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Feminist economists respond to the recent IMF Discussion Note Women, Work, and the Economy: Macroeconomic gains from Gender Equity (Part 2)

Source: Association for Women's Rights in Development - Fri, 31 Jan 2014 19:00 GMT
Author: Friday Files
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FRIDAY FILE - In this second of our two part series on the International Monetary Fund (IMF) Discussion Note entitled Women, Work, and the Economy: Macroeconomic Gains From Gender Equity, feminist economists Prof. Stephanie Seguino with Associate Prof. Elissa Braunstein and Dr. Anit N. Mukherjee take a look at the some of the shortfalls in the report related to gender wage gap, how macroeconomic policies perpetuate gender inequality, female labour force participation rate (FLFPR) and unpaid care work.

By Prof. Stephanie Seguino with Associate Prof. Elissa Braunstein and Dr. Anit N. Mukherjee

Prof. Stephanie Seguino[i] with Associate Prof. Elissa Braunstein[ii] assert that the Discussion Noteadvances the claim that “providing women with equal economic opportunities and unleashing the full potential of the female labour force (has) significant prospective growth and welfare implications (p. 12).” The implicit argument underlying the brief is that economies that limit women’s labour force participation sacrifice efficiency.

The report acknowledges that women’s wages are lower than men’s and discriminatorily so. The inference is that this is due to idiosyncratic employer behaviour that reflects outmoded stereotypes. Legal remedies, it is argued, can solve this problem. This account fails to note that the gender wage gap is fuelled by job segregation, which concentrates women in low-wage occupations and jobs. When we couple women’s higher educational attainment with their increased labour force participation and lower wages, higher profits to businesses is the result. There is evidence that in some countries, the gender wage gap has in fact been a stimulus to growth via its effect on investment and exports. A plethora of studies published by feminist economists in academic journals provide evidence for some countries that gender wage discrimination has stimulated growth, via its effect on investment and exports. None of these studies are cited in the IMF study.

Feminist economists have also identified the role of IMF-type macroeconomic policies in perpetuating gender inequality across the globe. Examples include contractionary fiscal policy that reduces public services, thereby increasing women’s care burden and making it more difficult for them to participate in paid work; inflation targeting that raises unemployment rates, worsening the gender competition for scarce jobs, with women losing out or facing domestic violence at men’s loss of their male breadwinner roles; financial deregulation that has led to global economic instability, with women often carrying the largest burden for helping the family weather crises by working longer hours and acting as the emotional shock absorbers for their families.

On the policy side, the authors of the brief advance a narrow set of standard market-oriented policies that emphasize individual incentives to engage in paid work without addressing the larger structural impediments to women’s economic empowerment. For example, they propose that governments shift from family income taxation to individual taxation in order to spur women to join the labour market. They further advocate for tax credits to employers to encourage them to hire women, without assessing the impact on public sector budgets needed for infrastructure spending and social spending to reduce women’s care burden. Finally, and indeed surprisingly, they advocate for reduced child support social benefits since these, they argue, might be a “disincentive” for women to enter the labour force. There is little consideration of the impact of women’s entry into low paying jobs on children’s well-being as compared to social supports to families caring for children. Their movement into low-paid, insecure jobs is unlikely to achieve that goal.

The IMF policies are recommended in lieu of changes to structural features of economies that are by far the largest inhibitors of gender equality or of pro-active legislation that would benefit women such as minimum/living wages. These include the growth of low wage jobs, shredded social safety nets, firm mobility that holds down wages, and financial deregulation that contributes to instability. The authors neither mention nor critique a broad set of policy recommendations advanced over the last 15 years for improved macro-level policies to promote gender equality that address these problems. For example, the brief is silent on the usefulness of Europe’s reconciliation policies in promoting work-family balance for both women and men. Failure to engage with the deep and broad gender and macroeconomics literature is a major shortcoming of this paper and ultimately undermines its analysis.

A particularly stark lacuna in the IMF brief is any mention of the gender implications of the financial crisis that began in 2008. Europe’s austerity programs have represented a step backward in the pursuit of gender equality by watering down, for example, what had been accomplished through the reconciliation laws during the 1990s before the crisis began. Moreover, austerity has led to cuts that disproportionately affect mothers, especially lone mothers, as the UK’s Women’s Budget Group has demonstrated.  

In contrast to the IMF analysis of gender equality, feminist economics makes clear that power matters. Gender inequality is produced and reproduced every day, not only via dynamics at the family level, but also by institutions and the macroeconomic policy environment. Women’s entry into the paid labour force may well stimulate growth, but it is likely to do so as a result of the disproportionate power of firms relative to women, leading to more, not less wage discrimination.

Gender wage inequality, in other words, is often a major source of the growth stimulus as more women move into paid labour. The downward pressure on public sector budgets increases the pressure on women to “choose” paid labour over unpaid labour, but at a heavy cost, especially to long-run productivity growth. By contrast, the IMF fails to engage with issues of unequal power, the role of institutions and its own policy framework, and the role of caring labour in promoting development and growth.

