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The Global Gender Gap

Could gender equality be the key factor to economic wealth?

Seminar Paper 2011 21 Pages

Economics - Job market economics

Excerpt

Table of Contents

1. Introduction

2. What is the Global Gender Gap?
2.1 Definition
2.2 How does the Global Gender Gap occur?
2.3 The Global Gender Gap Report

3. Could the reduction of the Global Gender Gap be a solution for economic wealth?
3.1 Gender equality as a theory for economic growth
3.1.1 The human capital theory in relation to gender equality
3.2 Gender inequality in an international perspective
3.1.2 Becker's theory on discrimination
3.2.1 Scandinavia vs. Poland - a comparison
3.2.2 The reduction of the global gender gap - a solution for economic wealth

4. The "Quota"-discussion in Germany
4.1 The arguments in favour of a quota
4.2 The Arguments against a quota
4.3 Conclusion
4.4 A short look at the Spanish "equality" laws and their outcome concerning quotas in comparison

5. Conclusion

6. Bibliography

1. Introduction

One of the highest goals to achieve in an economy nowadays is something described by the term 'sustainable development'. This term takes more factors into account than just the measurement of the gross national product (GNP) to describe the well-being of a particular country. Simply defined, one could say that 'sustainable development' means that "the rate of change of development over time is generally positive over some selected time horizon".[1] The actual development in this case can be seen as a vector of desirable social objectives. These could include amongst others: "increases in real income per capita, improvements in health and nutritional status, educational achievement, access to resources, a 'fairer' distribution of income and increases in basic freedoms."[2]

Many believe that the only way to really be able to achieve a sustainable development is through long-term investments in economic, human and environmental capital. A common shortcoming throughout the world is the fact, that the female half of its human capital is far from exhausted. Too often, women as human capital are undervalued and underutilized.[3] For global economics this can be seen as an excessive deficit, which, if rectified, could result in many benefits for the world economy. In this manner studies have found, that if the world's female capital were used more efficiently, many positive outcomes could be achieved. The economic growth in all the countries of the world would increase lowering the number of people living in poverty. Also, "business performances and innovation would be enhanced." Even problems such as the fertility rates in the world could be counteracted, as the "fertility rates would rise in OECD countries and decline in non-OECD countries".[4]

However, this all still depends on engendered government policies, which in many cases are still up for discussion. This piece of work shall focus on the Global Gender Gap in particular, discussing the matter of encouraging economic wealth my means of gender equality. Notably the current discussion in Germany on the topic of a quota for the representation of female board members shall be examined more carefully.

2. What is the Global Gender Gap?

2.1 Definition

The term 'Gender Gap' has been used for a variety of situations throughout the past century. It started off as an expression to describe the different voting habits of women since the introduction of women's suffrage. For this reason a gender gap is generally described as referring to "a situation where women are supposed to hold beliefs or attitudes or to engage in some form of socio-political activity, at a different rate or in a different manner than men".[5]

It is often suspected by social scientists that there are a variety of gender gaps.[6] In Economics these mainly refer to the four main sub-indexes of participation and opportunity, educational attainment, political empowerment and health and survival. Gender equality is measured by the Gender Gap Index. This is a measurement, which shows the correlation between the Gross Domestic Product (GDP) per capita of a country and its gender equality. By measuring gender based gaps in outcomes rather than using resources of input variables the Gender Gap Index avoids richer countries from automatically performing better regarding gender equality. In this sense perfect gender equality would be demonstrated with a score of 1 whereas a score of 0 would mean a country has total inequality.[7]

2.2 How does the Global Gender Gap occur?

Not just when describing but also as a means to solve gender gaps one has to ask oneself how gender gaps occur in the first place. What are the influential factors for gender gaps?

Ricardo Hausmann, Director of the Centre for International Development at Harvard University says that in fact current data shows that in 134 countries 96% of health gaps and 93% of education gaps have been closed. The area, however, which has not yet been closed accordingly, lies in economic participation.[8]

This is one important fact that strongly influences the global gender gap as the rate of female participation in the labour force compared to men is lower the world over. The rate may vary from country to country depending on many factors such as social and economic ones, but it still only adds up to an average of 60% of women being employed in the OECD countries.

But even when women are engaged in the labour force there still is a gender gap. This is due to the fact, that about three quarters of part time jobs are held by women, these constituting over one quarter of all working women.

But why is this? One of the reasons to explain the gap in working hours between men and women is that almost all over the world the lager amount of housework and child care is still seen to be the duty of women. The OECD estimates that „women would account for more than half of the GDP in the OECD area if the value of housework and childcare were included in national accounting".[9] The large amount of the household responsibilities falling onto women puts additional strains on women in the working force. Especially time is scarce leaving women with great disadvantages. Many have to combine the needs from home with work and some even have to take time off work to take care of relatives such as their own children or elderly e.g. sick parents. Even their mobility can be limited due to the desire to have a job close to home.[10] To add to the problems caused by solidified sexual stereotyping even women working the same hours of men earn less than men do. This is an often mentioned gender gap - The gender wage gap. According to the OECD the average difference in pay for men and women in full-time jobs is over 18%.[11] Even in countries such as Germany or the United States female pay is over 20% less than male pay as can be seen in the figure below.

