Why women are key to a more productive economy

ATHENE DONALD

As women have entered the workforce in ever greater numbers, productivity has grown on the back of the consequent increase in total hours worked. However, women have far more to offer than just turning up. Additionally, not everything in the economic system necessarily provides a level playing field for women, nor are their contributions always valued as much as their male colleagues. This means that potential productivity gains arising from women in all sectors of the workforce are not always realised. Their insight, innovation and energy may be lost and with it much potential benefit, both for the individual and the overall economic system.

Why should this be? There are multiple causes, ranging from women dropping out of the workforce due to inhospitable colleagues and patterns of working hours to a shocking lack of investment in female-founders. The advantages of a diverse workforce with diverse life experiences – and hence ideas for new products or tweaks to existing ones to offer more modalities – cannot be capitalised on if the workforce is in essence a monoculture. Business leaders need to think harder about the benefits of diversity for their bottom line, something the evidence shows up time and time again.

As a 2020 McKinsey report categorically stated ‘The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.’ Yet companies are not learning this lesson (a position which will not be helped by recent policies in the USA), with the statistics in their 2020 report showing that, not only were companies not improving the diversity of their leadership and workforce, in some cases they were even going backwards. Diverse boards are good for the bottom line, as the 2023 McKinsey diversity report spelled out, through its very title: Diversity matters even more.

There are many ways in which more attention paid to the life experiences and opportunities for women in the workforce could improve productivity growth.

• Leaders should recollect it has been shown how minorities – not just women, but certainly including them – are likely to be more innovative than the typical white male. A study in the scientific journal, Proceedings of the National Academy of Sciences, analysed the issue for scientists and showed that underrepresented groups produce higher rates of scientific novelty, but these novel contributions are typically devalued and discounted, losing the potential gains their findings could offer.
• Hours worked by women are impacted by the systematic under-investment in health issues that affect only women, such as endometriosis and migraine, which can cause chronic and/or long-term absences due to the burden of pain.
• Identifying and developing new product niches will not benefit from the ideas of female founders if venture capitalists are not, as is currently the case, willing to ‘take a punt’. Recent analysis shows a mere 2% of this money in the UK went to all-female founder teams, down from an already shameful 2.5% a year before.
• Innovation requires the diffusion of knowledge and absorptive capacity and this is damaged by the skills shortages that employers frequently cite. In sectors such as advanced manufacturing, it is often a shortage of people as much as a mismatch of skills. With STEM (Science Technology Engineering and Maths) and digital skills becoming ever more important, that the statistics show the massive gender gap in these subjects at every level, means a large number of women are early lost to this part of the skills pipeline. As a Royal Academy of Engineering report recommended in 2023, a more inclusive and equitable engineering profession and sector, attracting the widest possible range of diverse talent into engineering, would help to address the skills shortage.
• That part of productivity which AI could potentially transform will only deliver healthy outcomes if the AI itself is explicitly constructed so as not to introduce damaging biases. Currently, too often training datasets and algorithms are heavily and dangerously biased so that, for instance, hospital diagnoses may be incorrect when trained on male-only data.

These factors are just some of the reasons women are held back from contributing all they could to economic growth. There are many small actions, listed below and far beyond, which are cost-neutral or at low cost, and that could help to rectify the challenges faced by individual women and employers.

Policy recommendations

• The lack of diversity in many sectors starts with gender stereotyping from the earliest years of a child’s life. This impacts on both boys and girls, but current teacher training does not mandate any time spent raising awareness of these issues. Specific attention should be paid in training for all those, from nursery school up, involved in education to help to eradicate outdated stereotypes about career norms and behaviours.
• Businesses should be encouraged to pay more attention to diversity in leadership and across the workforce. A diversity award for businesses that successfully transform their activities (mirroring, for instance, the King’s Award for Enterprise) would demonstrate the Government takes these matters seriously when it comes to growth and the economy. Businesses should also ensure their employees go into schools to raise aspirations and awareness of all types of career opportunities.
• Venture capitalists need to be more conscious about their actions with regard to female-founders and improve the funding rate for female founders. The Rose Review recommended the creation of an Investing in Female Entrepreneurs Code, committing all financial institutions to the principles of gender equality and transparent reporting of gender funding data.
• In order to facilitate women being able to progress in traditionally male industries, incentives should be introduced – for instance in the ways the revised Growth and Skills Levy can be used – to encourage minorities including women to up- and re-skill, whereas currently they are often overlooked for training opportunities.
• AI needs to be adequately regulated to ensure that biases do not lead to errors and compounding of existing biases. This is needed at an international level, but this Government has placed much emphasis on becoming an AI leader so has a key role to play.

There are many ways in which better use could be made of the inherent economic capital women could offer across the board. The UK would be all the better if these recommendations were implemented.

To find out more about this subject, read Women, innovation and productivity by Athene Donald.