Women are the next China

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Screen Shot 2015 10 06 at 1.32.22 PMUS TrustGlobal female earned income versus China (in trillion of USD). Data as of August 2015.

China has long been an investor’s dream: a reliable economic juggernaut that made a 10% annual growth rate look easy.

But now the Middle Kingdom is sputtering, and investors are looking for the next big source of growth.

US Trust’s Joseph Quinlan advances an unexpected idea: women.

He characterises women as “the most underutilized and under-leveraged resource in the world.”

“Wealthier and healthier, influencers and creators — women now represent one of the most powerful economic cohorts not only the in United States but also the world,” writes Quinlan.

“Thanks to rising educational levels, greater labour force participation rates and rising incomes, the global purchasing power of women has never been greater,” he continued. “Around the world, more girls are in school, more women are working, and policies are being put in place to treat women more equitably.”

Women chinaUS TrustCountry GDP versus global female earned income, 2014. Data as of August 2015. Source: US Trust

Right now, only about 50% of women participate in the formal economy, which Quinlan notes is a “colossal waste of talent and a huge forfeiture of demand/spending.”

But even at these abysmal participation rates, the female economy is huge.

US Trust estimates that global female income topped $US15 trillion in 2014. That’s 40% larger than China’s economy, and larger than every economy except that of the US.

And somewhat obviously, if more women around the world get involved in the formal economy, this could be an even bigger amount.

Furthermore, even in developed economies where women already are major players in the economy, narrowing the gap between female and male employment could make a big splash. OECD estimates suggest that closing the gender gap in OECD nations would add 12% to the GDP.

Meanwhile, closing the gender gap in Japan would add ~20% to GDP in 15 years, and just narrowing it by 50% would add ~11% to GDP, according to OECD estimates. “That, potentially, would be a remarkable boost to growth for a nation literally and figuratively dying for a shot in the arm,” writes Quinlan.

However, the female economy’s boom is not inevitable. Unfortunately, there are some nations where women still forbidden to work, drive cars, own property, and sometimes even leave their homes. From a strictly economic point of view, this ends up being a disadvantage to individual women, and to the larger economy as a whole.

WomenUS TrustFemale labour force participation (% of female population age 15+).

A World Bank report, cited by Quinlan, found that out of the 173 economies examined in the report, women experienced gender-based job restrictions in 100 of them. Husbands could legally stop their wives from working in 18, and married women could not pass citizenship on to their children (while fathers can) in about 24.

Furthermore, women spend up to 9 hours a day doing menial tasks such as gathering wood, fetching water, and tiling the fields — which are all important things, but prevent women from participating in other jobs. And, “many girls, rather than being in school, are tasked with these chores, and therefore short-changed of the life-long benefits of education,” writes Quinlan.

Still, the female economy does have the potential to be the next economic boom.

As a final note, Quinlan cites a McKinsey Global Institute report that suggests that “as much as $US28 trillion — a staggering sum — could be added to the global annual GDP in 2025 if women in the world played an identical role in labour markets as men.”

“That’s very China-like in terms of impact,” he concludes.

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