President Trump has promised to increase US economic growth to over 3%, up from 2%, where it has hovered for the past decade. However, with lower labor force participation and sluggish productivity, how can he make this happen? One possibility: increase women in the workforce.

An aging US population has put downward pressure on the available number of potential participants. The large population of baby boomers has been retiring—and continues to retire—and subsequent populations, particularly in the Generation X cohort, are not large enough to replace them. I pointed to weak labor force participation in general in this previous post as a drag on the economy. More women in the workforce may limit the drag of an aging population, as a report by the IMF shows.

The IMF report also refers to studies that show macroeconomic growth increasing when the number of women is equal to the number of men in the workforce. In the US, that would translate to an increase of GDP growth to 5%. Further, fewer women in the workplace can result in GDP losses, up to 27% in some areas of the world.

If more women equals more growth, how do we accomplish it? A recent article in The Wall Street Journal posits Canada as a role model, an example I used in a blog post about parental leave. Up until the 1990s, US and Canadian women participated in the workforce at about equal rates. However, those numbers diverged and now 82% of Canadian women are working or looking for work, compared to 74% of US women. Why the difference? The answer may be found in both circumstance and intention.

Canada’s economy has grown at a slightly higher rate than the US—2.5% versus our average 2.3% since 1997. Canada did not experience a recession in 2001, as we did, and largely avoided the impact of the financial crisis in 2008.

During the late 1990s and into the 2000s, the Canadian government proactively encouraged dual income families by reducing the tax burden on double wage earners, adding financial support and incentives for child care, and expanding paid parental leave. Additionally, Quebec provides universal day care. Of these policies, universal day care has had the greatest impact on increasing the number of women in the workforce.

Could these policies work here? Some may say no, indicating that Canadians take a more “European” and “socialist” approach to many aspects of society and government. But their tax rates are not much higher than ours (15-29% in Canada, 10-35% in the US, according to Investopedia) and they still provide a year of paid leave for parents. That’s an incredibly simplistic comparison; the reality is far more complex. Yet, we are largely fighting a battle of perception when it comes to gender equality in the workplace: that universal child care or paid parental leave is too expensive, and might make employers balk at hiring mothers or women who might become mothers. It may take a crisis of economic stagnation for policy makers and those at the highest levels of business to take a hard look at the economic realities of more women in the workplace.



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