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Lagarde: Delivering On The Promise Of 2025 – Speech

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By Christine Lagarde, Managing Director, International Monetary Fund

(W-20 Summit, September 6, 2015, Ankara, Turkey) — Good morning–Günaydin [Gew-nahy-din].

Thank you, Dr. Türktan, for your generous introduction.

[Mr. President / Mr. Prime Minister,] Mr. Deputy Prime Minister, Madam Ambassador: I am delighted to be here for this inaugural gathering of the Women’s 20—the W-20.

Today’s launch is timely. At their summit meeting last November, the G-20 pledged to reduce the gap in women’s labor force participation by 25 percent by the year 2025—which would have the benefit of creating an estimated 100 million new jobs for the global economy.

That was The Promise of 2025. Today, I want to focus on how to deliver on that promise.

Certainly, it represents a major challenge. But with so much attention focused on gender equity—by the post-2015 Sustainable Development Goals this year, and by the G-20’s pledge from last year—we clearly have a unique moment of opportunity.

We must seize it.

Why the 2025 Promise Matters

By the latest estimate, there are more than 3½ billion reasons why gender equity matters. And if those are not enough, let us reflect a little more why this issue is so important.

As I have said many times before, women’s empowerment is not just a fundamentally moral cause, it is also an absolute economic no-brainer. What do I mean by that?

First, we know that empowering women boosts economic growth. For example, we have estimates that, if the number of female workers were to increase to the same level as the number of men, GDP in the United States would expand by 5 percent, by 9 percent in Japan, and by 27 percent in India.1

These estimates, while of course tentative, are significant and large enough to be taken seriously. This applies particularly to countries where potential growth is declining as the population is ageing.

Second, getting more women into secure and well-paid jobs raises overall per capita income. For Turkey, it has been estimated that gender parity in employment could increase per capita income by 22 percent.2 The same kind of gains are also possible for many other countries.

Third, greater gender equality not only raises absolute income, it also helps to reduce income inequality. A forthcoming paper by our staff examines this relationship by comparing a so-called Gender Inequality Index to measured income inequality. The results have been quite striking—it suggests that a boost to education and employment chances for women could lead to improvements in income equality of a magnitude that historically took decades to achieve.

And forth, female empowerment can reduce poverty. The Food and Agriculture Organization, for example, has estimated that giving women the same access to farming resources as men could increase agricultural output in developing countries by up to 4 percent—lifting over 100 million people out of hunger.3

So, to sum up, boosting growth, raising overall incomes, reducing inequality, and tackling poverty: that is why the promise of 2025 is so important.

Implementation

We all recognize, however, that setting a goal and achieving it are two very different propositions. To deliver, we need decisive, sustained, and collective action.

This is where the W-20 can make a difference: reminding the G-20 of their commitment—and holding them to account.

The IMF supports this effort. In recent years, as you may know, we have strengthened our work on the macroeconomic effects of gender gaps.

This has included new research, for example, on women’s role in the economy and legal barriers to female participation. Perhaps even more importantly, we are now looking to apply this research in our policy advice to our member countries.

So the IMF stands with the W-20. On which key policy areas should we focus to help deliver on the G20 promise?

Three Key Policy Areas for Women’s Economic Empowerment

Over the course of a woman’s life, there are numerous opportunities to support her empowerment. I will highlight three critical junctures:

  • Going to school—education;
  • Getting a job—working; and
  • Having a family.

Let me touch on each one:

1.      Education

Turning first to school, let me begin by quoting Aung San Suu Kyi:

“The education and empowerment of women throughout the world cannot fail to result in a more caring, tolerant, just and peaceful life for all.”

Indeed, opportunities in the classroom have ramifications that are wide-reaching and long-lasting.

At an individual level, for instance, we know that one extra year of primary school boosts a woman’s earning potential by 10 to 20 percent. One extra year of secondary school boosts her earning potential by 25 percent.4

At a country level, Turkey’s own experience with girls’ education is instructive. The proportion of Turkish women with graduate degrees who have jobs is very high—it exceeds 70 percent. At the opposite end of the scale, however—where there is illiteracy—just 17 percent of women can find work.5 Indeed, it is estimated that adding one year of preschool education in Turkey could increase female labor force participation by 9 percent.6

The message is clear: girls’ education is probably the single best investment a country can make.

Beyond investment in education per se, there are other ways to boost schooling of girls. Social programs such as cash transfers to poor families can be made conditional on their daughters’ school attendance—as is the case in Bangladesh and Cambodia.7 And strengthening infrastructure—such as roads and sanitation—makes it easier for girls to get to school. A comprehensive approach is required.

The good news is that gender gaps in education are narrowing in many countries. In too many countries, however, they remain significant—including in many emerging markets and developing countries.

If the promise of 2025 is to be met, those education gaps must be closed.

2.      Employment

What about the second major policy area: employment?

After receiving an education, a common life event for most women is getting a job. And while having a good education certainly helps women enter the workforce, it is by no means a guarantee of employment.

A number of countries with highly educated women still have low levels of female labor force participation. For example, it is a well-known challenge in Japan.

