Women’s Contribution to GDP

Author: Jayshree Bose

Jayshree Bose holds a masters degree in English and is currently pursuing her MBA from Symbiosis school of business studies. She is a freelance business writer and editor with the Center for Insurance and Risk Management. She contributes to a number of leading business publications and has freelanced for companies like KPMG, TCS (Isurance practice) , Jardine Fleming and others. With over  23 years of  experience in writing research- based books on banking, insurance and  business strategy, she also writes business articles, reports, white papers and does copy editing.  Jayshree was earlier associate editor of leading mainstream publications such as Business Standard, The Financial Express and Business World. She is currently based in Chennai, India.

Women’s Contribution to GDP: the Seamy Side

Worldwide, women dominate the unorganized sector, but their contribution to the Gross Domestic Product (GDP) is grossly under-represented. Domestic labor and care giving activities create intangible value and social capital and could add substantially to the GDP of a country, if valued. But, the few existing methodologies that have emerged recently to value women’s total economic contribution are yet half-baked. Why do such aberrations happen at a time when projecting growth is a top-of-the-agenda issue with all governments? And what are we doing to remedy the situation? 

If gender activists were to be asked what their biggest achievement had been after years of championing women’s issues, they would unhesitatingly point to the large number of women in the global workforce. After all, what could be a better example of gender equalization than these growing employment opportunities and the financial independence of women?

More so  in developing countries where the growth is inclusive—with the female workforce being drawn from  cross sections of society, right from the upper class urban female professional down to the ordinary worker in the unorganized  sector. If this doesn’t show ‘inclusive growth’ (the coveted objective of all governments and every country today), what would?

Can we then safely conclude that gender differences are history, now that women are contributing substantively to the economic growth of their countries? It’s logical after all, to presume that this growth is being reflected in the Gross Domestic Product (GDP) of  their countries and boosting this important indicator.

Women and GDP: ignored realities

But, it’s early days yet as far as women’s economic progress is concerned. And there are some startling facts about the seamy side and realities of their economic contribution that we need to consider before drawing any conclusions, at all.

The first is the unpaid work syndrome. Women dominate the unorganized sector in most developing countries. According to International Labor Organization (ILO) statistics, women account for about one-third of the workforce in the unorganized sector, worldwide. Yet, since a lot of their work (such as wood-gathering and fetching water) in this very sector is unpaid, or, at least underpaid, and does not fall within the organized market economy, there are very few reliable methods to quantify these. So, in cases where the labor is unpaid, it does not get reflected at all in an indicator that focuses on goods and services that fall within the market economy. In instances where work is underpaid, it ends up bringing down the GDP substantially.

Several studies have shown that even in segments of the unorganized sector where female workers do get paid, they draw just 67% of the wages of their male counterparts on an average, all other things being equal. This results in a distorted and substantially lower GDP figure than it should actually be. Simply speaking, this indicator, which reflects the total value of goods and services produced in a country within a year and shows the economic growth of a country, actually ends up reflecting lower growth than it should. Some breakthrough events between 1993 and 1995, the most trailblazing of these being the System of National Accounts in 1993 (SNA 1993) discussed later, has brought hope of regularizing national accounting methods. Periodic revisions are being carried out. But as of today, the methodologies that are in place need to be refined radically to yield acceptable results.

Domestic care giving: boon or bane?

Women perform an enormous amount of domestic activities. This would include tasks such as care giving for children and the elderly, agricultural activities, fetching wood and water and other routine domestic work. No one would undermine the importance of the investment made by women in terms of time in caring for the elderly, or, the social capital created by caring of children—particularly when one gauges it against a lower crime rate and better educated young citizens. Yet, since this goes gratis and there are no reliable methodologies in the national accounting system yet to evaluate it, such work is obviously not taken into account when calculating GDP. Thorny questions have been raised about the importance of calculating the intangible value of mental and emotional strengths such as motivation and stress handling that care givers may sometimes even unwittingly give their children. But economists don’t know exactly how much this contribution is worth.

