Participating in the Economy

Women’s inability to enter the labor market on the same footing as men denies their dreams – and the local economy suffers, too.

As well as being paid less than men, women are under-represented in the workforce – both as paid employees and as entrepreneurs.

In much of the world, women are more likely to be unemployed, to find it more difficult to secure paid work and to be denied access to financial services so they can open their own business.

This comes at a significant cost to the global economy. A 2016 McKinsey study found women’s full participation in the economy would add $12 trillion to global growth by 2025. At a regional level, unequal access to entrepreneurship opportunities and the job market leads to a 27 per cent loss of income in the Middle East and North Africa, 19 percent in south Asia and 8.5 percent in sub-Saharan Africa.

Access to paid work

The global labor participation rate – the percentage of people working or looking for work – is currently 76 percent for men; for women, it is only 49 percent. This varies significantly by region. India has one of the lowest participation rates in the world for women – just 27 percent of the country’s more than 600 million women are engaged in the job market.

Being out of work can be particularly difficult for women, and their unemployment rates are often higher. In the Middle East and North Africa, the unemployment rate for women is over 20 percent, more than double the rate for men. Much of the time, this is not by choice. Women and men worldwide express similar levels of enthusiasm for taking on paid work.

Again, there is a cost when women’s employment needs are not being met. The Asian Development Bank estimates that East Asia and the Pacific lose $42-47 billion every year because women lack the same employment opportunities as men. Just as importantly, the gap between aspiration and access means that, globally, millions of women’s dreams are not being fulfilled for reasons beyond their control.

To give more women access to the jobs market the International Labour Organization recommends national policies that take on work-family balance, workplace discrimination and creating meaningful jobs in the care economy.

The Informal Sector

The informal economy is the number one source of employment for women in developing countries. Typical jobs in this area include domestic work, street selling, and waste picking. U.N. Women estimates that more than 80 percent of women in non-agricultural jobs are in informal employment in south Asia, alongside 74 percent in sub-Saharan Africa and 54 percent in Latin America and the Caribbean.

Working outside the formal economy means women often lack basic social protections, from paid leave to healthcare, childcare, education and pensions. Women in the informal sector earn less than women in formal work and are more vulnerable to sexual harassment and discrimination. It is easier for men to make the transition from informal to formal work.

In recent decades, organizations such as WIEGO [Women in Informal Employment: Globalizing and Organizing] and the ILO have campaigned to extend basic social protections to female informal workers worldwide.

Entrepreneurship

To start a business, women need equal access to financial services, credit and loans, as well as a supportive environment for childcare. Growing a business often means having a good credit rating, but for women who run smaller businesses, it can be hard to build up a strong credit history, particularly if microfinance loans are not counted on public registries.

Globally, the World Bank estimates that 30 percent of small and medium enterprises are owned and run by women. Entrepreneurship rates can be relatively high in some developing countries. Senegal has a women’s entrepreneurship rate of 37 percent, and Uganda’s rate is 35 percent, compared to the much lower rates found in Western Europe. But that does not necessarily mean these countries are good places to start a business for women.

The Global Entrepreneurship Monitor finds that women in developing countries are often “necessity” entrepreneurs: they are running a small business as their only option, rather than the more traditional understanding of an entrepreneur, who enters the business world out of a sense of opportunity.

No developing world countries appear in the top 10 of the Female Entrepreneurship Index, which rates the best countries for women to open a business, and the World Bank has found that as an economy develops, women tend to leave necessity entrepreneurship roles for the formal paid sector.

In developing countries, 70 percent of formal women-owned small and medium businesses are either shut out of financial institutions or cannot get the capital they need. Among city-based African small businesses, the median female-owned firm has 2.5 times less start-up capital than the male equivalent. The World Bank notes that this is not because women are less effective entrepreneurs, but because they have less access to resources than their male counterparts.

To create a better environment for female entrepreneurs, experts suggest improving access to technology for women, reducing barriers to credit and savings, providing mentorship schemes and engaging men in supporting women-run businesses.