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The importance of gender balance from a male economist

Whilst achieving gender balance in the workforce is often looked at with the lens of being a social issue it is undoubtedly a commercial opportunity for business, industry sectors and the economy more broadly. 

Increasing female workforce participation is key to boosting Australia’s productivity. Currently (January 2020) the workforce participation rate among those aged 15-64 years is 61.4% for women and 70.9% for men. For females to achieve the same participation rate as males in Australia there would need to be an extra 1,001,174 women in the labour force. Currently there are approximately 6.5 million women in Australia's labour force.                    

As evidenced in the above graph Australia has improved its women’s workforce participation and made encouraging progress towards reducing the gender participation gap.  This progress is, amongst other things, due to increased levels of education, changing social attitudes towards gender roles, declining fertility rates, improved access to childcare services and increased uptake of flexible working arrangements.

However, Australia still has relatively low female participation rate in comparison to many of our OECD peers (eg Iceland 77.8%, Norway 67.2% and Sweden 70.7%) and our nation’s progress has not translated into some industry sectors.  For example female participation in the construction industry is lower than any other Australian industry and has remained unchanged for a significant length of time. 

Currently the construction industry has the largest gender imbalance of any Australian industry with overall female participation sitting at approximately 13 per cent of the construction workforce with most of these women in clerical and administrative roles. This comes at a significant economic cost to the construction industry as it hampers productivity and weighs on growth.  In short it is a missed opportunity.

Benefits to the economy and industry

Achieving gender equality is important for workplaces not only because it is ‘fair’ and ‘the right thing to do,’ but because it is linked to Australia’s overall economic performance.

International evidence is unanimous, when more women participate in economic decision-making at all levels within businesses and more widely at an industry sector level, economies grow. Improving female participation particularly in leadership boosts productivity, increases economic diversification and income equality in addition to other positive outcomes.

For example:

  • UN Women found increasing the female employment rates in OECD countries to match that of Sweden, could boost OECD GDP by over USD 6 trillion. Conversely, it is estimated that gender gaps can cost economies some 15 per cent of GDP.
  • In 2012, the Grattan Institute found that if there were an extra 6 per cent of women in the workforce, Australia could add up to $25 billion, or approximately 1 per cent, to our nation’s Gross Domestic Product.
  • The Organisation for Economic Co-operation and Development (OECD) estimates that closing the gender participation gap by 75 per cent could increase growth in Australian GDP per capita from 2 per cent per annum to 2.4 per cent. 
  • Goldman Sachs & JBWere calculated that the rise in female employment since 1974 has boosted Australian economic activity by 22 per cent. 
  • Projections by KPMG indicate that if the labour force participation gap between men and women was halved, Australia’s annual GDP would increase by $60 billion in just 20 years. Our cumulative living standards would also rise by $140 billion in this time (KPMG, 2018).

Benefits to businesses at a microeconomic / company level

There exists considerable microeconomic evidence—that the financial performance of companies improves with more gender-equality in organisational roles. Improving gender balance whether by industry, occupation or level (including board level, executive level and team level) has clear economic benefits for individual businesses delivering better financial performance.

Increased organisational performance: There is significant evidence from across the globe demonstrating the positive impacts on company performance of female representation on boards, in executive management and senior leadership.  For example McKinsey found that companies in the top quartile for gender diversity on their executive teams were 21 per cent more likely to experience above-average profitability. They found that executive teams that were high-performing had more women in revenue-generating roles. Findings also indicate that companies with low representation of women were 29 per cent more likely to underperform on profitability.  

Diversity and organisational performance: Credit Suisse found that well managed diversity brings together varied perspectives, produces a more holistic analysis of company issues and spurs greater effort, leading to improved decision-making.   Men and women have different viewpoints, ideas, and market insights, which enables better problem solving, ultimately leading to superior performance at the business unit level. A gender-diverse workforce provides easier access to resources, such as various sources of credit, multiple sources of information, and wider industry knowledge. A gender-diverse workforce allows the company to serve an increasingly diverse customer base.

Enhanced ability of companies to attract talent: When workplaces are equally appealing to women and men, organisations understandably have access to a larger talent pool. Employees value positive workplace cultures and environments that offer gender equality policies and practices, flexible working arrangements and support for employees with family and caring responsibilities.

Enhanced ability of companies to retain employees: Workplace policies that support gender equality retain talented employees. Research shows that employees are more likely to remain with an organisation in which there is a proactive diversity ‘climate’ as they perceive a concrete payoff to themselves by staying in an organisation they view as fair. The costs associated with employee turnover and resulting hiring and training new employees can be high. The Australian economy is estimated to lose approximately $3.83 billion in productivity and $385 million in avoidable recruitment costs each year (PwC, 2014).

Enhanced organisational reputation: The benefits of inclusive workplaces to organisational reputation are evident - gender equality is critical to an organisation’s success and is viewed as a baseline feature of leading organisations. High performing employees are attracted to companies that have a positive reputation for promoting gender equality.

In summary benefits of greater gender balance include increased financial performance; enhanced innovation and decision making; improved customer relations and orientation; reduction of staff turnover; stronger corporate reputation; attraction of the best talent; and a higher level of employee satisfaction. 

The aggregation of these benefits to individual companies produces industry and economywide benefits. Achieving gender balance is ‘fair’ and the ‘right thing to do’ but an evidenced based approach to this issue on the economic gain is also arguably a very good way to advance progress.

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