The discrepancies of faulty methods

Consider this: in 2006, women in Nepal accounted for 27% of a household’s income on an average. When this figure was adjusted for unpaid work, it rose to 56%, a discrepancy that arose solely because their unpaid labor was not taken into account while estimating GDP. The result: GDP was lower than it actually should have been. In Philippines, studies conducted on the male and female workforce showed that when women’s contribution in terms of domestic work was taken into account, their economic contribution to the household was notched 12% higher than that of men. But since there are very few established methodologies to evaluate domestic labor, and that too, with not a very widespread acceptance, this could not be factored into GDP estimation. The result: once again a lower than warranted GDP for the country.  If only these aberrations could be tackled, say economists, global growth could see a ballpark increase of even 25—28 per cent, in many cases.

Traditionalists may raise their eyebrows at the very mention of trying to put a figure to domestic work. But, there have been sporadic demonstrations on this issue in Germany and other countries over the past ten years. Gender activists spearheading the movement assert that it’s high time a notional methodology for valuing domestic work was at least in place.. But, as of now, inclusive growth remains a buzzword and accurate GDP estimation that takes the female labor workforce’s contribution into account is a farce.

The illusion of inclusion

Is change for the better in sight? Not until better national accounting parameters are put in place. In fact, what is even more alarming is getting the leviathan government machinery to move and change status quo. This task is so difficult that even governments which frame policies for women and multilateral institutions that mainly fund these programs and could have empathized, choose to look the other way when it comes to change.

This has an impact not only on inclusive growth, but on their financial inclusion, as well. As a result, women’s contributions and their concerns often remain ignored in taking decisions in important areas such as credit sanction and disbursement, legal systems, organized collective bargaining, social security systems, etc. This excludes women from funding of their small enterprises (though micro finance has made a significant difference in many countries) and many well-structured training programs, forcing them to continue in the unorganized sector.

Looking ahead

There’s no doubt that a slew of breakthrough events that took place between 1993 and 1995 have triggered off a strong awareness about the impact of such misguided policies, and the picture is not wholly bleak today. As stated earlier, the 1993 SNA has led to a global acceptance of refined methodologies such as adopting more recent base years and other national accounting reforms. The Beijing Conference held in 1995 was another major turning point and for the first time it established the need for measuring women’s contribution to GDP to be taken up as a routine task for national accountants. How much of a difference have all these developments really made?

Not as much as could be expected; the movement flagged off at the forum has still not taken off in a major way. But this may have less to do with apathy and more to do with the fact that economists and statisticians are still grappling with the basic task, an unenviable one - of having to gather different sets and combinations of data such as GDP industrial sector wise and institutional sector wise; formal and informal sector wise; and gender wise, after which the data has to be disaggregated.  But concerned economists are not waiting in the wings either, and are currently interacting with Women in Informal Employment: Globalizing and Organizing (WIEGO), an international organization involved in issues on women’s participation in the informal sector. This is to remove these roadblocks to data collection. Once this is done, a major hurdle will have been crossed.

Experimenting with methodologies

In the meantime, there have been some important developments. These interactions on public for a have resulted in identifying two methods for calculating women’s contribution to GDP. But they are applicable only to women engaged in paid labor in the unorganized sector, and does not relate to unpaid work. One is the Income Side Method, and the other, the Production Side Method. The  Income Side  Method, which estimates productivity based on income,  shows blips and has not gone down well with users  because of two reasons; one, the disparity in income levels of men and women doing the same work, and two, the difficulty in getting authentic data about income from property. The Production Method is proving to be more popular, particularly in the unorganized sector where women dominate. Even so, the method needs to be refined further.

