Want a Better GDP? Close the Gender-Wage Gap
On April 12, 2016, the United States celebrated Equal Pay Day, a day that symbolizes how far into the year women must work to earn what men earned in the previous year (www.pay-equity.org). Although closing the gender pay gap has made progress over the past few decades since the Equal Pay Act (EPA) was passed in 1963, the United States has still works to achieve gender-wage equality. Not only is equal pay a step forward for women, but studies show it would also be beneficial to the United States’ gross domestic product (GDP) and the economy as a whole.
In a recent report published by the McKinsey Global Institute (MGI), findings show that greater gender parity in the workplaceâ€”in terms of pay, hours worked, and access to full-times jobsâ€”the greater the benefit the country’s overall economy (www.govexec.com). The findings in the report strongly recommend that both government and businesses take a more proactive stance in effectuating gender equality. Currently, economists are concerned that as America’s population ages and retires, there will not be enough young workers to take their place, which would have a harmful effect on the economy, as there would be fewer people to provide goods and services, to work and earn wages, as well as lower levels of productivity. Each of these factors would likely culminate in a slowing of GDP growth (www.govexec.com).
In spite of economists’ worries, the GDP will not suffer if employers aim to bridge the pay gap by making more room for women and paying them the same wages as men in the workforce. At present, women work fewer hours, mostly in lower-paying sectors, and have a lower labor force participation rate than men. However, if employers increase women’s labor force participation and assist them with entering and staying in more lucrative and highly-productive jobs, it will be easier to maintain current levels of economic activity and production even as the aging population retires, which will ultimately prevent economic deceleration in the United States.
Although the infographic below was published in 2012, the information is still relevant to the issue of pay disparity in 2016:
The McKinsey report provides number estimates on how the current gender pay gap could be closed. According to the report, if by the year 2025 women are paid equally as men, work the same number of hours as men, and are represented equally in every sector, an additional $4.3 trillion could be added to the United States GDP. This number is 20 percent greater than in a business-as-usual scenario, which does not account for closing the gender pay gap. Since this number is a high estimate given that women’s paid labor would have to precisely echo that of a man’s paid labor, McKinsey researchers also created a more plausible scenario in which each U.S. state matches the level of pay with other states currently making the greatest progress toward gender-wage equality. In this situation, an additional $2.1 trillion could be added to the GDP by 2025.
While Equal Pay Day was established by the National Committee on Pay Equity (NCPE) in 1996 as a public awareness event, women, men and the economy may rather want to make this a celebration of the past the moment gender-wage equality becomes a fact of existence in the United States.