October 15, 2012

Empowering the Third Billion: Utilizing Women as Key Drivers of Economic Growth

With a staggering 1 billion women around the world set to enter the global economy in the coming decade, Booz & Company provide an analytical look into this complex group’s potential and the common challenges that it faces.

If female employment rates were to match male rates in the UAE, the country’s GDP could see a boost of 12 percent; in Egypt, it would grow by 34 percent. These figures indicate the pivotal role that women in the work force can play in spurring economic growth. Yet – despite amounting to almost 1 billion worldwide and rivaling the populations of India and China – this fast-growing group of people has not received sufficient attention from key decision-makers in many countries. In light of this, management consulting firm Booz & Company have created the Third Billion Index – a ranking of 128 countries based on how effectively leaders are empowering women as economic agents. The Index is a composite of established data on women’s economic and social status; it aims to isolate factors that facilitate women’s access into the larger economy as well as determine how additional advancements and further integration can be achieved.

Striking Conclusions
The Third Billion Index is a combination of indicators of women’s potential for economic participation, drawn from a spectrum of criteria – all of which were taken from existing data compiled by the World Economic Forum or the Economist Intelligence Unit. The index divides all the characteristics of women’s economic stand­ing into two separate clusters: the first, “inputs”, identifies measures that a government and other entities can take to affect the economic posi­tion of women. These are grouped into three combined elements that include women’s level of preparation for joining the workforce, the country’s access-to-work policies and entrepreneurial support.

The second centers on a set of “outputs”, which are based on observable aspects of women’s contribution to the national economy. These comprise issues such as inclusion in the workforce, the degree of advancement in the national economy and equal pay for equal work in practice.

Key Findings
The results of the index lead to several revelations about government practices and women’s economic progress. “First, there is a clear correlation between the front-end processes and policies regarding women’s economic opportunities (inputs) and the actual success of women in their national economies (outputs). We discovered this by clustering the 128 countries into five broad categories based on their index rankings,” explained Dr. Karim Sabbagh, a Senior Partner with Booz & Company.

The countries with a strong set of both inputs and outputs are labeled “on the path to success”; these are typically developed economies. Moreover, the countries “taking the right steps” have implemented a slate of input policies and are just beginning to see their efforts pay off. They vary widely in other political and social dimensions and include Malaysia, Tunisia, and Venezuela. On the other hand, a small number of states also comprising China and Cambodia are “forging their own path”; they are seeing modest output results, but have not yet established a strong foundation of inputs.

The next group of countries, classified as “average,” consists of those that have taken slow steps to improve inputs to women’s economic progress and have, subsequently, seen commensurate output results. Nations such as Columbia, Serbia and Thailand belong to that realm. Lastly, there are nations that have not yet approached the problem at all; those are said to be “at the starting gate” and include most of the Arab states in the Index, as well as Indonesia, Laos, and Nigeria. This category accounts for the largest number of the 128 countries, suggesting an immense economic opportunity in many parts of the world.

The Effect on “Outcomes”
Perhaps the most significant finding from the Third Billion Index is the impact of “inputs” and “outputs” on “outcomes” – the latter which refers to broader indications of well-being, including per capita GDP, literacy rates, access to education, and infant mortality.

“The data shows a very strong correlation between index scores and beneficial outcomes. This relationship indicates that positive steps intended to economically empower women not only contribute to the immediate goals of mobilizing the female workforce, but also lead to broader gains for all citizens,” said Dr. Leila Hoteit, a Principal with Booz & Company.

Universal Challenges
In truth, all countries have unique requirements and must combine specific input policies to create a solution that can best address women’s needs. However, Booz & Company’s research has also found several common challenges that women face – regardless of their country’s stage of economic development or its performance in empowering women.

“The first obstacle is the care economy,” said Dr. Sabbagh. “Around the world, women are the primary caregivers for children, the elderly, and the sick, and this burden hampers their economic development. If companies and governments want women to reach their maximum economic potential, they must also provide high-quality, accessible care for vulnerable populations.”

Enabling Women for the Future
Additionally, in every country in the world, women require investments – financial, educational, and cultural – in their future. “Allocating capital for investment in women’s businesses is fruitless if women do not have the education and training to run a business successfully, or the cultural perception that they can compete economically with men,” added Dr. Hoteit. “The measures needed to create change in each of these areas will vary according to a country’s level of economic development.”