Encouraging trends and developments

Among other encouraging developments are certain shifts in demographic patterns that have taken place in the meantime and are likely to drive change faster. For example, women are now increasingly playing the role of primary breadwinners. Micro finance institutions are extremely supportive towards women’s funding needs, bringing about a perceptible change in their status. Also, with the number of migrant male workers on the rise, many women in the lower classes are assuming the role of heads of households. These new roles that they are playing are all factors that are bringing women centre stage from where they would be playing an extremely important part in economic activity. The upshot of this is that they cannot be ignored any longer.

On the policy front, another very significant development has been the System of National Accounts (SNA) in 1993mentioned earlier, when many countries accepted the rationale behind going in for new base years, so that a better updated groundwork could be laid. Most of all, adopting a new base year would enable countries going in for the new system the advantage of using results obtained from the better-conducted recent surveys.

The same year, there was another breakthrough development  where the UN Statistical Commission (UNSC) stipulated that national statistics offices in all countries need to prepare satellite accounts using Time Use data for unpaid work, particularly those performed by women. It also said that these should be in conformity with the now universally-accepted 1993 SNA so that women would fall within policy frameworks. Countries making use of the Time Use method are Benin, Nigeria, India, Nepal, Philippines and South Africa.

Research has also thrown up some other interesting findings, which countries are now adopting as a reliable basis for estimation methodologies in future. Some of the important findings are:

• A better estimation of women’s contribution to GDP has been possible in countries and states where multiple jobs and activities are taken into account, as in Burkina Faso in South Africa. The fact that most African countries have been the first to put in place a better data-gathering and disaggregation infrastructure becomes clear from the fact that estimates of the informal sector are the most frequent and regular there.
  
  This could be because unpaid labor contributes significantly to the economy. The situation is just the reverse in Kenya, Tunisia, Indonesia, Philippines and Latin American countries for different reasons, but is expected to improve now that the System of National Accounts (SNA), 1993, is being revised.
  India could also take a leaf out of the African book and upgrade and regularize its methodologies.
  
  
• Women’s contribution is most under represented in countries where labor force surveys have been unable to capture their multiple activities adequately, such as is seen in India and some Arab countries. Benin, on the other hand, is a case in example which has not only conducted a series of meaningful surveys, but has refines the use of the Time Use Series on an ongoing basis. The adjustment rate achieved in final GDP figures was significantly higher in these cases and that is a lesson that other countries are avidly learning..

What these facts show is, (1) the realization that status quo cannot continue (2) present methodologies are inadequate; (2) economists and national accountants are therefore trying to actively experiment with new methodologies; and (3) to make this process faster, studies are being conducted in countries where women’s contribution to GDP is better estimated, so as to incorporate these features for strengthening existing methodologies.

GDP is the most effective indicator of a country’s economic growth, today. So much so that many countries have included post-catastrophe economic activity and are now clamoring to include illegal economic activity in GDP estimations so that projections are as authentic as possible. With such radical changes in the offing, there is no reason why women’s contribution to GDP should be ignored for no other reason but apathy.

Some remedies

Governments should go out of their way to usher in effective reforms in this regard. The under-reporting of GDP would have serious implications for grants from multilateral institutions, because these grants are often linked to GDP.

• The SNA (1993) needs to be adopted more widely with periodic revisions being carried out.

• Methods need to be formulated to value domestic work. The Time Series is a case in example.

• The invaluable contribution of women to the build up of social capital needs to be quantified.

• All productive activity, however insignificant, needs to be quantified. Eradicate the evil of the unpaid work syndrome.

• Legislation should be enacted and enforced to ensure equal pay for equal work.

• Multiple jobs held/activities carried out by women should be taken into account when estimating their economic contribution.

• Women’s right to property and income from the property should be ensured.

• That women receive the benefit of all relevant reforms, policy changes, credit sanctions and disbursements as well as all necessary funding facilities is something that should be ensured.

• Avoid cutbacks in healthcare facilities, especially for the poor to avoid any additional burden of unpaid work devolving on women.