By
Michael A. Blank, Managing Director Senior Advisor, Credit Suisse Private
Advisors, Miami, Florida, USA
Women make up at least half of the work force in most countries. While there are still obstacles for women to fully participate in the production process, women are nevertheless increasing their spending power. Demographic surveys show that more and more women will have to make their own financial decisions. This development is mirrored in the developing world where the majority of immigrants are women.
Women are playing an increasingly important role in the global economy, contributing substantially to gross domestic product (GDP) via increased consumption for goods and especially services, but also via enhanced productivity. The increasing participation of women in the labour market is expected to add to potential growth, especially in the West. In most developed countries, there are more female than male students in higher education, defined as tertiary type B (minimum duration of two years full-time) and first degree. In the USA, this figure was 60% in 2004. In the UK, it is as high as 67%; Germany, 61%; and Sweden a high 53%. Japan and Korea lead Asia with 65% and 52%, respectively (source: Organisation for Economic Co-operation and Development). This trend is mainly due to current employment opportunities, as well as a dramatic rise in the cost of living. In general, education strengthens women’s attachment to the labour market by increasing their potential earnings.
Potential shift in GDP per capita growth
Ultimately, this situation should lead to increased labour productivity and employment performance, which in turn is bound to shift GDP per capita growth upwards – especially in mature industrialised countries, where we see a decline in male labour force participation rates. The extent to which this would bring an increase in potential GDP varies in different countries and is shaped by socioeconomic and political structures. In New Zealand, for instance, an increase in female participation by women aged 25–34 and adjusted for paid maternity leave to the average of the five best-performing OECD countries would raise potential GDP by one percentage point.
Obstacles to higher female participation
It appears, however, that there are still serious obstacles to taking full advantage of one of the most underutilised sources of growth worldwide. One is often associated with the role of working mothers. On the one hand, it is feared that an increased female participation rate will have negative effects on fertility rates. Academic studies, however, show that, on the contrary, there seems to be a positive correlation between fertility and the participation rate at least for the developed world. Country-specific differences have a significant effect on the employment rate for women, such as the tax treatment of second earners, childcare benefits/subsidies and paid parental leave. For example, the Nordic countries appear to show a higher level of full-time female participation.
In a very broad sense, the decision of women to join the labour force is influenced by three factors: their economic situation, their preferences and cultural habits, and the institutional framework in their society. While cultural habits do not change easily, institutional framework conditions can change more quickly and can also foster a change in cultural habits. While there is no all-embracing model for family-friendly institutional policies, some basic features can be identified. They all aim at assisting parents with balancing their workload within the family, and generally enhancing the participation of women in the working world. According to a Credit Suisse study , family-friendly policies include tax incentives that encourage women to earn a second income, childcare support systems and the promotion of gender equality with regard to employment opportunities.
Besides shifting the potential rate of growth upward, an increase in the female labour participation rate would change the economic structure of a society, as it results in a different demand, eg, for services. A higher participation of women in the work force also seems to reduce countries’ savings quotas, ie, increasing the propensity to spend in those countries. This seems to be of special importance for countries with a relatively high savings ratio, such as Germany. With many home-related services having to be outsourced, there is a greater potential to positively influence economic growth in both the developed world, where the demand is mainly created, and also in the emerging economies.
The global care chain
By the year 2005, there were slightly more female than male immigrants in all regions of the world except Africa and Asia. North America is exceptional, as female immigrants have outnumbered male immigrants since 1930 and still do as is the case in Canada. While most women historically migrated for marriage or family reunification, recent years have seen an increase in women on the move, drawn by the challenges and opportunities of an increasingly globalised world.
In 2006, the United Nations reported that poverty is increasing at twice the rate for women as for men. Over the last 20 years, the number of rural women living in poverty in the developing countries has increased by close to 50% to 565m, while the number of men living in poverty has grown by only 30%. Many women’s opportunities are also limited by patriarchal traditions. All this helps to drive female migration. In migrating, women often make the courageous decision to enhance their families’ well-being by leaving their country and families to work abroad. In the developed world, the combination of women’s increased participation in the work force and the lack of family-friendly labour policies and childcare options in many countries has led to a strong demand for migrant nannies, eg, Latin American nannies in Milan or Miami and Philippine nannies in Bahrain. This phenomenon is well known as part of the “global care chain” and is helping to build a foundation for worldwide GDP growth. Another part of the global care chain refers to nursing services, which have traditionally been provided by women. The excessive burden of health care needs in poorer countries, low pay, few opportunities for promotion and poor working conditions have led many nurses to migrate to wealthier countries.
Power of the purse
Overall, migration supports the home countries and can raise families out of poverty. For example, of the more than USD 1 billion sent back to Sri Lanka in 1999, 62% was from women. As they typically receive less pay for equal work or are employed in sectors that offer poorer remuneration, the total that women remit might be less in comparison to men. But available data from the United Nations show that women tend to send a higher proportion of their income more regularly and consistently. In addition, roughly 56% of the money transferred is used for daily needs, health care and education, thus supporting the long-term prospects of the home countries’ economies as referred to above in the developed world example. This is largely due to the fact that women are generally more willing to invest in all of their children than men, especially in traditional patriarchal societies.
According to the World Bank, global remittances in 2005 are estimated to be USD 232.3 billion. The sheer size is opening an interesting new business opportunity for banks willing to offer technology-driven, simple and low-cost payment transfer solutions. Potentially, today’s migrant might be tomorrow’s regular retail banking client. Moreover, we think that know-how transfer and the increased financial knowledge resulting from migration should further support the demand for micro-finance in the emerging market world. In the developed world, meanwhile, women are benefiting too. The rising proportion of women participating in work is likely to shift the spending behaviour and support GDP growth in the developed world in the future, especially taking the aging population into account. Women are becoming increasingly prominent in product categories that have not been specially marketed to them in the past, including financial services, consumer electronics or home improvement.
More women are responsible for their own wealth
With the massive entry of women into active economic life, marketing to women could become a major opportunity for financial service companies. Given the changes in lifestyle and the aging of baby boomers, a very high proportion of women in the US are becoming responsible for their own wealth. Women need to save and invest more if they want to have enough money when they retire.
Owning real estate is also important in long-term financial planning. According to the National Association of Realtors, single women are today’s fastest-growing segment of homebuyers supporting the market for condominiums. Financial institutions offering broad advice including products with protection are well positioned to serve this growing client segment.
In addition, we expect marketers of women’s luxury products to benefit further, particularly companies with strong global brand names. In general, companies need to adapt to the changing consumer world or they could risk missing half of the market. It is also important to highlight the differences in the behaviour of men and women, especially regarding consumption, saving and investment, and risk-taking behaviour. For example, many women tend to devote a larger share of income to activities that benefit the household. Many are more oriented toward productive, but less risky savings and investments. If managed properly, female migration can be a win-win situation, raising standards of living and improving quality of life in both developed and developing economies. A higher participation of women in the work force can induce new investment that increases output and GDP growth.
The material on these pages represents the opinion of Credit Suisse Private Advisors and is not intended to predict or depict the performance of any asset class, investment sector or commodity. The information provided herein including excerpts, abstracts, and other summary material derived from third parties is believed to be reliable but no such warranty is made. Past performance is no guarantee of future results. These views are as of March 2007 and are subject to change based on subsequent developments.
michael.blank@credit-suisse.com
Percentage of Women in Higher Education Source: OECD
Trends in Female Migration (%)
Source: United Nations, World Migrant Stock: The 2005 Revision Population Database
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