higher paid roles which, again by implication, contribute more to
the economy. (And if we use the expenditure basis for calculating
GDP, ie how much money was spent, then that's right. But if we use
the output basis, ie how many goods and services were sold, it's
arguably wrong… we can probably all think of occasions when
high pay and productivity gains did not go hand in hand).
- If significantly more women are encouraged by new policies etc
to seek paid work do we risk oversupply and downward wage pressure?
The implicit assumption in Goldman Sachs' report is that if the
women come, then roles at an average level of productivity can be
found for all them. The labour market is tightening, yes, but
do we really have latent demand for another 210,000 jobs (= the
male employment rate less the female rate times the # females of
working age)? If not, what time frame is this economic upside
positioned in?
I truly do look forward to fresh insight on these questions and
hope you will share these in the Comments box below!
P.S
Though I was not able to stay to hear Hekia Parata speak at the
breakfast, I was lucky to hear her address later that same day to
the huge audience at the EEO Trust's Work Life Awards dinner. She
was terrific - entertaining, energetic, empathetic and on message.
If you get a chance to hear Hekia speak, I strongly recommend you
grab it!