" Gender Wage Gaps

Gender gap in median earnings of full-time employees, 2004 or latest year"

Abbildung in dieser Leseprobe nicht enthalten

Source: OECD Labour Force Statistics, shown in OECD, GENDER AND SUSTAINABLE DEVELOPMENT:

MAXIMISING THE ECONOMIC, SOCIAL AND ENVIRONMENTAL ROLE OF WOMEN

Many try to argue that this is due to the fact of women usually having lower-level jobs or work in female-dominated fields such as e.g. health care, which are underpaid. Here one should, however, ask oneself how come these fields are underpaid, and whether the fact that they are female-dominated may even contribute to this occurrence. What people have to consider trying to argue this way is, notwithstanding, that the gender wage gap is actually highest in management positions, even in the cases where the qualifications between men and women are the same.[12]

2.3 The Global Gender Gap Report

The Global Gender Gap Report was first prepared and released in 2005 and has provided a continuous comprehensive framework for benchmark global gender gaps ever since. Through this the World Economic Forum „has been quantifying the magnitude of gender-based disparities and tracking their progress".[13] The aim of the Global Gender Gap report is to reveal those countries that are leading in dividing resources equitably between both sexes in all levels. This way gender equality can be developed further throughout the world, by learning from other countries as role models.[14]

The Global Gender Gap is measured by the Global Gender Gap Index. This was developed with the purpose of having a figure which makes it easier to compare the level of equality between man and women across time.[15] The Global Gender Gap Report's index evaluates 134 countries by their proficiency of dividing their resources and opportunities amongst the men and women of their population. An important fact, which makes the results neutral, is that it doesn't take the level of resources into account, preventing richer countries to automatically have better results.

The size of the gender inequality gap is measured in four particular areas: First, the economic participation of opportunity, including the outcomes of salaries, participation levels and access to high skilled employment; Secondly, the education attainment, which comprises the outcomes on access to basic and higher level education; Further health and survival, in other words the outcomes on life expectancy and sex ratio and finally, political empowerment, meaning the representation in decision-making structures.[16]

The Global Gender Gap Report 2010 amasses the data from the previous 5 years. This way it tries to demonstrate the progress in the evaluated countries transparently. It is hoped that by doing this the international community will be able to pool its knowledge to achieve faster progress.[17]

3. Could the reduction of the Global Gender Gap be a solution for economic wealth?

3.1 Gender equality as a theory for economic growth

In theory, gender inequality may used to have fit into more traditional societies. This can be demonstrated by one of the most basic economic principles – the law of comparative advantage. This principle says, that "the individual with the lower opportunity cost of producing a particular output should specialize in producing that output."[18] Using this principle, which is actually used in describing international trade, analogously to describe the small economy of a family can shed light on the original sense of gender inequality. In times, when the economy was dominated by the primary sector of the economy and the secondary sector of the economy the opportunity costs of participating in the economy in general were a lot lower for men than women. This was due to the importance of physical strength in these two economic sectors. If in most cases men automatically due to their physique had the lower opportunity costs for participating in the economy, women, as a result, had to automatically face the lower opportunity cost of housework in most cases. This way the combined output (work and household) could be mastered most efficiently.

As in today's economy the tertiary sector of the economy and the quaternary sector of the economy rise in importance, the physical differences between men and women have diminished in importance. This leads to the question whether gender inequality can still be justified in today's economic theories. In the following part of this coursework gender equality shall be discussed in relation to the "human capital theory".

3.1.1 The human capital theory in relation to gender equality

The Human capital theory, as its name suggests, looks on human resources as capital. As a theory it claims that individuals are able to enlarge their stock of human capital by investing in it first. These investments would be in form of expenditures on education, training, health care, job search and migration.

In the theory it is assumed that increases in human capital lead to increased productivity and this yet again to an increase of individual earnings. Although the theory itself existed long before, Becker had one of the greatest impacts on the theory in the 20th century. According to him, the reason for human capital to be able to be treated and analyzed as a capital investment is due to the fact, that these expenditures take place in the present and yield in future periods.

This means, that if the internal rate of return exceeds the market rate of interest one will find individuals undertaking this sort of expenditures in order to increase their human capital. In this sense the internal rate is the interest rate that “equates the present value of the investment's benefits […] with the present value of the direct or indirect costs.” Here it goes without saying that anything that increases benefits or reduces costs will increase the internal rate of return making investments more appealing. [19]

The relation to gender equality in this theory is basically simple. Gender equality in the working force automatically leads to a larger amount of potential human capital. Due to the assumption that increases in human capital lead to increased productivity, this would mean that integrating women equally into the working force would increase human capital (larger resource) and with that increase productivity. However, there are a number of factors that have to still be considered in this sense.

The human capital theory has been greatly criticized by feminist economists.

