The economic benefits of more women in the workforce

An addition of 25 million women to the labour force will have the capacity of adding $85 billion to Pakistan's GDP.

My previous columns on the contribution Pakistani women could make to the development of the economy invited a number of comments. Some of these were sceptical of the claims I was making. There was an impression on the part of several commentators that I was attempting to be cheerful about one, possibly manufactured, aspect of what is indeed a dismal situation.  Those who believe that the economy is going down uncontrollably on a slippery slope are not prepared to look at some of the positives on which a better future could be built. One of them is the role women are poised to play. This is one reason why I am revisiting the subject and providing another way of looking at what women could do for the country’s economy.

One place to start this inquiry is to provide a measure of the cost to the economy of the Pakistani women’s persistent — and it should be emphasised forced — backwardness. A simple calculation will help to underscore the magnitude of this loss. According to the 2011-12 Pakistan Economic Survey, Pakistan’s labour participation rate in mid-2012 was an estimated 32.8 per cent of the total population. This is extraordinarily low when compared to other developing countries. For a population of 181 million, this means the size of the workforce is 59.41 million. Of this, 41.2 million (69.4 per cent) is in the countryside and the remaining 18.2 million is located in the towns and cities. The World Bank estimates Pakistan’s GDP in 2012 at $200 billion. This implies output per worker at a little over $3,400. As explained below, this should be much higher in case women were allowed to participate more fully in the workplace.

Pakistan has one of the world’s youngest populations in the world with a median age of about 22 years. This means that one-half of the population, or 90.5 million, is below that age. A much larger share of this population should be in the workforce. If this were the case, the country would be benefiting from what the economists call the demographic window of opportunity, when the proportion of the working population is much greater than those who are dependent on it. This would be realised if both men and women of working age were able to work. This is not the case in Pakistan. The proportion of men in the workforce is relatively high; 68.6 per cent. That of women is very low; only 31.4 per cent. This means that while 63.5 million men are in the workforce, the number of working women is only 29 million.

This does not mean that millions of women are sitting idly in their homes. In fact, most of them are doing a great deal of housework looking after their children, preparing food for the family, and in the countryside, often tending farm animals. Would getting them out of the house and into the workforce add to the country’s gross output? The answer is, probably yes, if the marginal return to their work in the marketplace is higher than what would be paid to those who would be called in to provide help in the house. This will be the case certainly among the middle-income households in the urban areas. By stepping outside their homes, middle-income women will create opportunities for those women lower down on the income scale. This will produce a ripple effect in the economy or in the language of economics a ‘multiplier’ will get to work.

This brings me to one of the ‘what ifs… ?’ questions about the situation in Pakistan. What would be the impact on the economy — to its size and the rate of growth — if the proportion of women in the workforce reached, not quite the level attained by men, but close to it, say 50 per cent. This would mean an addition of 25 million women to the labour force. This addition to the workforce will have the capacity to add $85 billion to the gross domestic product of $200 billion — an increase of 42.5 per cent. With this increase in the country’s GDP, income per capita will increase from the current $1,100 to $1,575. In other words, women could make a larger contribution to the economy if they are allowed to be part of the workforce. But for that to happen, the society will have to lift the many burdens that weigh down women and prevent them from contributing to the economy.

Women could help in one other way. Much of the contribution made by them to the national output is in low-paying and low-rewards jobs. This is particularly the case in the countryside. No firm estimates are available on gender inequality in terms of per capita income. If we assume that the monetary rewards from the jobs they perform are only three-fourths of that by men, then by narrowing the gap, there would be a significant addition made to the gross domestic product.

The most productive way of making women contribute more to the national product is to improve the level of their literacy and impart them with better skills. This has begun to happen as argued previously in this space. We should, in other words, look positively at some of the changes that are taking place — changes that could ensure a better economic future for the country.

Published in The Express Tribune, December 3^rd, 2012.