BrazilEnhancing gender equality in APAC holds $4.5 trillion potential, says McKinsey
In a wide-ranging report on workplace gender equality, the global strategy and management powerhouse McKinsey has contended that the Asia Pacific could add as much as $4.5 trillion to collective regional GDP in 2025 through greater female participation and business leadership.
In a follow-up to its original ‘power of parity’ report in 2015, the McKinsey Global Institute – McKinsey & Company's business and economics research arm – has released a wide-ranging study report on the advancement of gender equality across the Asia Pacific, concluding that the region could boost its GDP by 12% within eight years by improving female workplace participation and leadership – which, at a total of $4.5 trillion, is equivalent to ‘adding an economy the combined size of Germany and Austria each year.’
Naturally, there are significant existing differences across the countries of such a vast region, both culturally and economically, but even a mature economy with relatively strong societal gender equality standards such as Australia’s could by 2025 add up to 12% per annum to its ‘business-as-usual’ GDP trajectory by taking certain measures to promote greater female labour-force participation – an area in which the nation lags behind other developed economies.
All in all, every region studied in the McKinsey report has according to the firm the potential to increase its gross domestic product by between 8 and 16 percent over the next ten years, with India and China by as much as 18 and 13 percent respectively – representing absolute respective gains of $770 billion and $2.6 trillion per year. At the lower end of the scale sit Japan and Singapore, yet each nation could still get a five or more point boost to GDP – which for Japan is equal to a $325 billion annual bonus.
As it stands, the current contribution by women to national GDP varies greatly from country to country, by as low as 11% in Pakistan from a 22% labour-force share to the 41% contribution by female workers in China who make up 44% of the nation’s workforce. As a collective, the Asia Pacific region sits on par with the global average of a 36% female GDP contribution – stemming from a slightly lower average participation rate of 37% against the global figure of 39%. In respect to McKinsey’s $4.5 trillion projection in economic potential, 58% of the regional sum would derive from raising this female-male workforce ratio.
Beyond increasing simple participation, the remaining gains of McKinsey’s total estimate would be achieved through growing the hours of paid employment for women (17% of the calculation), and by raising relative female productivity with the introduction of more women to higher-productivity sectors – such as those within the STEM disciplines: Science, Technology, Engineering and Mathematics – which could alone contribute a quarter of the $4.5 trillion sum.
Again, there are notable regional variations when it comes to the factors at play and national levels of equality in key indication areas. China, for example, already has a slightly greater female-to-male ratio when it comes to professional and technical jobs, at a 1.07 representation, (this is also the case for Australia, the Philippines, Myanmar, Vietnam and Thailand, with the Philippines as high as 1.42), yet in China, the perceived gender wage gap ratio is at 0.59, and women hold only one fifth of the country’s leadership positions.
As to women in leadership, while not quantified in respect to national economic gains in this most recent report, past analysis from McKinsey has demonstrated the business case for greater female representation at the highest levels, showing that “companies in the top quartile for gender diversity on their executive teams are 21 percent more likely than other firms to report above-average profitability,” as well as that, those with “three or more women on their executive committees scored higher on organisational health, on average, than companies with no women at this level.”
Here, the figures show that women account for only one fifth of the leaders across the Asia Pacific – with female senior management numbers in Japan at just the 1%, despite women in the country making up 46% of its tertiary-educated graduates; a waste of talent, the report says, that certain East Asian nations can ill-afford with respect to their aging economies and labour-force erosion. Even in Southeast Asia, commonly considered a young demographic, the proportional retirement-age bracket of its most advanced economies is projected over the next 25 years to grow at a rates pushing or above 4%.
Career progression bottlenecks are common however across the whole region, including in the Philippines, which, according to both the McKinsey study and an earlier global report from Grant Thornton (although the figures differ at 33% against 46%) has achieved the most progress globally toward senior leadership parity (albeit a recent BCG report found that Vietnam led the way in the upper senior bracket). While the progress in the Philippines is encouraging, the female senior-level representation rate of 33% (on the McKinsey figures) is still well below the 53% graduate share, and the representation ratio is more than halved at the board level.
The authors of the report note, however, that “gender inequality does not exist purely in the workplace—it affects women’s life in society, too. Indeed, one influences the other. Progress on gender equality in work is unlikely to be achievable without progress on gender equality in society. Realising the power of parity will require addressing societal drivers of gender inequality in the workplace including education, health, attitudes towards women working outside the home, access to finance, and more access for women to the internet and the benefits of the digital revolution.”
When considering some of these systemic factors in workplace gender inequality, it’s apparent that the potential $4.5 trillion windfall cited by McKinsey won’t come for free. Yet, according to the consulting firm, the estimated 20 to 30 percent in additional spending on health, education and other areas required worldwide to tackle such issues in closing the gender workforce gap could reap returns six to eight times higher than the increased social spending that will otherwise be required.
The report concludes; “Asia Pacific is today arguably the most dynamic region in the world, a global engine of growth driven by productivity, investment, technology, and innovation. Women can help—and are helping—to power this engine, making vital contributions to sustaining and enhancing Asia’s growth and lifting more people out of poverty. Yet gaps remain large in many countries in the region on gender equality both in work and in society. From an economic perspective, trying to grow without enabling the full potential of women is like fighting with one hand tied behind one’s back.”
