When women lead

Gender equality is good economics,” declared a 2019 International Labor Organization (ILO) report. It went on: “Increasing women’s labour force participation has been shown to boost the gross domestic product at the national level.” Labor force participation refers to the percentage of people of working age (15 years and up) who work or actively seek work. As of 2022, the average labor force participation rate globally was about 47 percent for women and 72 percent for men, reflecting a gender gap of 25 percentage points. The good news in the Philippines is that our gap is narrower at 21.5 percentage points as of January 2023, with male and female participation rates at 75.2 and 53.7 percent, respectively. The gap had gone as high as 28.2 points at the height of the pandemic lockdowns in April 2020, with respective male and female participation rates at only 69.8 and 41.5 percent then.

In “Women in Business and Management: The Business Case for Change,” ILO cites evidence from the Organization for Economic Cooperation and Development (OECD), World Economic Forum (WEF), and PricewaterhouseCoopers (PwC). The 2015 OECD study estimated that a 50-percent reduction in the gender gap in labor force participation would raise the gross domestic product (GDP) by about 6 percent. WEF, in 2017, predicted that reducing the global gender gap in labor force participation by 25 percent by 2025 would add an additional $5.3 trillion to global GDP. The 2018 PwC study estimated that raising the OECD countries’ female labor force participation rate to Sweden’s 80 percent would boost GDP by over $6 trillion. Meanwhile, ILO found from its dataset covering 186 countries for the period 1991-2017 that every 10 percent of female employment growth is associated with 1.6 percent of annual GDP growth on average. “Given that women surpass men in educational level in many countries, they represent a formidable talent pool and an underutilized resource in an era of skills shortages,” the study observes.

The results are even more impressive for increased women’s participation in senior management positions in business. It’s an established fact supported by evidence that companies with more female executives make more money. In a 2016 study of nearly 22,000 firms from 91 countries, the Peterson Institute for International Economics (PIIE) found companies with women in management positions to be more profitable. Having a 30-percent female share in top positions (chief executive officer, board, and other top executive level positions) translated into a 15-percent increase in a typical firm’s profitability over those with none. Also in 2016, Credit Suisse Research Institute, from a survey of 3,400 companies across all industries, found that companies with at least 15 percent women senior managers had over 50 percent higher profits than those with a ratio of less than 10 percent.

What leads to these outcomes? Various studies have come up with possible explanations. Professor Joe Carella of Arizona State University found that more gender-diverse companies are more creative. Analyzing Fortune 500 companies, he observed that companies with women in top management roles produced an average of 20 percent more patents than male-led firms. PIIE found that having female senior leaders leads to less gender discrimination in recruitment, promotion, and retention, which in turn improved the company’s chances of hiring and retaining the most qualified people. There is also some evidence of “sexual dimorphism” in neurological science, that men tend to take quicker action while women would be more analytical—and a well-functioning organization needs a good combination of both. While sexual dimorphism research remains inconclusive, what is clear is that there are benefits to gender diversity.

The bad news is that ILO data show the Philippines to have seen a steady decline in women’s share in middle to senior management from 2011 to 2016, from well over 50 percent to just over 30 percent. Thailand, in contrast, had a steady rise, although it started at a much lower percentage than ours. Perhaps our companies ought to better heed the evidence, and make sure this declining trend is arrested.