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ISET Economist Blog

A blog about economics in the South Caucasus.

Who Is the Surgeon?

Riddles are fun; sometimes, though, they teach us more than expected. Consider this riddle, for example. A son and his father get into a terrible accident; the father dies immediately while the son is rushed to the hospital for an urgent operation. A minute after being called in, a prominent surgeon steps out from the operating room and says “I cannot operate on this boy; he is my son”. Who is the surgeon? Take a guess!

Hopefully, many of you guessed the quite obvious answer: the surgeon is the boy’s mother. The riddle has gained popularity due to the silly responses people give, in some cases suggesting a plot worthy of any of Georgia’s favorite soap operas. This is an excellent demonstration of the hidden biases and prejudices that over half of the world’s population (i.e. women) have to fight, which can partially explain persistent low female participation in labor markets globally.

Despite significant progress having been made in the last few decades, female contribution to economic activity remains far below its potential, but evidence of its social and economic costs is staggering. Recent studies indicate that barriers to women entering the labor force (cultural and societal norms, lack of decent childcare facilities, etc.) are costlier than previous research has suggested and the benefits of closing gender gaps are even larger than previously thought. According to the 2015 McKinsey Global Institute report, advancing women’s equality can add up to $12 trillion to global Gross Domestic Product (GDP) by 2025, which is roughly equal to the size of the US and Chinese economies combined.

According to the World Development Indicators published by the World Bank, in 2017 average Female Labor Force Participation (FLFP), the proportion of the female population aged 15 and older that is economically active (employed, self-employed, or actively looking for a job), stood at 52% in the countries of Europe and Central Asia, compared to 67% Male Labor Force Participation (MLFP).  In Georgia specifically, the gap between male and female participation is even more pronounced. Figure 1 shows these differences; despite significant steps towards adopting legislative and policy reforms to encourage gender participation and activity in the labor market, this trend is not reflected in women’s activity in the labor market. FLFP remains approximately 17 percentage points below MLFP in Georgia.

A recent International Monetary Fund (IMF) study from 2018 provided even more insight into how and to what extent low FLFP affects countries’ macroeconomic development, building on well-established microeconomic evidence that female and male workers bring different skillsets and attitudes to the labor market. However, these differences between male and female workers have largely been ignored in macroeconomic models that study determinants of economic growth in the long term. In conventional macroeconomic models, male and female labor are treated as perfect substitutes, but the 2018 IMF study based on a number of alternative data sources (World Bank macroeconomic data, The Penn World Tables data, The OECD Labor Force Database, and a firm-level data set from Chinese Annual Surveys) shows that there is a strong complementarity between women and men in production. In other words, increasing the female labor force when it is in short supply, is shown to bring greater benefits than an equal increase in the number of male workers unless female productivity is significantly lower. Models that fail to account for this complementarity between the male and female labor forces underestimate the impact of gender diversity on growth, incorrectly attributing some of it to technological changes.

Generalizing these results, closing the gender gap has the potential to increase a country’s GDP by 10-80 percent, conditional on initial FLFP. One channel of this impact is through the increased labor supply: more employees, in the longer term, are expected to produce more output. The second channel is through the impact of gender diversity on productivity. Increased female participation increases total labor productivity; that is, male workers also benefit from more gender diversity.  The cost of barriers to female participation is even higher on the path of development to a service-based economy, which tends to be more gender-equal. Barriers to female participation slow down this process and lead to even higher output and welfare losses.

The study once again demonstrates the value of more gender equality in the labor market, and finds new evidence of welfare gains stemming from labor diversity. Moreover, considering the complementarity of women and men, greater gender diversity is thought to have value not only for women but for men as well. Realizing these benefits cannot be a magic bullet to overcoming the obstacles that prevent women in the labor force from contributing to economic growth. The remedy lies in tackling gender inequality in education and healthcare, endorsing laws for equal rights to property ownership and credit access, childcare facilities, and properly designed family benefits. For example, Sweden’s success in having one of the highest rates of female participation in the world is mostly believed to be a result of investments in childcare and early education, as well as promotion of flexible work schedules for women and parental leave policies.

More recent investigations into the causes of low female presence in the labor force or in top positions reveal that oftentimes it is a lack of confidence rather than competence that holds women back. For instance, in a forthcoming study Buser and Yuan (2019) show that despite scoring equal points, more girls than boys stop competing in the Math Olympiad in the Netherlands after losing in the first round. Estes and Felker (2012) show in a controlled lab experiment that with a slight manipulation in confidence levels, which provokes all participants to tackle each and every task on an assignment, females’ overall performance matches that of males; without this manipulation, female participants tended to give up without attempting the task, reducing their overall performance compared to men. Lisa Damour, a clinical psychologist, provides an interesting conjecture in a recent New York Times article that the observed disparity in attitudes can be explained to some degree by schooling that praises and encourages “inefficient overwork” mainly by girls, since they seem to be the ones who are more self-disciplined. This, on one hand, builds the competence of girls, so they usually outperform boys at any level of education; on the other hand, it paves the way to perfectionism, manifested in lack of competence in the later stages of their lives.

These recent findings, coupled with well-established conventional knowledge on the costs of an uneven playing field for female and male labor, call for immediate action so that no aspiring female surgeon is discouraged from entering and competing in the labor market.


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Monday, 22 July 2019

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