How reducing gender inequality could boost U.S. GDP by $2.1 trillion

By Kweilin Ellingrud, James Manyika, and Vivian Riefberg
How reducing gender inequality could boost U.S. GDP by $2.1 trillion

Gender equality is an economically "smart" thing to do. The U.S. could add at least 5% to GDP by 2025 by advancing the economic potential of women in the workforce, write Kweilin Ellingrud, James Manyika, and Vivian Riefberg in Harvard Business Review.

It is remarkable that gender inequality in the United States, the largest economy in the world, remains so high. While many argue that gender equality is the “right” thing to do, it is now clear that equality is also economically the “smart” thing to do. New research by the McKinsey Global Institute (MGI) finds that every U.S. state and city could add at least 5% to GDP by 2025 by advancing the economic potential of women. Half of U.S. states could add more than 10%, and the nation’s 50 largest cities could add between 6% and 13% of GDP. We found that about $2.1 trillion could be added to the country’s GDP in 2025 if every state matched the state with the fastest progress over the last 10 years in three areas: women’s participation in the workforce, the share of women’s jobs that are full-time, and the mix of sectors in which women work. That’s 10% higher than if no action is taken to narrow the U.S. gender gap, and it means that an economy the size of Texas could be added in less than a decade. These numbers don’t come close to the economic value of true equality between men and women—which would net the U.S. economy up to $4.3 trillion by 2025.

About 40% of the economic potential MGI has estimated relies on getting more women into the labor force. The rest comes equally from shifting the balance in the mix of part-time and full-time work and the sectors in which women work. On average, women do 42% of the full-time jobs and 64% of the part-time jobs in the United States. Female workers are more likely than men to be working in lower-productivity sectors such as health, social work, and education, and less likely to be employed in higher-productivity sectors such as manufacturing and business services. Capturing the $2.1 trillion GDP opportunity would require the creation of 6.4 million jobs; they would be created at a rate of 1.0% a year in the period to 2025, compared with 0.6% in a business-as-usual scenario. This, we estimate, will require additional capital investment of around $475 billion.

We used a wide lens to analyze gender inequality in the United States because evidence from around the world shows that gender equality in work and gender equality in society go hand in hand—one is not possible without the other. So we looked at 10 indicators embracing both aspects, finding that the United States has high or extremely high inequality (which we define as being between 25% and 50% away from parity, and 50% or more away from parity, respectively) on six indicators: leadership and managerial positions, unpaid care work, single mothers, teenage pregnancy, political representation, and violence against women. To give an idea of the considerable challenges that the United States faces, there are just 66 women for every 100 men in business leadership and managerial positions. Women do about double the unpaid care work of men. There is one incident of sexual violence for every two women in the United States. The United States is one of the worst-performing developed nations in the world on women’s representation in politics. One in four U.S. families is headed by a single mother living in poverty. And according to one study, the high teen birth rate is estimated to have cost the nation nearly $10 billion in 2010. These problems all hold women back from achieving their economic potential.

Change will require considerable effort in both the private and public sectors, but there are obvious, concrete steps businesses and governments can take. Companies can promote gender diversity in their own organizations in areas such as recruitment and performance evaluation and take a comprehensive approach to increasing women’s representation in management positions that have flexible employment and leave policies, transparency in hiring and promotion, and strong women’s networks. Governments can consider ways to make improved child care and paid parental leave a reality for more men and women and can introduce state-level programs to address issues like teenage pregnancy.

Parental leave is one area where real change is beginning to happen. Just last week, New York become the fifth U.S. state to mandate paid parental leave - 12 weeks - for new parents or employees caring for an ill family member. Some companies are leading in this regard too. In 2007, Google increased paid maternity leave from 12 weeks to 18 weeks (and paid paternity leave from seven to 12 weeks) and achieved a 50% reduction in the rate at which new mothers leave the company. But caring for children and the elderly accounts for just 20% of the unpaid work that falls disproportionately on women; routine household chores make up the other 80%. (Altogether, this unpaid work adds up to about $1.5 trillion in value per year, and it isn't included in GDP.) Sharing those tasks more equitably will require couples, as well as institutions, to change.

If you need more motivation to argue for talent policies that better serve women or a fairer family leave policy - or to do the dishes if you're a man or choose not to if you're a woman - just think about that $1.2 trillion.

This article originally ran in Harvard Business Review.

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