These say that there are numerous embedded assumptions within the human capital theory, hereby making it objectionable when trying to explain the differences in earnings between genders. In many views of the human capital theory woman are merely seen as assets, who either provide “reproductive capital”. For example Smith draws a forceful distinction between productive and unproductive work. Here, although reproduction includes the creation of human capital, it is considered to be unproductive.

In later research economists have tried to integrate the gender perspective into the theory using it to try to explain how come a gender wage gap exists. These explanations include women having less human capital than men or women having the same amount of human capital, however, varying in type in 4 different ways:

- Women are more likely to invest in human capital with high nonmarket return
- Women seek to invest in human capital that is more likely to increase satisfaction instead of human capital with a high return in wages
- Women are less likely to invest in specific human capital
- Women invest in human capital that depreciates less rapidly [20]

With regard to these attempts to explain gender inequalities within the workforce it becomes apparent, that occupational segregation is being determined as in relation to rational choice. Here it is thought, that men are more likely to work in occupations requiring a higher level of education and training. This way a higher number of men increase their human capital value and their productivity and this way justify higher wages. This idea cannot be supported by empirical evidence, as there are many examples, which could be named at this point to demonstrate the opposite. E.g. that by the 1990s in the UK there were almost as many woman as men in higher education, and still the return received by women was substantially lower.

This is just one of the deficits of the human capital theory. Further, the human capital theory fails to explain why women often choose traditionally female occupations, as a bigger problem. The decrement of earnings as a result from intermittent employment doesn't differ considerably between male and female occupations, yet, the earnings in male occupations are monumentally higher. [21]

But if gender equality is so important for economic growth, how can it be explained that inequality is still so great? How can it be that women are treated so much less favourably, even though women are an unexhausted source of human capital and due to this fact be encouraged more to enlarge productivity?

Here another one of Becker' s theories gives insight into reasons for difficulties for women in the working force – his theory on discrimination.

3.1.2 Becker's theory on discrimination

Gary Becker's work on discrimination preceded his work on the human capital theory. In this theory he assumed that men and women are equally productive. Women are disadvantaged, however, by the discrimination coefficient. This is the fact that employers tend to discriminate against women by means of only employing women if they can be paid a lower wage. The lower wage would then be established as a man's wage minus the discrimination coefficient.

This can be illustrated in a graph:

Abbildung in dieser Leseprobe nicht enthalten

Gary Becker's 'taste for discrimination' model

Source: Ehrenberg and Smith (1982) in Dijkstra, 'Gender and Economics' p. 45

It is established in economic theory, that the wages for a particular group of workers is set equal to the marginal productivity of the last hired worker. This means that an employer, when not acting discriminatory, would either “employ N0 workers and pay the corresponding wage at C or employ N1 workers and pay the corresponding wage at E.” Here, the actual equilibrium wage results from the correlation of supply and demand (more workers want to do a job when the wage is higher). In the figure “the actual marginal product is the negativity sloped demand curve for Labour ABG.” When an employer discriminates against women, he will only employ them to the point where the women's marginal product is the same as the subjective value of the employer. In the graph this would be Wf+d. He will employ N1 women and make a profit of AEG. N0 men would be paid according to their actual marginal productivity at a wage of Wm=Wf+d.

This model demonstrates that the discrimination actually leads to a higher profit. However, if thought through, one could think, that this could lead to male wages sinking until there is gender equality, because if women earn less, and their labour then leads to higher profits for the employer, he will then hire more women until men are prepared to work for less, and so forth.[22]

[...]


[1] Pierce 1991, p. 3.

[2] Pierce 1991, p. 2.

[3] OECD 2008, p. 3.

[4] OECD 2008, p. 8.

[5] Robertson 2002, p. 205.

[6] Robertson 2002, p. 205.

[7] von Grebmer, 2009, p. 21.

[8] URL: http://www.weforum.org/issues/global-gender-gap/index.html (viewed: 18th May, 2011).

[9] OECD 2008, p. 13.

[10] OECD 2008, p. 14.

[11] OECD 2008, p. 12.

[12] OECD 2008, p. 12.

[13] WEF, Global Gender Gap Report 2010, p. V.

[14] WEF, Global Gender Gap Report 2010, p. V.

[15] WEF, Global Gender Gap Report 2010, p. V.

[16] URL: http://www.weforum.org/issues/global-gender-gap/index.html (viewed: 19th May, 2011).

[17] WEF, Global Gender Gap Report 2010, p. V.

[18] McEachern 2008, p. 32.

[19] O’Hara 1998, p. 465.

[20] Peterson 2000, p. 444.

[21] Dawson 2000, p. 48.

[22] Dijkstra 1997, pp.45 et seq.

Details

Pages
21
Year
2011
ISBN (eBook)
9783656708551
ISBN (Book)
9783656709831
File size
762 KB
Language
English
Catalog Number
v278296
Institution / College
Carl von Ossietzky University of Oldenburg
Grade
1.3
Tags
global gender could

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Title: The Global Gender Gap