08 Mar 2022
For the first time in a decade, the cost of living has become the most topical economic issue in Australia. Unusually, the supply side of the economy, not demand, is now the main constraint on output.
This is an opportunity for macroeconomic policy and diversity – including initiatives to support women’s economic opportunities – to reinforce each other.
“Women overall have lower labour force participation, earn less than men with lower hourly wages and fewer hours worked.”
Reform is needed but is particularly challenging to implement when demand is weak and productivity gains elusive. The decade before the pandemic featured elevated underemployment and low wage growth. Productivity reform aims to improve the economy’s use of resources, adding additional deflationary pressure. Reform, as a consequence, isn’t very welcome.
The situation is different when demand is strong. Improving outcomes require reform to the supply side, to utilise existing resources more effectively. It’s the ‘inspiration’ not ‘perspiration’ in the equation. Reform in this case doesn’t threaten incomes - in fact, it can raise them further and it allows the economy to meet demand. The threat of reform is diminished and the payoff is higher - as is the tolerance for it.
Challenging gender inequity might be Australia’s best supply side reform. Australia fell six places to 50th in The World Economic Forum’s (WEF) 2021 Global Gender Gap Index. The decline in ‘economic participation and opportunity’ was stark. Australia is, stubbornly, a long way from equality.
Women overall have lower labour force participation, earn less than men with lower hourly wages and fewer hours worked. To quote European researchers, “the average women fares worse than the average man in any country”.
This isn’t helped by the unvarnished reality that Australia faces structurally different population dynamics. Growth in the working age population peaked in 2008 at 2.3 per cent a year. It hasn’t risen above 1.5 per cent since 2010 and has probably stepped down since the pandemic. The age dependency ratio inflected in 2009: the share of the population ‘dependent’ on those of prime working age (15-64) is now is now 55.1 per cent, up from 47.8 per cent.
If Australia wants continued robust economic growth, it has little choice but use its untapped labour force – including women - more effectively.
Notably, in the Global Gender Gap Index, Australia retained first place for educational attainment, suggesting opportunity not talent is what is missing.
Equalising the financial and social costs of having children across genders would seem to be fundamental. The ‘child penalty’ plays a role in women’s economic outcomes, but it’s not about biology. A Danish study of biological and adoptive parents separated the effects of raising a child from those of giving birth and found “almost no difference” in the impact on earnings including participation, hours worked and wage rates.
Gender is only one form of inequality but has negative macroeconomic impacts the pandemic has only exacerbated. Those on higher incomes tend to save more, reducing top-line gross domestic product (GDP) growth. Those on lower incomes borrow more, increasing economic vulnerability. Inequality is also associated with larger drops in consumption during downturns.
Better gender representation in decision-making positions during the pandemic would have likely improved outcomes. The UN’s 2020 Global Gender Response Tracker reported women made up 24 per cent of COVID-19 task forces globally. And of the 206 countries analysed, 20 per cent had not put in place specific measures to assist women.
Nearly all countries closed schools during the pandemic. Measuring the impact of this is complicated but managing students at home fell disproportionately on primary caregivers – often women. At what cost was medical advice often given priority over other types of expertise? A report from the World Bank, UNESCO and UNICEF suggests these students risk losing $US17 trillion in lifetime earnings (at present value), equivalent to 14 per cent of today’s global GDP.
Even within the home there have been benefits to better balance. Men’s mental health during this pandemic was strongly connected to their partner’s employment status. Having an unemployed spouse had a measurably negative impact.
As we work through what is hopefully the tail end of the pandemic, future preparedness is a topical issue with much at stake. In the US, biomedical inventions created by women are 35 per cent more likely to benefit women’s health than those created by men. But just 4 per cent of patented biomedical inventions are created by teams of women.
In the health sector, unbalanced participation is costly. A Canadian study suggests women are more likely to die or experience complications after an operation by a surgeon who is male than one who is female.
The intertwined pandemic and climate crises encourage us to think about ‘better’ and ‘different’ rather than just ‘more’. The World Bank suggests “it is essential that renewable natural capital and human capital are given the same importance as more traditional sources of economic growth, so that policymakers take steps to enable long-term prosperity”.
Addressing gender inequity can give us different, better and more. The best time to strike is when the iron is hot.
Richard Yetsenga is Chief Economist at ANZ
This article was originally published in The Australian
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
08 Mar 2022
08 Mar 2021