The Economic Power of Womens Empowerment

Keynote Speech By Christine Lagarde

Managing Director, International Monetary Fund
Tokyo, September 12, 2014

As Prepared for Delivery

Good afternoon to all of youmina-san, konnichiwa. Let me begin by thanking
Prime Minister Abe for inviting me to this important conference, and for his
inspiring words of introduction. Let me also thank our generous hosts todaythe
government of Japan, Keidanren, Nikkei, and the Japan Institute for International
Affairs.
The great Japanese writer and feminist, Raicho Hiratsuka, once famously wrote:
In the beginning, woman was truly the sun. An authentic person.
Today more than ever, the global economy needs precisely this kind of radiant sun
to provide light and nourishment. To provide healing. To dry out the swamps of
poverty and unrest.
The reason is obvious. Seven years into the worst global financial crisis since the
Great Depression, the recovery is still too tepid and too turbulent. And even after
the crisis abates, we will face grave challenges to growthas a slower new normal
sets in, as populations age, and as economic disparities increase.
Given these challenges, we will need all the economic growth, dynamism and
ingenuity we can get in the years ahead. Thankfully, a key part of the solution is
staring us right in the faceunleashing the economic power of women. Bringing
the worlds largest excluded group into the fold.
This has special resonance here in Japanand indeed is a major priority of the
government, thanks to the great leadership shown by Prime Minister Abe. It is also
a priority for us at the IMFit is two years now since we released our first major
paper on this topic, called Can Women Save Japan? And the answer to that
question is still an emphatic: Yes!
With this call in mind, I would like to talk about three things today:

First, a birds eye view of female economic exclusion todayin Japan and
elsewhere.

Second, how to empower women in the economy across three areas

economic policies, laws and institutions, and societal and business culture.

Third, what Japan can do to further boost womens economic empowerment.

1. Womens economic exclusion and its costs

Let me start with the landscape of exclusion and why it is so harmful.
To some degree or other, women everywhere face barriers to flourishing and
achieving their potential.
Gender gaps in labor force participation exist all over the worldranging from 12
percent in the OECD economies to 50 percent in the Middle East and North Africa.

Japan is somewhat in the middleits female participation rate is 65 percent, 20

percentage points lower than males. This is better than the Asia average, but still
low for an OECD economy.
Another global reality: when women do participate, they tend to be stuck in lowpaying, low-status jobs. Globally, women earn only three-quarters as much as men
this is true even with the same level of education, and in the same occupation.
Again, this is an acute issue in Japan, with a gender wage gap of 29 percenton
the high side for an OECD economy.
Women also tend to be overrepresented in less secure jobssuch as informal,
temporary, or part-time work. This is partly because they want more flexible work
options, and partly because they are locked out of higher-status careers.
We can see this clearly in Japan. Many large companies reserve the permanent
positionsthe coveted sogo shokufor men, and women flock to lower-paying and
less secure jobsthe ippan shoku.
Globally, women also tend to be locked out of leadership positions, where gender
seems to matter more than ability. Women make up only 5 percent of Fortune 500
CEOs. They account for only 24 percent of senior management positions around
the worldthese numbers are fairly consistent across Asia, Europe, Latin America,
and North America. In Japan, it is 9 percent.
Clearly, the global economy is not using its productive resources very effectively. It
is tossing away economic growth at a time when it cannot afford such wanton
waste. This needs to change.
The benefits of greater inclusion are clearnot just for women, but for all of us.
For a start, women are the ultimate agents of aggregate demand, accounting for 70
percent of global consumer spending. So if we want growth, let us put women in
the drivers seat.
This brings to mind something that the Japanese author Osamu Dazai once said:
the term gender equality means that the status of men is raised to the status of
women!
This might be true, but, in the case of the labor market, we have to start with
raising women to the position of men! We know that eliminating gender gaps in
labor force participation can lead to big jumps in income per capita. This is true
everywhere in the world, but especially in lagging regions like the Middle East and
North Africa, and South Asia.
What about Japan? Here, we showed that gradually raising female labor force to
the average level of the G7 could raise income per capita by 4 percent
permanently. Going even furtherto participation levels of Northern Europe
would give Japan a further 4 percent. Overly ambitiousperhaps, for now. But
this shows the powerful ripple effect that higher female labor market participation
could cause.
We also know from the business side that prejudice does not pay. Companies that
are open to women do better than companies that are closed. For example, the
Fortune 500 companies with the best records of promoting women have been
shown to be 18 to 69 percent more profitable than the median firm in their area.