The IMF should be called upon to engage with the full literature on gender and growth – in peer reviewed academic journals like Feminist Economics, World Development, the Cambridge Journal of Economics, and others, rather than selectively choosing the research it wishes to emphasize and ignoring the rest. In an organization that emphasizes free markets, it does not appear to be willing to engage in the free market of ideas.

In another response Dr. Anit Mukherjee[iii] says thatinterest in gender equity has been rekindled in the aftermath of the global fiscal and financial crisis. The recent IMF report on ‘Women, Work and the Economy: Macroeconomic Gains from Gender Equity’ is an attempt to gather the existing evidence in favour of an economic justification for increasing the ‘participation’ of women in the labour force and to advocate for policies which would remove the supposed ‘barriers’ that prevent them from contributing fully to productive activities in the economy.

The hypothesis underlying the paper is that the female labour force participation rate (FLFPR) is low and should be increased. This rise in FLFPR would generate an additional driver for growth in per capita income. Even in advanced OECD countries, this increased FLFPR would raise the GDP by 5% in the US and 9% in Japan, while the gains in developing countries are substantially higher - 34%in Egypt, for example. It is therefore argued that economies would reap efficiency gains if gender equity was achieved in the work force across the world.

This standard growth accounting framework is misleading in many respects. First of all, the FLFPR is not grounded in a gender analysis of ‘work’ in different conceptual and practical contexts. The most significant omission to growth as well as national income accounting is unpaid work (see Waring, If Women Counted). While the report acknowledges that women contribute overwhelmingly to unpaid work, it does not call for a change in reporting standards, which would incorporate gender disaggregated unpaid (care) work indicators. Initial estimates of the economic value of the work that carers in Australia perform has been calculated as 21.4 billion hours in the period 2009-2010 averaging nearly 1000 hours per person.  The 11.1 million full time equivalent (FTE) workers in the unpaid care economy was 20% more than the total Australian full time employed work force. In 2009-2010, the care economy was estimated to be worth $762.5 billion, out of which paid care was worth $112.4 billion, 8.8% of GDP, providing nearly 20% of all paid employment. Unpaid care was estimated to be worth $650.1 billion, equivalent to 50.6% of GDP and six times the size of the paid care sector. Women contributed to 77% of paid care work and 66% of unpaid care work[iv].

Second, it is not an economic choice to switch between the unpaid subsistence, household and care work on the one hand and the ‘productive’ paid employment sector on the other. This makes FLFPR indicator discontinuous and an inadequate measure to undertake a growth accounting analysis of macroeconomic impact of gender equity in labour market. This is particularly true of economies where the traditional modes of production and community ownership of assets are still predominant, which is applicable for a majority of countries in this work except few OECD economies. Starting out with the hypothesis that women’s labour supply decisions based on market wage are superior to traditional systems where women dominate both productive and unpaid activities puts into question the methodology employed in the paper.

Women’s contribution to ‘work’ and ‘production’ requires a far more nuanced approach than looking only at partial indicators such as FLFPR. While it is heartening that IMF has acknowledged the role of gender equity as an important objective to pursue, economic analysis of labour markets would need to go beyond the usual neo-classical hypothesis. Issues of unpaid work, subsistence production and community participation that determine the labour market decisions for the vast majority of women in this world need to come to the forefront of economic analysis.

Edited by Rochelle Jones

Read part one: http://www.awid.org/News-Analysis/Friday-Files/Feminist-economists-respond-to-the-recent-IMF-Discussion-Note-Women-Work-and-the-Economy-Macroeconomic-Gains-from-Gender-Equity-Part-1

[i] Stephanie Seguino is Professor of Economics at the University of Vermont, USA. Her current research explores the relationship between inequality, growth, and development. A major focus of that work explores the effect of gender equality on macroeconomic outcomes, with a recent paper investigating the macroeconomic role gender plays in countries with a balance-of-payments constraint to growth. She has also examined the gender and race effects of contractionary monetary policy. She is Research Associate at the School of Oriental and African Studies (SOAS), University of London, Research Scholar at the Political Economy Research Institute, Associate Editor of Feminist Economics, past president of International Association for Feminist Economics.

[ii] Elissa Braunstein is an Associate Professor in the Department of Economics at Colorado State University. In her work she uses a feminist lens to better understand macroeconomic and international economic processes and outcomes, with particular emphasis on issues of economic development and gender equality. She publishes widely in both academic and policy venues. Her current research focuses on macromodeling care, econometrically estimating the costs of patriarchy for economic growth, and assessing the impact of recent economic changes in the Latin American region on gender inequality in employment. She does regular consulting work for a number of international development institutions, including the ILO, UNRISD, and UN Women.

[iii] Anit N. Mukherjee is a Consultant with the Gender and Economic Policy Management Initiative of the UNDP. He is a public finance and policy expert specializing in the issues of education, health, poverty and gender in developing countries.

[iv] Waring, Mukherjee, Reid and Shivdas, 2013, Anticipatory Social Protection: Claiming Dignity and Rights, London: Commonwealth Secretariat

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