strategy+businessONLINE OCTOBER 15, 2012BY DEANNE AGUIRRE, LEILA HOTEIT,AND KARIM SABBAGHHow to Keep the Promiseof the Third BillionA new index of countries links their future prosperity to raisingthe status of women.
A How to Keep the Promise of the Third Billion A new index of countries links their future prosperity to raising the status of women. by DeAnne Aguirre, Leila Hoteit, and Karim Sabbagh1www.strategy-business.com s political leaders around the world struggle Third Billion,” by DeAnne Aguirre and Karim Empowering Inputs, Integrating Outputs with economic headwinds, many of them are Sabbagh, s+b, Summer 2010.) Yet the women of the neglecting one of their most significant oppor- Third Billion have been largely overlooked in many tunities: raising the status of women, especially those in countries, and actively held back in others. emerging economies. Nearly 1 billion women could This is a far more complex problem than fostering enter the global economy in the coming decade, moving economic growth in a single country, because women into roles as employees, executives, and entrepreneurs. are scattered around the globe and they face a range of So far, many of these individuals have been economical- obstacles. In both developed and developing economies, ly stunted, underleveraged, or held back, to the point women have lower rates of labor-force participation and where they are invisible to the global economy. By receive lower pay than men for the same work. The eco- standing in their way, countries are letting a valuable nomic gains among this group to date have often come resource sit idle. despite strong societal forces opposing them. Indeed, Who are these women, and why is the status of the factors that keep women out of national economies women so important? According to data from the are so widespread and interconnected that governments International Labour Organization, a United Nations and companies seeking to help the Third Billion have agency that tracks global workforce statistics, roughly hardly known where to start. 865 million women will be of working age (between the Now, however, a new body of quantitative evidence ages of 20 and 65) by 2020, yet will still lack the funda- shows, country by country, how best to empower mental prerequisites to contribute to their national women and leverage this valuable asset. A clear set of economy. Either they don’t have the necessary education policies has emerged that will put more women into the and training to work, or — more frequently — they workforce and foster more women-owned businesses, simply can’t work, owing to legal, familial, logistical, and leading to stronger and healthier societies and more financial constraints. Of these 865 million people, 812 competitive national economies. million live in emerging and developing nations. We call this group the Third Billion, because their economic impact will be just as significant as that of the These guidelines were a result of the Third Billion billion-plus populations of China or India. (See “The Index, an in-depth research project that assesses the per-
DeAnne Aguirre Leila Hoteit Karim Sabbagh Also contributing to this article were Booz & Company partneris a senior partner with Booz & is a principal with Booz & is a senior partner with Booz & Christine Rupp; seniorCompany based in San Company’s Middle East Company and the leader of the associate Joanne Alam; andFrancisco. She leads the firm’s public-sector practice, where firm’s communications, media, senior research analystwork on organizational and she focuses on human capital and technology practice in the Mounira Jamjoum; contribut-talent effectiveness. development. Middle East. He is also ing writer Jeff Garigliano, and chairman of the Ideation former Booz & Company Center, Booz & Company’s senior editor Melissa Master think tank in the Middle East. Cavanaugh. The not-for-profit La Pietra Coalition maintains a website on the Third Billion Campaign: www.thethirdbillion.org/. 2 firstname.lastname@example.org email@example.com firstname.lastname@example.org of more than 100 countries in economically Countries that have a solid foundation of empoweringempowering women. To reach these conclusions, our inputs — policies aimed at giving women a footingteam of Booz & Company researchers started with eco- equal to that of men in the workplace and the nationalnomic data from the World Economic Forum and the economy — have yielded significantly better results.Economist Intelligence Unit, both of which study the The linkage is clear, and governments need not experi-workforce gender gap and women’s economic issues. ment or wonder what might work. Each organization publishes a gender parity index Some countries have already put these policies intothat is fairly broad. Between them, they cover all aspects place and are generating results. For example,of women’s well-being — including access to healthcare, Argentina, one of the countries that showed a stronglegal rights, and political participation. However, we correlation between inputs and outputs, was among theexcluded those issues from our analysis, in order to focus first Latin American nations to enact legislation regulat-specifically on the world of work. In doing so, we did ing working conditions for women and children. It hasnot wish to downplay these issues; instead, our goal was a strong education system, in which more girls completeto isolate the factors that directly correlate to economic secondary and tertiary education today than boys.empowerment for women, akin to controlling for cer- (Although this is true of some other emergingtain variables in a laboratory experiment. economies, it’s rare in Latin America.) Women have Our model looked at the performance of countries advanced in the political sphere as well: Since 2007, theon three specific groups of “inputs,” or policies put in country has had a female president, Cristina