We can see this in Japan too. As Kathy Matsui has pointed out, Japanese firms
with the most women managers reported returns on equity exceeding 10 percent,
while the firms with the least women managers had low or negative returns on
equity.
So excluding women simply makes no economic senseand including women can
be a tremendous boon to the 21st century global economy.
2. Unleashing the economic potential of women
This brings me to my second area todayhow to unleash the economic power and
potential of women.
I think there are three main ways to do thischanging economic policies, changing
laws and institutions, and changing attitudes and culture.
Let me start with economic policies, which is clearly the bailiwick of the IMF.
In this domain, countries can lift up women by adopting more pro-female, profamily, approaches. Such policies include moving more from family to individual
taxation; providing more affordable child-care and parental leave; and allowing for
more flexible working arrangements.
We know that these policies can work. We have the evidence. For example, Sweden
devotes a full one percent of GDP to childcare and pre-primary spendingmore
than most other countries (and three times more than Japan). It also takes
workplace flexibility very seriously. It is no coincidence that Sweden has one of the
highest female participation rates in the world.
We can also look at the Netherlands, where female labor participation rose sharply
over the past few decades as part-time work was given the same status as full-time
workthe same social security coverage, the same employment protection, the
same rules. This means that women could have part-time work without part-time
rights.
Or take a country like Chile, which saw female labor force participation rise by 20
percentage points over the past quarter century. For sure, a lot of this reflects
cultural change, but some of it surely reflects economic policies tooespecially the
large increase in social spending, including on early childhood education and
childcare, and the increase in maternity leave.
And the benefit is clear: when we boost the participation of women, we boost the
growth potential of a country.
The second major area affecting womens empowerment is law and institutions. A
research group at the IMF (of women, no less!) is doing some work on this. In a
study spanning 100 countries, the preliminary findings are that gender gaps are
lower when men and women are treated equally under the lawin terms of
inheritance, property, and economic opportunity.
More specifically, what seems to matter most is equal property rights for married
women; default joint titling for married couples; and womens freedom to pursue a
profession, get a job, or open a bank accountwithout prejudice or partiality.
As one example, consider the story of Rwanda, where the legal system guarantees
equal rights in terms of land ownership and inheritance, and the constitution
enshrines gender equalitywith 30 percent quotas for women in leadership

positions. Because of this strategy, Rwanda tops the world for women in
parliament53 percent in 2013. And notably, Rwanda has been able to make
impressive progress in reducing poverty and inequality.
Think also about Saudi Arabia, where some of the main obstacles to womens
participation are legal and institutionalrestrictions on travel and participation in
specific sectors of the economy, unequal property and inheritance rights.
Encouragingly, Saudi Arabia has started to move forward in some areas, but it
could still go further. Morocco and Tunisia, for example, have enshrined gender
equality into their new constitutionsalthough in Tunisia, many womens rights
were already in place since independence.
Of course, changing policy cannot fix everything. Changing laws and institutions
cannot fix everything. We also need to change attitudes away from a maledominated culture, to make it more open and receptive to the great contributions
offered by womenin society in general, and in business in particular. This means
knocking down the outdated obstacles that hold women back.
In part, that means taking diversity seriouslydaring the difference, as I call it.
It means taking a leap of faithin hiring women, promoting women, investing in
women.
And it means having recourse to strong mentors and role models who can reach
out and pull up women up behind them.
We have a great example of thisright here in Japan.
Back in 1968, Fusae Ichikawathe remarkable leader of the Japanese womens
suffrage movementpaid a visit to a young woman who was busy teaching at a
university and raising her two children. She saw great potential in the young
woman, and encouraged her to become the first female Japanese delegate to the
United Nations General Assembly.
We all know that womans name: Sadako Ogata. And of course, she rose to become
UN High Commissioner for Refugees, and is now regarded as one of the most
accomplished global leaders of her generation. Who knows what would have
happened if she had not heard that little whisper in her ear all those years ago?
Never doubt the power of encouragement, the world-altering potential of women
helping women.
To sum it up: we know what it takes to reach a more gender-inclusive global
economy. We know the benefit it yields. So lets do it.
3. Female economic empowerment in Japan
This takes me to my third area todayhow Japan can further female
empowerment.
The issue has particular urgency here. Japan is growing older at a faster rate than
anywhere else in the world. Its working age population will fall from a peak of 87
million in the mid-1990s to 55 million by mid-century. As populations age, vitality
will diminish, and growth will slow, and it will be hard to maintain current living
standards. We expect growth potential of only about 1 percent over the medium
term.

