A new research study by Moody’s Analytics shows a significant shift in the global labor market. This study has found that gender employment gaps are narrowing across the world due to increased female participation rates, adding $1.5 trillion to global income since 2019.
Of this, nearly half can be attributed to India and Japan, two large economies where gender gaps remain wide. The income generated from new entrants into the labor market benefits not only the individuals who are compensated for their work, but also the firms that are able to increase production, the governments that receive more in income tax revenue and may also pay less in income support, and the world economy overall through the second-round effects on demand.
Impressively, the female participation rate had already risen above its pre-pandemic level in the European Union in 2021 and in the U.S. in 2022. Progress in the EU has been especially remarkable, with the female labor force participation rate rising almost 3 percentage points in three years.
The labor force participation rate, in this context, is defined as the proportion of the working-age population (age 20 to 64) that is either employed or actively seeking employment.
There are still significant disparities across countries. For example, while the largest post-pandemic declines in the gender gap have been observed in India and the Philippines, the gender gap in those countries remains extremely wide—in India’s case, more than four times the U.S. or the EU.
3 key forces behind the narrowing in gender gaps
Tight labor markets – unemployment rates are at or near record lows in many countries. To attract talent, employers may be offering higher wages or incentives, pulling participants into the labor market.
Cost of living rise – high inflation and interest rates have squeezed household budgets, pushing new participants into work to make ends meet.
More flexible working conditions – the post-pandemic shift towards remote working and more flexible work arrangements has opened doors for some, pulling participants into the labor market.
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