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How Do You Boost GDP by $28 Trillion? Gender Equality Would Do It, McKinsey Says

  • Gain would be size of U.S., China economies combined
  • Companies must set clear targets for equality programs

Denying women full participation in the global economy is costly. McKinsey & Co. has now calculated by just how much.

Full gender equality would add 26 percent, or $28 trillion, to global gross domestic product in 2025, according to a new report by the consulting firm’s research and economics arm.

While capturing that potential may not be realistic in the short term, boosting women’s equality at the same rate as the fastest-improving nation in a region -- bringing Bangladesh to the level of Singapore, for instance -- would increase annual GDP by $12 trillion in 2025, the study said.

“Women are such a crucial part of society and they are an undertapped resource,” said Anu Madgavkar, a McKinsey Global Institute senior fellow and a lead author of the report. A $28 trillion increase in GDP roughly matches the U.S. and Chinese economies combined.

The report’s release coincides with the 20th anniversary of the UN’s declaration of a Platform of Action for women’s empowerment, which aims to ensure women achieve parity in economic, social, cultural and political decision making.

Some companies are adopting policies that others could follow in advancing equality, McKinsey said. Among them, Wal-Mart Stores Inc. has a program to use women-led companies and entrepreneurs in its supply chain, and Hennes & Mauritz has set up education programs in Bangladesh, where many of its clothes are sewn. For new mothers, Vodafone Group PLC introduced a global minimum of 16 weeks of paid leave and a return-to-work period of reduced hours at full pay, even in countries where the government doesn’t require it.

Targets Necessary

Such private sector plans to advance the status of women only succeed with clear direction from senior executives, Madgavkar said.

“You really do need to set targets flowing down from the top,” she said. “Companies that don’t have targets are not that effective. Businesses can do a lot more to drive diversity.”

The report considered 95 countries representing about 93 percent of the population. The economies were filtered into 15 indicators of gender parity, from labor force participation to legal protections and health criteria. Overall, McKinsey found that women generate just 37 percent of world GDP even though they make up half the population.

There were huge regional variations, with India the laggard. India’s women generate just 17 percent of the nation’s GDP, compared with 18 percent in the Middle East and North Africa and 40 percent or more in North America and China, according to the report.

“When it comes to both economic equality and societal inequality, India has gaps on both scores,” Madgavkar said.

Internet Access

One area where women and men aren’t so far apart is in access to the Internet. About 52 percent of those lacking a connection were women, the report said. Connecting to the Internet gives women access to financial services such as banking as well as digital education, Madgavkar said. Still, more than 4 billion of the world’s 7.3 billion people -- male and female -- lack that access.

And despite the many regional variations, there were several areas in which every nation fell short, including leaders such as the U.S., Canada, Australia and New Zealand. Sharing of unpaid work such as family care, political and legal representation, and women in leadership all scored low in gender parity across the board.

“These are globally pervasive problems that won’t just go away as nations become developed,” she said.