Halving gender pay gap may boost developed and emerging markets GDP by 6%

Closing employment and wage gaps completely could lead to further economic gains, Goldman Sachs says

The gender pay gap has edged lower and is now about 18% in emerging markets and approximately 23% in developed markets, according to Goldman Sachs Research. PA Images

Reducing the current wage and employment gap between men and women may boost the gross domestic product of developed and emerging markets by 5 per cent to 6 per cent, according to a report by Goldman Sachs.

Closing these gaps completely could result in a 10 per cent GDP boost for developed market economies, rising to 13 per cent in emerging markets, the report says.

“Looking at these issues afresh, we find that shrinking working age populations mean that it is now more important than ever to utilise the full resources women have to offer (and to reward them fully),” the report by Goldman Sachs senior portfolio strategist Sharon Bell and emerging market strategist Sara Grut said.

Gender gaps persist in education, health, work, wages and political participation across developed and developing countries alike.

This is despite numerous studies that have highlighted the economic case, in addition to the basic human rights argument, for gender equality.

A report by the World Economic Forum last month showed that women will not achieve equality with men globally for another 131 years, with only tepid progress made in closing persistently large gender gaps, prompting the urgent need for action.

For the 146 countries covered in the 2023 index, the economic participation and opportunity gap has closed by 60.1 per cent, according to the WEF report.

Based on a constant sample of 102 countries covered in all editions of the report since it began in 2006, the economic participation and opportunity score regressed from 60 per cent in 2022 to 59.8 per cent in 2023.

At the current rate of progress observed between 2006 and 2023, it will take 169 years to close this gap.

While women are moving into positions of leadership in business, progress is slow and representation at the top of organisations remains elusive, the Goldman Sachs report said. Men account for 92 per cent of chief executives at large-cap companies listed in developed markets, reaching 94 per cent in emerging markets.

New challenges are also emerging as a result of the impact of advanced technologies on labour markets. The jobs that will be most affected by artificial intelligence also tend to be held by women rather than men: about 60 per cent to 70 per cent of the workforce in these areas are women, the report said.

However, roles that require a high degree of face-to-face interaction, or caring professions – both areas where women dominate – are likely to be made more productive through AI and are unlikely to be replaced by it, the report said.

What policy-makers, companies and investors can do

To address the gender gap, Goldman Sachs recommends that policy-makers, companies and investors focus on specific areas.

Education is "all-important", as women with a higher level of education are more likely both to work and to earn more when they are employed, the report said. They also typically spend this increased income on their families, improving their children’s educational attainment, health and welfare.

Stakeholders must also offer family-friendly policies, including maternity and paternity leave, as well as subsidised, high-quality childcare, the report said. All of these policies are associated, albeit loosely, with the higher participation of women in the workforce.

More transparency is needed in the disclosure of pay gaps, which Goldman Sachs says are "still large and still largely unexplained".

The report also calls for "broadening out the leadership pipeline", particularly in technology and finance, as these sectors are lagging in terms of female representation, both generally and at more senior levels.

These sectors are also crucial when it comes to financing women-led businesses and the implications of AI on work opportunities for both men and women, Goldman Sachs said.