Fernandezplace to economically empower women. These were de Kirchner, and women account for 24 percent of theequal education opportunities for girls; access-to-work national parliament — the highest proportion in thelaws; and entrepreneurial support (such as credit, train- world.ing, and other forms of assistance). Similarly, Japan has a strong legal foundation of Next we looked at “outputs,” or indications of how support for women. Its constitution mandates genderwell women had been integrated into national equality, and the country passed equal opportunity lawseconomies. Our three output groups were inclusion back in 1986. Additional policies have followed, such as(female labor force participation); advancement (the the 2001 law on men and women’s common social par-number of women among professional workers, busi- ticipation, which aims to eliminate discriminationness leaders, and company owners); and equal pay for against women. As a result, Japan has a relatively highequal jobs in practice. rate of female participation in the workforce. The central hypothesis of the Third Billion Index More broadly, research on the Third Billion sug-was that stronger inputs should correlate with stronger gests that economically empowering women spurs GDPoutputs: The stronger the policies for their empower- growth. Our estimates, which are conservative, indicatement, the greater the economic status of women would that if female employment rates were to match malebe. The findings strikingly backed up this hypothesis. employment rates in the United States, overall GDP
Relative Progress3www.strategy-business.com would increase by 5 percent. In Spain, such a change says Cherie Blair, founder of the Cherie Blair could raise GDP by 10 percent. In developing Foundation for Women, which supports entrepreneurs economies, the effect is even more pronounced. The in Asia, Africa, and the Middle East. “This is more true United Arab Emirates would see a boost of 12 percent today than ever before. With the global economy still in GDP, and the Egyptian economy would grow by 34 struggling through a slow and spotty recovery, it is in percent. everyone’s interest to help women make the most of Finally, these policy initiatives don’t merely benefit their potential. No real social progress is possible with- women. Rather, they improve socioeconomic condi- out the economic progress of the Third Billion.” tions for everyone. In addition to inputs and outputs, we analyzed a third set of data points that we called “outcomes,” such as per capita GDP, literacy rates, and Before anyone pops open the champagne, we need to infant mortality. These were independent of the input emphasize that the notable achievements, in virtually all and output variables, but we hypothesized that coun- cases, represent relative progress, not absolute success. tries with strong performance in economically empow- Many of the countries that scored highest in our rank- ering women, as measured by the first two sets of ings benefited from comparisons against others with variables, would have stronger results in these societal poorer track records in empowering women. For exam- measures as well. ple, Germany ranked very high in the equal-pay catego- Again, the correlation that we had expected to see ry (along with other developed nations such as showed up clearly in the results. Positive steps intended to Australia, the Netherlands, Norway, and Sweden). economically empower women not only contribute to the However, women in virtually all of these countries still immediate goals of mobilizing the female workforce, but earn lower salaries than men. In Germany, women on also lead to more widespread gains for all citizens, such as average earn 23 percent less than men earn for similar economic prosperity and improvements in health, early work. childhood development, security, and freedom. Some of that disparity stems from structural differ- In short, the economic advancement of women ences. German women with greater family responsibili- doesn’t just empower women; it results in greater overall ties and obligations often choose to avoid demanding prosperity. This idea has been a consistent theme in the careers that require long hours and frequent travel. literature of women’s issues, but it is typically argued with However, even correcting for these differences and assess- anecdotal rather than quantitative results. Our findings ing only the salaries of men and women holding similar show that economically empowering women is the key jobs, with similar tenure and qualifications, there is a to greater societal gains. One reason is that women enter- salary gap of approximately 8 percent. That’s better than ing the workforce increase the overall labor force, mak- most other countries, and it represents a genuine ing countries more productive and increasing GDP. advance, but it’s still not equal pay for equal work. There is a multiplier effect as well. Women are Similarly, in the U.S., although women are rising more likely than men to invest in their children’s educa- into the ranks of middle management, they are not yet tion, which can lead to a boost in economic growth, taking the final step into senior positions. In 2011, especially as those children grow up and enter the work- women held just 16.1 percent of board seats at Fortune force themselves. Moreover, women who are economi- 500 companies and 14.1 percent of executive officer cally active tend to have fewer children, and this often positions. Less-developed countries have even worse translates to fewer children in poverty. records: A World Economic Forum survey of Indian “Giving women the chance to become financially employers in 2010 found that women employees held independent and make the most of their talents is the just one in 10 of the senior management positions at key to higher living standards and stronger economies,” responding companies.
