DeAnne Aguirre, Leila Hoteit, Christine Rupp, Karim Sabbagh
October 15, 2012
Nearly 1 billion women around the world could enter the global economy during the coming decade. They are poised to play a significant role in countries around the world — as significant as that of the billion-plus populations of India and China. Yet this Third Billion has not received sufficient attention from governments, business leaders, or other key decision makers in many countries.
There is compelling evidence that women can be powerful drivers of economic growth. Our own estimates indicate that raising female employment to male levels could have a direct impact on GDP of 5 percent in the United States, 9 percent in Japan, 12 percent in the United Arab Emirates, and 34 percent in Egypt; but, greater involvement from women has an impact beyond what their numbers would suggest. For example, women are more likely than men to invest a large proportion of their household income in the education of their children. As those children grow up, their improved status becomes a positive social and economic factor in their society. Thus, even small increases in the opportunities available to women, and some release of the cultural and political constraints that hold them back, can lead to dramatic economic and social benefits.
In that context, a critical question of the 21st century becomes: What can governments, companies, investors, and NGOs do to ensure that the Third Billion realizes its potential? One of the factors that makes the Third Billion so powerful — its global reach — also makes that question difficult to answer. Any answer must start with an assessment of the specific constraints faced by Third Billion constituents in a given region.
To begin understanding the levers available to decision makers, we developed the Third Billion Index, a means of ranking countries in terms of how effectively they are empowering women as economic agents in the marketplace. The index itself is a composite of established data drawn from the World Economic Forum and the Economist Intelligence Unit, among other sources. Our composite index is unique, 10 Strategy& however, in that we have chosen to focus on women’s economic and professional empowerment.
The Third Billion Index groups the indicators of women’s economic standing into two clusters. The first is “inputs,” meaning steps that governments and the private sector can take to improve the economic position of women. These inputs include laws and policies regarding minimum schooling, employment policies during and after childbirth, and access to credit.
The index also considers “outputs,” meaning the observable aspects (social, political, and economic) of women’s participation in the national economy. These include the ratio of pay between women and men as well as the proportion of women among technical workers, senior business leaders, and employees. A combination of the input and output factors for a country determines its overall index ranking.
The results of the index lead to several striking conclusions. 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 national economies (outputs). We discovered this by clustering 128 countries into five broad categories based on their index rankings. The countries with a strong set of inputs, labeled “on the path to success,” universally also have strong outputs. These are typically developed economies such as Australia, Canada, Finland, France, Germany, and Norway.
We identified four other clusters of countries. Just behind the topperforming countries are those that are “taking the right steps.” They have implemented a slate of input policies and are just beginning to see their efforts pay off. These countries, which include Malaysia, Tunisia, and Venezuela, vary widely in other political and social dimensions; however, they have all moved onto the path of empowering women.
We also defined a small number of countries as “forging their own path.” They are seeing modest output results, but have not yet established a strong foundation of inputs. These countries include Botswana, Cambodia, and China. In the future, the countries in these two groups are likely to be among the most dynamic in terms of economically empowering women.
The next group of countries, labeled “average,” includes those that have taken modest steps to improve inputs to women’s economic progress and have seen commensurate output results. These countries, which include Colombia, Serbia, and Thailand, will need to invest more on the input side to move onto the “path to success.”
Finally, there are countries that have not yet systematically approached the problem at all. They have correspondingly worse performance. These are said to be “at the starting gate” and include countries such 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.
Perhaps the most significant finding from the Third Billion Index is the impact of women on broader “outcomes.” We defined “outcomes” as broader indications of well-being, including per capita GDP, literacy rates, access to education, and infant mortality. These transcend genderrelated effects and represent improvements to society at large.
The data shows a very strong correlation between index scores and beneficial outcomes. Such a 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 in such areas as economic prosperity, health, early childhood development, security, and freedom.
This is a crucial conclusion. The idea has been a consistent theme in the literature of women’s issues, but it is typically argued with anecdotal rather than quantitative evidence. Our findings give compelling numerical evidence of a correlation between women’s economic participation and a country’s general economic growth and well-being. They strongly suggest that the economic advancement of women doesn’t just empower women but also leads to greater overall prosperity.
In short, even when setting aside legislative measures to improve women’s quality of life, or setting standards for the number of highlevel positions held by women, government leaders have several precise levers they can pull to economically empower their female citizens. For example, they can foster more forms of financial credit or take steps to improve women’s literacy. Countries that pull these levers are producing results.
The report includes in-depth profiles of 10 countries that have a range of geographies and are at varying stages of economic development, which Strategy& compiled in conjunction with local experts in the private sector, academia, and government within each nation.
In addition, we profiled three countries from the Middle East and North Africa (MENA) region: Egypt (108th), Saudi Arabia (123rd), and the United Arab Emirates (109th), which are all “at the starting gate.” In focusing on this region, we wanted to highlight the remarkable socioeconomic transitions currently under way, and to show that women represent a crucial part of those changes.
At a recent conference on women’s issues held by the Organisation for Economic Co-operation and Development (OECD), the organization’s secretary-general, Angel Gurria, summed up the challenge: "Women are the most underutilized economic asset in the world’s economy."1 Only by correcting this situation through sweeping national, regional, and global institutional changes, and ensuring that women everywhere have the opportunity to become active economic agents, can we create stable prosperity, healthy societies, and a hopeful future.
1Sylvia Ann Hewlett et al., “The Battle for Female Talent in India,” Center for Work-Life Policy, 2010.