“Lack of credit is another common hurdle,” said Dr. Mounira Jamjoom, Senior Research Specialist at Booz & Company’s Ideation Center; “although micro financing has helped launch many women-owned businesses, these schemes also risk limiting such businesses to tiny operations in the service sector, instead of helping foster larger operations.”

More so, in all areas of women’s economic empowerment, there is a need for detailed, updated, and gender-disaggregated data – so interested parties can better understand the issues that women face and more effectively frame solutions. This includes data on access to capital, property rights, and small and medium-sized enterprise (SME) ownership. Addressing these matters will require a set of solutions tailored to individual countries, with cooperation from various entities. Yet the universality of these challenges certainly shows that solutions in one part of the world will likely apply elsewhere as well, and that best practices will transcend borders.

Spotlight on the MENA Region
Three countries from the Middle East and North Africa (MENA) region are also featured in the inaugural Third Billion Index – and they include Egypt, Saudi Arabia and the UAE. The analysis highlights these nations’ remarkable socioeconomic transitions and also serves to combat some of the popular stereotypes about their women. It also spearheads discussions about the best path forward for the region as a whole and its women in particular.

In effect, this is a region with tremendous potential that has not yet been realized. Women’s regional labor force participation is at just 26 percent, and they hold ownership positions in only 20 percent of businesses in the MENA region. Furthermore, only about 9 percent of women in this part of the world actually start businesses.

In terms of the categories of this report, Egypt, Saudi Arabia, and the UAE are all “at the starting gate”. These three countries face substantially different challenges at the macroeconomic level, and the members of the Third Billion in each also face unique circumstances. Nevertheless, their governments and companies have a great opportunity to boost their own economic growth by opening new doors for women.

Egypt’s overall index score placed the country in the 108th spot. If women are to play a more active economic role in Egypt, the government must craft policies to formally correct societal and legal constraints that are hindering their advancements. In actuality, women’s participation in the workforce and ability to start businesses should be the most urgent items on the national agenda. And, the state needs to create jobs, grow its economy, and incite innovation to enable this.

For example, Egypt’s government can undertake a number of steps to encour­age private firm managers to employ women, such as subsidizing the cost of motherhood for a limited period of time; enforcing equal opportunity laws; offering better training and educa­tion schemes in partnership with the private sector to prepare women for new opportu­nities in growth fields such as technol­ogy. Flexible work arrangements such as telecommuting are one promising option, espe­cially given Egypt’s advanced level of telecommunications infrastructure. Finally, Egypt's well established NGO sector can also contribute to the economic empowerment of women through establishing connections with the private sector to foster corporate social responsibility (CSR) initiatives in this regard.

Saudi Arabia
Saudi Arabia was ranked 123rd on the Third Billion Index score. Despite the nation’s multitude of cultural and legal restrictions, females constitute 57 percent of university graduates – a figure strongly indicative of the great strides that have been made in safeguarding the education of women. Today, however, the challenge is to create opportunities for them in the marketplace. This can be steadily resolved through a number of measures: the Saudi government can create incentives for private-sector companies to hire women and institute a high-level task force to explore their needs in the labor force. With the combined efforts of the public sector, Ministry of Labor and companies, as well as an adequate entrepreneurial ecosystem in place, the country’s women could bring the economy to the next level.

The Federation assumes the 109th place on the Index Score. With high levels of education, strong personal ambitions and leadership support, Emirati women have the opportunity to advance rapidly as both workers and entrepreneurs. But laws related to maternity leave and non-flexible working hours deter their ability to efficiently pursue their careers. Changes regarding policy, infrastructure, and culture are also required. Women in the UAE need more inclusive work­places and dedicated entrepreneurial resources to reach their full potential.

Ultimately, the Third Billion consists of many individual women around the world – each with her own personality, needs, obstacles, hopes, and desires. Yet the global economy does not have the luxury of addressing this crucial group one woman at a time. Only sweeping institutional changes at the national, regional, and global levels can help women everywhere reach their full economic potential and make the contributions necessary to keep the global economy moving forward. These advancements will not solely benefit each woman directly, but also the community around her, the national economy she is supporting, and the world at large.

To learn more about the Third Billion Report and Index Rankings, please click here.