Common Challenges The Burden of Care. In rich and poor countries, the 4 www.strategy-business.com ed to small, informal businesses in the service sector, Insufficient Representation in Upper Management.The precise blend of policy initiatives and private-sector rather than startups in key sectors such as technology. Inefforts to economically empower women will vary other cases, lending policies unfairly burden women. Inaccording to local needs. In general, however, most China, for example, many lenders base loan decisionscountries will have to address a similar set of challenges: on collateral, rather than cash flow. This particularly affects women, who have far lower rates of propertyresponsibility for children, the sick, and the elderly falls ownership than men in the country.almost exclusively on women. Women in the countries Clearly, governments cannot — and should not —of the Organisation for Economic Co-operation and simply force banks to lend to a specific business seg-Development (OECD) spend about 2.4 hours more ment, including women-owned businesses. Those kindsthan men on unpaid work (including care work) each of heavy-handed interventionist approaches have theday. In less-developed countries, unpaid work also potential to damage the credibility of recipients. Yet reg-includes household chores that compensate for a lack of ulators can at least ensure that the playing field is level.infrastructure, such as getting water and finding fuel. A recent study in Italy found that women running smallOne study found that if care work were assigned a mon- businesses were charged higher interest rates than menetary value, it would constitute between 10 and 39 per- for overdraft privileges, even though the women hadcent of GDP. slightly better credit histories than the men. Moreover, Many of these practices are grounded in deep cul- for key industries that a country seeks to foster, such as Lack of Credit. Credit is another universal issuetural norms. In China, for example, eldercare is viewed technology, the government can create tax breaks andas a woman’s tianzhi, or heavenly duty. As a result, some other incentives to direct capital to areas where it can do95 percent of Chinese women have eldercare responsi- the most good.bilities, and 58 percent help support their parents finan-cially. In Brazil, education policies add to the burden on The glass ceiling persists. Study after study shows thatwomen. The standard school day is just four hours in boards of directors and C-suite executives are still over-some regions of the country, requiring that women take whelmingly male, even in countries where women nowcare of children during the remainder of the day (and represent a higher percentage of college graduates thanleading to lower education outcomes as well). men and even more of the overall labor force in many Governments can intervene to better care for these countries. Thus, the European Commission is exploringpopulations and free women to work if they choose. the use of quotas to promote gender parity on boards.This intervention need not take the form of state-run Some countries, including France, Iceland, Italy,facilities. Even policy shifts can spread the responsibility Norway, Spain, and Sweden, have adopted such quotasfor care. For example, several years ago, Germany began voluntarily. Deutsche Telekom has promised that byoffering a bonus of two months’ pay if fathers took 2015, 30 percent of its leadership positions will be heldpaternity leave; the number of fathers exercising this by women.option doubled in the first year. The private sector can The use of quotas may seem like a blunt instru-take steps to address this issue as well, through more ment, but it should be seen as a stopgap measure untilflexible work schedules and by offering on-site day care cultural and business mores have evolved sufficientlyfacilities. and women can take their rightful place on the execu- tive floor. When Norway introduced boardroom quotasaffecting women. Many women’s lending programs thus nearly 10 years ago, the policy was controversial. Yet itfar have been limited to microcredit — systems based has generated results. In 2003, only 7.3 percent ofon small loans backed up by community activity. These Norwegian board members were women. By 2006, theare better than nothing, but their impact is often limit- number had increased to 21 percent, and today is near-
5 Lack of Support for Entrepreneurs. Finally, femalewww.strategy-business.com businesses and societies. + ly half. As with credit, simply leaving this issue up to In conclusion, the women of the Third Billion have market forces is not likely to result in a more equitable the potential to become a tremendous economic force split between men and women. in global markets over the coming decade. The coun- tries and companies that can harness this force and eco- business owners need structured support. The chal- nomically empower women — as employees, lenges they must overcome to succeed are so widespread entrepreneurs, and executives — will gain a clear edge. and numerous that they cannot make it alone. In devel- If the social benefit of economically empowering oped economies, they need access to energy and tech- women is not sufficient rationale to act, the sheer busi- nology. In developing markets, they need training in ness opportunity should tip the scales. As Caroline basic business functions. Anstey, managing director of the World Bank, said at a Networking is another critical aspect of this sup- women’s entrepreneurship event in 2011, “Gender port, and one that often requires concerted efforts from equality is good in and of itself, and it is smart eco- both the public and private sectors in developing nomics. But [equality] alone never seems to convince economies. A Booz & Company survey of 175 entre- anyone.” The findings of the Third Billion Index pro- preneurs in Saudi Arabia found that more than three- vide a set of operating instructions for how to go about quarters of respondents received no encouragement economic empowerment: education for girls, policies from teachers or mentors to start their companies. that give women access to work opportunities if they Perhaps predictably, among women entrepreneurs, 60 choose to take them, and support for entrepreneurs. percent of companies were in a handful of sectors where These measures represent investments for the future — women traditionally launch startups: retail, service, and not just in women, but in stronger, more prosperous education. Recent changes in Saudi laws now allow women to invest in higher-growth areas such as real estate and construction, yet if they are to succeed in these fields, they will need access to networks and con- tacts. There is no one perfect solution to boost female entrepreneurship, yet a number of measures can help. Governments can give priorities to women-owned busi- nesses for procurement contracts. Companies can take similar steps to ensure they have a diverse supply chain. Successful women can take part in mentoring programs for their younger counterparts; women with capital can reach out to promising young women with good ideas for new companies.