The Gender Gap

According to the IFC Job Study, women comprise 49.6 percent of the world’s population, but make up only 40.8 percent of the formal global labor market.  While globally inequality between men and women in education has been shrinking, women are still less likely to be educated.   These gender imbalances, primarily represented by education and employment, have been coined as “the Gender Gap”.  Before one can address this unfortunate social issue, the magnitude of potential positive change and the barriers to eliminate the issue must be understood.

A research report conducted by Goldman Sachs indicated that if Australia were to reconcile its Gender Gap (hire as many women as men), its GDP could increase by 11 percent.  Conducting the same analysis for other major nations suggests that US GDP could be boosted by as much as 10 percent, Eurozone GDP by 14 percent and Japanese GDP by 21 percent.  These projections are based on women’s contributions as more efficient laborers, as well as a simple increase in laborers.

Empirical evidence indicates that female employment has a positive impact on a company’s productivity and society’s well-being. In a recent case study, Oderbrecht’s, a Brazilian engineering, construction and chemicals group, newly acquired female-led team performed tasks 35 percent faster than teams with a majority of male workers.  Additionally, employed women are more inclined to help their families and communities out of poverty.  According to the IFC Jobs Study, women-headed households were found to reinvest up to 90 percent of their income into their families, compared to 30-40 percent contributed by men.  By investing in their children, women are helping to create a more productive future generation.

The barriers that stand in the way of progress toward reconciling the Gender Gap can be categorized as legislative, cultural and financial.

 

  • Government Difficulties:  In many developing nations, government instability makes implementing new policies and adapting old policies very difficult. Further in 102 of 141 economies, there already exists at least one legal difference between men and women that could hinder women’s economic opportunities – IFC Job Study.
  • Cultural Norms:  Much of the world still holds traditional views when it comes to women’s roles. Some cultures require permission from a husband to work; others don’t allow women to work outside of the home at all – IFC Job Study.
  • Financial Constraints:  Women are more likely to lack access to finance. A study of 34 countries from Western Europe to East Asia showed that women were 5 percent less likely to receive a loan – IFC Job Study.

These barriers provide a clear direction for effectively addressing the seemingly perpetual Gender Gap.  Over time, these barriers will diminish, especially where progress is intentionally encouraged. By supporting organizations and companies that implement gender-diversity hiring practices, as well as increasing awareness of the Gender Gap, we can help to eliminate it.

The Missing Middle

     Big business often dominates the financial headlines every day, as journalists, investors and politicians seemingly track every single movement of the stock and bond markets. Yet when it comes to the U.S. economy, big business is only part of the story. One infrequently hears about businesses with less than 500 employees, yet in the U.S. they represent 99.7 percent of employer firms, have created over 65 percent of net new jobs from 1994 to 2009, and account for over half of nonfarm private GDP. These smaller businesses are often considered the lifeblood of the American economy, accounting for a good portion of innovation and often helping to give rise to the next generation of industry leaders. They have been a major driver of the economic growth of the U.S., as well as almost every major developed economy.

     In developing economies, the story is somewhat different. Historically, a lack of investment capital and poor economic policies have generally suppressed the growth of these small and medium enterprises (“SMEs”). Their business owners are just like business owners in the United States – willing to work hard to expand their businesses, create real value for their economies, accept accountability for results and ultimately help contribute toward a better future for their families and communities. Unfortunately, they have historically had a number of obstacles hindering their growth, the most common of which is a lack of access to financing.

     SMEs are the backbone of most economies, and have come to be known by many names in financial markets. “Small business,” “small-cap,” “middle market,” are some of the terms used to describe those firms that typically are profitable enough to have grown past the start-up phase, but yet not big enough to finance themselves in the debt capital markets. The definition of what qualifies as an SME can vary greatly from country to country, depending on the relative size of the economy and the sector under consideration. In the United States, the Small Business Administration (SBA) defines small business broadly as those businesses with 5 to 500 employees, a definition adopted for TriLinc Global.

     The “missing middle” is a term generally used by economists to describe the lack of financing available to this vital portion of the global economy. It describes the typical situation in developing economies: the largest businesses typically dominate bank financing. Microbusinesses are primarily funded by microfinance institutions, which have helped this business segment grow over the last 20 years. Unfortunately, those small and medium-sized businesses in the middle often have a harder time accessing finance, with five out of six SMEs worldwide claiming a lack of access to sufficient capital, thus making up the “missing middle” of finance.