Japanese women who are currently in their early-30s typically have more than 14 years of schooling behind them—second only to women from New Zealand.8 Moreover, Japanese women on average have completed more years of education than their male counterparts.9 Despite this, the gender gap in labor force participation in Japan stands at 25 percentage points—compared to just over 10 percentage points on average in major advanced economies.10

So yes, education is essential—but it is part of a larger package. What else is needed to help women find work?

First, removing legal barriers is vital. These include obstacles that prevent women from everyday activities—such as opening a bank account and having equal property rights.

Recent IMF research noted that almost 90 percent of countries have at least one important legal restriction that makes it difficult for women to work.11 In half of the countries we studied, when gender equity was constitutionally granted, female labor force participation increased by at least 5 percent over the following 5 years.

The second barrier is women’s pay. Even with the same level of education, and in the same occupation, women earn just three-quarters of what men earn.12 This is by itself a great disincentive for being part of the workforce.

Third, infrastructure can be an obstacle. Without access to basic transport or energy sources, women find it very difficult to work outside the home. In rural South Africa, for example, electrification increased female labor force participation by 9 percent.13

And fourth, there is unequal access to finance. In emerging and developing countries, 70 percent of female-owned small and medium-sized enterprises are either unserved or under-served by financial institutions.14

Increasing financial inclusion for women is an issue that I plan to emphasize at the UN Summit on the Post-2015 Development Agenda later this month. It is crucial to delivering on the 2025 objective.

3.      Family

So too is the third broad policy area—which revolves around the special role that women play in family life. As a practical matter, what can be done here?

For one thing, paid parental leave helps to maintain a woman’s connection to the labor market. Japan, for example, is making significant strides in this area. The government has expanded childcare leave benefits from 50 percent to 67 percent of salary.15 Employers are increasingly playing their part as well—for example, the paternity leave participation rate in one well-known Japanese insurance company reached 100 percent this year.16

This raises a salient point: men—not only as partners, but also as fathers, sons, and brothers—have an important stake in empowering women. Not only does this help their partners, daughters, mothers and sisters to achieve their potential, it also helps build a stronger society for all.

As Amartya Sen put it:

“Women are increasingly seen, by men as well as women, as active agents of change: the dynamic promoters of social transformations that can alter the lives of both women and men.”17

Policymakers and employers can work hand-in-hand to provide affordable and high-quality childcare. Research suggests that cutting the cost of childcare by half could increase the number of young mothers in the labor market by 10 percent.18

Tax reform can also help. In too many countries, the tax system discourages secondary earners—who are often women—from working. Replacing family taxation with individual taxation can reduce marginal taxes on these secondary earners, thereby encouraging women to work.

This package of parental leave, childcare, and a fairer tax system can enable women to combine a job with a family. Along with investing in girls’ education and easing women’s entry into the labor market, it also supports women’s economic empowerment.

Conclusion: From Words to Action

The G-20’s pledge to reduce the gap in women’s labor force participation by 25 percent over the next decade holds the potential to empower women in a historic way. More than this, it holds the potential to boost growth, raise overall per capita income, tackle poverty, and reduce income inequality for people all over the world.

In short, this can be a game-changer for the global economy. But the promise can only be fulfilled if words become actions.

We need to work together—the G-20, the W-20, the IMF’s 188 member countries—to transform aspiration into reality.

Thank you–Cok tesekkurler [chok te-shek-ular].

1 IMF Staff Discussion Note, Women, Work, and the Economy: Macroeconomic Gains from Gender Equity
2 World Bank: http://www.worldbank.org/en/news/opinion/2015/04/09/important-balancing-act-turkey
3 OECD DAC Network on Gender Equality, Women’s Economic Empowerment
4 Daring the Difference: The 3 L’s of Women’s Empowerment
5 IMF Staff Discussion Note, Women, Work, and the Economy: Macroeconomic Gains from Gender Equity
6 World Bank. 2013. Programmatic Concept Note: Turkey: Women’s Access to Economic Opportunities in Turkey Trust Fund
7 IMF Staff Discussion Note, Women, Work, and the Economy: Macroeconomic Gains from Gender Equity
8 IMF Working Paper, Can Women Save Japan?
9 Ibid
10 IMF Staff Discussion Note, Women, Work, and the Economy: Macroeconomic Gains from Gender Equity
11 IMF Staff Discussion Note, Fair Play: More Equal Laws Boost Female Labor Force Participation
12 Daring the Difference: The 3 L’s of Women’s Empowerment
13 Forthcoming IMF Staff Discussion Note, Catalyst for Change: Empowering Women and Tackling Income Inequality
14 Forthcoming IMF Staff Discussion Note, Financial Inclusion—Can it Meet Multiple Macroeconomic Goals?
15 Japanese Ministry of Health, Labor, and Welfare
16 Bloomberg News: http://www.bloomberg.com/news/articles/2014-04-22/japanese-men-bringing-up-babies-seek-to-send-wives-back-to-work
17 Amartya Sen, Development as Freedom
18 IMF Staff Discussion Note, Women, Work, and the Economy: Macroeconomic Gains from Gender Equity

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