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The Surefire Solution for Economic Growth -- Women

By Jessica Alling – Mar 30, 2014 at 9:30AM

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New data suggests that having more women in the workforce is a driving factor for GDP growth.

There's no denying that the economic recovery following the global recession has been a long, drawn-out affair. But a new study suggests an easy way for countries around the globe to boost their GDP growth -- get more women involved.

International, motivated female
The study, completed by the International Monetary Fund at the behest of its first female leader, Christine Lagarde, found that if countries made it easier for women to participate in the workforce in the same proportion as men, the result would lead to significant growth rates for GDP.

Worldwide, women are either excluded from the paid working force or overexploited through low-wage work in informal settings. Based on the data collected by the IMF, the world's female workforce has stagnated around 50%:

Source: "Women, Work, and the Economy: Macroeconomic Gains From Gender Equity" 09/13; Prepared by Katrin Elborgh-Woytek, Monique Newiak, Kalpana Kochhar, Stefania Fabrizio, Kangni Kpodar, Philippe Wingender, Benedict Clements, and Gerd Schwartz.

If women had an equal footing with men in the workforce, the study claims that:

  • We would feel a big macroeconomic impact -- for example, GDP growth of 37% in Egypt, 9% in Japan, and 5% in the United States.
  • Increased income control by women would support economic developments in developing countries, including increased enrollment of girls in school.
  • Older workforces that will lead to shrinking labor markets can be offset in countries like Japan.
  • Female-owned businesses would have better access to productivity resources, leading to growth opportunities.
  • Corporations would be able to better manage their talent pools, with growth potential as a result.

That last bullet point is one of the key facts that corporate America has only just begun to fully embrace. Though there are plenty of other facts that affect women's participation in the workforce, encouraging women to join the upper ranks within corporations is only now becoming a widespread trend.

You need women
A separate 2007 study completed by found that companies that have more female board directors and management members performed better financially than male-dominated firms. Though this is a theme that has been reiterated by other studies from the Financial Times and The Economist, the 2013 Catalyst review of Fortune 500 companies found that there has been little growth for women in top level positions.

Women held only 16.9% of board seats in 2013, making that the eighth year in a row with no significant growth. The year also marked the fourth consecutive featuring stagnation for women in executive officer positions -- with women taking the helm in only 14.6% of the companies.

Left to right: Phebe Nokakovic, Marillyn Hewson, Mary Barra. Source: Company websites.

Last year did see two historically male-dominated companies promote women to the top job, with Phebe Nokakovic taking over General Dynamics (GD 1.54%) and Marillyn Hewson taking the reins at Lockheed Martin (LMT 1.42%). Likewise, CEO Mary Barra just recently took control of General Motors (GM -0.09%) in January.

Though there has been progress in the past few years, with 23 female CEOs being announced at Fortune 500 companies since 2006 (4.6% of F500 CEOs), there's a lot more room for women to advance in the nation's corporations.

It's no longer a "nice to have"
The argument for more women in the workforce and in the top spots of corporations is no longer just a feel-good one, according to the IMF's Lagarde -- there are serious economic implications for every country to consider.

Though there's no quick solution for the problem of slow economic recovery, by promoting equality for women in the workforce, each country has the potential to spark new growth opportunities, sending both personal worth and financial strength higher.

Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends General Motors and owns shares of General Dynamics and Lockheed Martin. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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