There is one obvious option for rescuing Japan from this harsh demographic fate
empowering women. We all know that Japans women are among the highest
educated and most talented in the world. We all know that they have the ability,
the potential, and the desire to contribute even more. Empower them to do so!
I know that the government is working flat-out to level the playing field in the
world of workand I support these efforts completely. Prime Minister Abe and his
team have set ambitious targets for empowering womenand I am convinced that
they can be met.
We think that these measures can really pay offadding percent to growth each
year if implemented aggressively. This is significant. Yet even so, it falls short of the
1 percent boost to growth that Japan needs for Abenomics to succeed with flying
colors. So while women can save Japan, they need help from other structural
reforms.
Let me offer some thoughts on how Japan can fulfill its promises in the area of
womens empowerment.
An over-riding issue is to provide better incentives on both sidesmaking
employment more attractive to women, and making women more attractive to
employers.
Right now, most Japanese women tend to leave work when they have children
and do not come back. Recent evidence suggests that 60 percent of women leave
when they have their first child. And after they finish taking care of their children,
they start taking care of their elderly parents.
At the same time, companies are often reluctant to hire women, especially in the
coveted career positionsthe sogo shoku. These jobs are traditionally seen as
lasting for a life time, so hiring somebody entails a huge cost for the company.
Employers fear that they will not get a return on their investment as women drop
out. So they either do not hire women, or hire then in career streams with soft
skills and with few opportunities for leadership.
A related issue is that the internal corporate culture often turns off women.
Companies demand long hours, insist on face time, and tie pay to seniority rather
than merit. There are lots of silos andlet me be candidlots of exclusive boys
networks.
There is no magic bullet for solving these problems and breaking down this twotier employment structure. It requires changes in public policy complemented by
changes in business culture.
Starting with policy: a key impediment is the limited availability of childcare
without which women cannot go back to work. The government is certainly giving
this priority, pledging to create 400,000 new spaces by 2018. The situation is
getting better. But the government could go even further by cutting away some of
the red tape surrounding childcare, and letting more private providers offer their
services.
And as women go back to work, who will take care of their children in these
childcare centers? Who will take care of their elderly parents in the worlds fastestaging economy?

One option is skilled immigrants. We all know that Japan is renowned across the
world for the kindness and hospitability of its people. If it extends this welcoming
spirit by opening its doors and its borders in an appropriate way, then everybody
wins. Everybody gets the jobs they need. Everybody gets the care they need. And
Japan gets to shape its own demographic destiny.
In terms of other policy areas, Japan could also follow international best practice
by removing tax disincentives for women to work, extending parental leave, and
better targeting child care allowances toward those who need them most. I know
some of these issues are under discussion.
There is a limit, of course, to what the government can accomplish on its own. We
also need to address attitudes and cultureespecially in the world of business.
In short, business must become more welcoming of women. One obvious step is to
make the work environment more flexible. This includes moving away from the
ingrained culture of lifetime employment and long working hours, and toward a
system based more on output and performance. Businesses could also encourage
both men and women to take parental leave. They could take more risks in
promoting more women to higher positions, which in turn creates more mentors
and role models.
Again, I know that some efforts are underway here, but I believe that there is scope
to go further.
One final point here: a new business culture will require a new mentality, a new
outlook, for both women and men alike. In this, Japanese men might seek
inspiration from Tasogare Seibeithe Twilight Samurai in Shuhei Fujisawas
famous novelwho ran home in the evening to care for his family, rather than
staying out late with his fellow samurai!
The lesson is clear: if we want a strong and bright economic future, then we need
strong and bright women to help drive it. That means all strands of society need to
embrace inclusion.
4. Conclusion
Inclusion is a good note on which to offer my conclusion. The history of Japan
shows clearly that great things can happen when women are given the chance to
shine.
Think of the iron will behind the great women leaders of yorewomen like Himiko,
the shaman queen; Empress Suiko; and Masako Hojo, the daunting nun-shogun.
Think about the creative genius of women like Murasaki Shikibu, the author of the
literary masterpiece, Tale of Genji; Izumo no Okuni, the founder of the hauntingly
beautiful art of kabuki; or Raicho Hiratsuka, the inspirational feminist author.
Think about the pioneers of womens education like Umeko Tsuda and Yaeko
Yamamoto; or the great global leaders like Sadako Ogata.
Think of the graceful and talented figure skating champions like Mao Asada, the
effervescent young women behind the global cultural phenomenon of J-pop, and
even the bold and iconoclastic style of the Harajuku girls!

Think of theseand also of the millions of Japanese women today, brimming with
talent and potential, just waiting for the chance make their mark and turn their
dreams into reality.
Let us unlock their doors to success and unblock their avenues of opportunity.
So I urge everyoneall women and men of goodwillto dare the difference and bet
on women. I promise you this: you will not be disappointed. For when women shine
like the sun, their radiance will be forever undimmed.