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The Greatest Economic Stimulus Plan Ever?

A new Citi Global Perspectives and Solutions report highlights a potential economic boost: women.

The Greatest Economic Stimulus Plan Ever?

What are the most effective tools for creating economic growth? It’s a question that drives and plagues government officials and economists alike, as an endless quest for increased growth dictates policies that touch all of our lives. From tax reform to trade policy, decisions on immigration, infrastructure and education, growth is what lies beneath it all.


But there is another powerful driver of economic growth that has long gone largely unrecognized: women’s economic empowerment. Commonly framed as a human rights or social issue, the conversation around women in the global workforce is now shifting towards the potentially explosive financial impact that increased gender equality could bring to both developed and emerging economies.

While women make up just over half the worldwide population, a recent study* determined that they account for only 37% of measured global GDP, according to a recent Citi Global Perspectives and Solutions (GPS) report. But make no mistake, today’s women are working–just not as consistently as men in the type of work that factors into GDP. In addition to formal jobs, women do 60% of the unpaid work, such as child and elderly care, shopping, and household tasks that allow society to run smoothly. In the U.S., if household production were properly accounted for in national income accounts, this work alone would amount to  26% of GDP.  

The Citi GPS report, Women in the Economy: How Women’s Empowerment can Shape the Global Economy. tells the story of women as a powerful, often untapped driver of economic growth. The research has far-reaching potential to raise awareness of the issues and ultimately shift public policy. The numbers are, in fact, staggering: Countries in the Organization for Economic Cooperation and Development (OECD) could see as much as a 20% leap in GDP if female involvement in the economy was raised to that of men.

You read that right: 20%.

To put that number into context, today’s estimates set the total potential growth for OECD countries at about 1.5 percent per year from 2016-18. According to Ebrahim Rahbari, managing director of Global Economics Research at Citi, and one of the report’s lead authors, the potential for growth through women’s economic empowerment far outweighs other options to boost growth such as monetary or fiscal stimulus packages.

“The 20% number is an ambitious, best-case scenario because it relies on female participation levels, average working hours and average productivity levels matching that of men. More conservative, perhaps more realistic estimates for the near-to-medium term put the potential at 6% if we create the conditions to increase female participation in the economy,” Rahbari says. “But even at 6%, it far surpasses what you would expect as a gain from alternative options to boost growth such as the proposed tax reform in the US, which might boost GDP by around 1-1.5% over a few years. The size of the opportunity is just huge.”


And here’s a bit of historical context:  At the height of WW2, the greatest GDP increase the United States saw was 28%, and that was the result of colossal government spending. It is also worth noting that the same era saw the largest increase of females into the US workforce, ever.  That was during a world war. If the world today could get a third or even a quarter of that growth, it would be a historic leap forward in not just economic growth, but many other spheres.

The new report is a follow up to one Citi first published in 2015, titled Women in the Economy: Global Growth Generators. It brought global attention to the issue, as well as a seat on the UN High Level Panel on Women’s Economic Empowerment for Citi’s Chief Global Political Analyst, Tina Fordham. The new report brings together data and global case studies from Citi’s own political and economic researchers, as well as comprehensive findings and recommendations from the UN Panel.

So what exactly does women’s economic empowerment mean? “It’s about creating gender equality and removing barriers to entry into the workforce for women,” says Fordham. “Empowerment comes from creating onramps for women to be able to work if they want to. It’s what happens when we address barriers like unpaid care work, or a lack of access to property and financial assets, which are just some of the reasons why women’s labor participation is lower.”

By identifying those barriers, which also include adverse social norms, discriminatory laws, and a lack of legal protection granted to women by their own governments, solutions start to emerge. “In developed nations, access to high-quality, subsidized child care, or removal of so-called ‘marriage penalty’ [when the second earner’s income, usually the woman’s, pushes a couple into a more expensive tax bracket] taxes can remove financial barriers that stand between women and work, and in the end, generate more tax revenue,” Fordham says. “In developing countries, the problems can be more difficult to overcome—basic things like infrastructure need to be improved. A woman might want to work, but if there’s no bus or roads where she lives, she’s not getting there.”

Unlike so many economic choices, the equation around women’s economic empowerment is a win-win for women, the economy, and society. “When money goes into the pockets of women,” she says, “they spend it on their families and that leads to better outcomes in terms of health, nutrition, education and there is a big national benefit to that. So many studies have confirmed this.”

As the terms of the conversation are expanded from a social issue to an economic one, it’s likely more leaders will be willing to stand up and get behind it. “It’s not just a purely affirmative action argument in terms of redressing historic injustice,” says Fordham, “but stating the fact that by investing in women, we’ll see a range of social and economic outcomes that are beneficial to society and to the economy as a whole.”


* “The Power of Parity” by McKinsey Global Institute

This story was created for and sponsored by Citi.


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